Nov 23, 2020 | Leadership, Strategy
It is November, typically the beginning of the planning cycle for budget year 21/22.
First point of call in a formal review is generally ‘How did we perform so far this year against the plan we set ourselves back in November 2018?
Few could reasonably mark themselves as a success. The impact of a pandemic of any type, let alone Covid, was not even mentioned. Despite the warnings from SARS, MARS, Ebola, and from individuals such as Bill Gates, no planning I have seen or even heard of made mention of the possibility of a disruption such as that we have seen, and continue to see. The gap of 18 months between the strategic planning and review/adjust marker posts is terminal against an opposition that evolves and pivots in weeks.
So, to the core of the strategic challenge.
What will the rest of 20/21 look like, and what are the drivers present that will persist?
How do we allocate resources to the longer term?
This will be strategic planning in an entirely new environment, and the only consolation is that all your competitors are faced with the same degree of uncertainty.
Perhaps it is the case where the least worst gets the cake?
It seems to me that there is massive value in making the distinction between strategic planning, and strategic implementation.
A lot of planning goes on, but often the implementation pays only lip service, being driven by tactical ‘necessity’. As Prussian Field Marshall Helmuth von Moltke noted and many have since paraphrased: ‘No plan of operations extends with any certainty beyond first contact with the main hostile force’. This certainly will have been the case over the last 12 months, but that does not remove the importance of the planning part.
Covid has been the catalyst of all sorts of changes, but when you pull them apart, all the things that have come to pass were there previously, lingering on the edges. Covid has just been the catalyst to massively accelerate the growth and impact of those pre-existing trends from out on the edges, from where change almost always emerges.
If this is true, the strategic planning processes are still valid, you still have to make those strategic choices, which markets, which products, which customers, which technologies, and so on, but in the implementation, you no longer have the luxury of time, it is the quick and the dead.
It seems to me that ‘Strategic planning’ should provide a framework within which to make tactical decisions that reflect the intent of the framework. They should be made ‘rolling,’ so as to absorb the learning from the previous cycle, and be able to accommodate changes as they emerge. A strategic OODA loop.
This is easier said than done, but if it was easy, everyone would be doing it.
It also seems to me that the siloed top down decision making and the cultures and processes that support it should no longer have a place at the table. Unfortunately for most existing organisations, they combine to assure that agility and creativity in response to new information is removed from the process.
The ability to deal dynamically with new information and changed circumstances is the new competitive advantage, but culturally it is not common.
We need to be able to give those in direct contact with markets and trends both head time to absorb the things they see, and the power to act on them without a long bureaucratic filtering process of approval. They also need the power to allocate resources to those ‘experiments’ within pre-agreed parameters, and have real time feedback from those experiments, seen at the top level so as to be able to influence the strategic cycles directly.
The feedstock of this cultural change is more than data, with which we have become obsessed. It is the ‘soft’ stuff, human experience and judgement that becomes vital to the outcomes, as it is only by humans that judgements can be made. Algorithms are great at collecting data, and telling us what happened, but lousy at projecting, this requires human judgement, intuition, and experience.
It is this judgement that synthesises the data into something different to an extrapolation, absorbs the lessons of the past to apply to nascent and emerging trends.
In these differences lies the secret of strategic implementation.
Call me now for a strategic reality check.
Header cartoon courtesy Hugh McLeod at www.gapingvoid.com
Nov 20, 2020 | Leadership, Strategy
Warren Buffet is renowned as perhaps the greatest investor of our time. To be noted as a mentor, as was Philip Fisher, is indeed being stuck on a pedestal.
Fisher published quite a bit, his seminal work being ‘Common stocks and uncommon profits’ first published in 1958.
In it he outlined 8 principals by which he invested. Buffet credits these 8 principals as being fundamental to his success, along with the quantitative analysis he learnt from Benjamin Graham. These two men, along with Charlie Munger, his intellectual side-kick for 60 years, are credited by Buffet as the foundation of his success.
The Fisher principles in summarised form are:
- Go and see.
- Depth of R&D leads to growth.
- Sales and merchandising are make and break.
- Being a low cost producer, and working to stay there leads to higher margins.
- Generate your finance internally.
- Have only great people. The depth and quality of management, represented by integrity, transparency, willingness to learn from mistakes, and who build working relationships with stakeholders are essential.
- ‘Scuttlebutt’ is a serious business, and should be collected by talking to as many knowledgeable people as possible who may be familiar with any company you were learning about, and analysed in depth.
Like all great advice, this list applies equally today as it did 50 years ago, and the application is much wider than just investing. If you were setting out to construct the framework for the business you wanted to create, that drove the culture you were seeking, then this list would be a great foundation.
I particularly like the dedication in the most recent edition of Fishers book, which reads “This book is dedicated to all investors, large and small, who do NOT adhere to the philosophy “I have already made up my mind, don’t confuse me with facts’. This admonition seems particularly pertinent in these times of an overwhelming volume of opinion posing as fact, being blasted at us, demanding our attention.
Nov 12, 2020 | Strategy
My daughter and wife do jigsaw puzzles together. The dining room table is often covered with a 5,000 piece puzzle in varying stages of completion.
I simply do not have the patience, but the process they use to piece together the puzzle is instructive.
First, they make sure the box is in a prominent place so they can see it easily. Ever tried doing a jigsaw puzzle without knowing what the end result should look like?
Then they assemble the pieces into groups that seem to reflect some part or other of the puzzle. In the course of that process they separate out all the pieces with a flat side, being one of the perimeters of the puzzle. They are particularly focussed on finding the 4 corner pieces. Finding them, 4 pieces amongst 5,000 scattered around the table, enables the puzzle to start to take some sort of shape.
Over time, often a wet weekend, the picture evolves.
Pieces are fitted together, usually after several failures to get that exact fit. Often, pieces look like they go together, but are somehow, not quite right, so they try again, and again. Slowly, groups of pieces emerge, and together these groups make up the final picture.
Strategy is similar.
In the absence of a picture of the end result, the process is just about impossible in a complex environment.
Similarly, the role played by the corner pieces is far more important than just one of many pieces, they are the linchpin around which the construction of the strategy puzzle evolves.
Even a simple puzzle is hard to complete in the absence of the 4 corner pieces as reference points.
What are the corner pieces of your strategy?
What does the end result look like?
Oct 22, 2020 | Change, Innovation, Strategy
We are all looking for ways to increase the competitive leverage we can bring to bear. It is tough to find the sources of that leverage, and then apply it effectively in aggressive and often homogenised markets. However, there is a thought process that few have ever heard of that delivers such an outcome.
Observe, Orient, Decision, Action, or ‘OODA Loop’ is a competitive thought process articulated by Col. John Boyd, the maverick American fighter pilot, engineer, and scientist, who revolutionised the practise of aerial warfare’, and indeed warfare full stop. His nickname in the Airforce was ‘40 second Boyd,’ reflecting his bet, that he could beat any other pilot in a simulated dogfight in under 40 seconds. It is said, nobody ever collected from him.
Observe: is more than just seeing what is around, it is a process of absorbing all the information available, and synthesising it with the context from which the information emerged. For example, while the 2008 financial meltdown was a surprise to most, the signs of financial fragility were there, for those who were looking for the right messages, hidden in plain sight amongst the hyperbole and emotion of what appeared to be a never ending bubble.
Orient: is a process of applying domain knowledge and experience with the observations made. Continuing the 2008 meltdown example, those few traders who saw the mismatch between the mortgages being written, and the ability of those who were getting them to repay the loans, oriented themselves to take advantage when the bubble did burst. Such a meltdown seemed obvious to the few who were looking, when they observed the mismatch between the assumption of ever increasing prices, employment uncertainty, and the herd mentality that prevails.
Decide: Based on the observe and orient phases, choices need to be made, risks assessed,
and a decision taken.
Act: This is simply executing on the decision, from which point, the cycle starts again.
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, and implement, absorb feedback, reorient and go again. Given that the decision is almost always based on ambiguous and incomplete information, the tendency is to hesitate, seek other information, look for alternatives, seek reassurances and permission, this all takes time.
Boyd saw the winning process as increasing the tempo of the cycle, thereby getting ‘inside’ the oppositions ability to respond effectively, leaving them vulnerable, and beaten. The example he continuously used was the ‘kill ratio’ of US fighter jets ‘dogfighting’ against the Russian MIGs in Korea, which was 12:1, being whittled down to almost 1:1 by the end of the Vietnam war. Partly this was the result of better training of the MIG pilots, but significantly it was because the quicker, lighter MIGS, although less well armed and protected, could get ‘inside’ the manoeuvrable envelope of the US fighters, and shoot them down.
For an SME competing against larger, better resourced competitors, being able to move quickly and decisively, orienting assets and resources towards that opportunity, actively leveraging it, then ensuring that the lessons that emerge are incorporated into a learning loop, delivers victory.
Case Study.
In 1985 the yoghurt market in Australia was in its infancy. Australians did not consume much yoghurt, it was a fringe product, consumed by a small number, with limited retail distribution, manufactured by local state based dairies, largely as a means to give shelf life to raw milk, that promised better margins than butter, cheese, or dried milk powder.
French brand Yoplait was launched from a modern purpose built plant in Victoria, and changed all that almost overnight. The market boomed, as a result of a good product, and better advertising and marketing by Yoplait, which completely dominated the booming market nationally in a very short time.
Ski yoghurt was produced under licence in several states by local dairies, and prior to Yoplait was a significant brand amongst the group of brands available in the then small market.
After the Yoplait launch, Ski was relegated to relative insignificance nationally.
The licensee in NSW, Dairy Farmers Co-Operative Ltd, took the aggressive step of investing in a new dairy foods plant in western Sydney, closing the 100 year old plant located in the inner Sydney suburb of Ultimo. Part of the investment was to produce yoghurt by a continuous process, packaged into form fill and seal cups to compete with Yoplait.
Over the course of the next 6 years, Ski overtook Yoplait, by firstly taking over the licences in every state, to deliver operational scale to the Sydney plant, then embarking on a series of product and packaging innovations, backed by marketing support, that created a tempo of very successful new product launches that Yoplait, being controlled by a French company working through a licensee, and having an inflexible manufacturing plant could not match.
Ski inserted itself well inside the operational speed of the Yoplait licensee, executing product launch after product launch, some minor, some very major, that altered the dynamics of the industry, and was able to dictate the terms on which the marketing battle for consumers minds was played.
The battle was won on the basis of that agility in product development, and ability to bring products to market quickly, and be on to the next thing before Yoplait had time to respond.
Subsequently, both brands lost focus, ceased to invest in the long term health of their brands and innovation, instead, drinking from the sugar hit of tactical price promotion demands by supermarket chains, they shrivelled in size and no doubt profitability.
Oct 5, 2020 | Leadership, Strategy
Over 45 years I have seen all sorts of strategies. Some work, some fail, some are elegant articulations of a vision and mission, some are a few words on a sheet of paper. Some are data driven, some full of a breathless accounting of what they will make the world look like, and everything in between.
They come in all shapes and sizes.
The common denominator of those that are successful is none of these.
That common success element is that they have been driven by someone who has a bias to action.
They implement.
While others look for more information, watch what their competitors are doing, lobby the government, spend more on developing the next iteration of that great product, the action oriented leader implements.
It will never go completely to plan, there will be mistakes, uncertainty and anxious regret that more care was not taken, and sometimes hordes of naysayers. Nevertheless, the only strategy that has a chance of delivering is the one that gets implemented.
A strategy document that sits on the shelf, gathering dust as information and consensus is accumulated, is the one that never works, because it is not a strategy. It is an excuse for surrendering to the status quo, to the concern about being seen as being wrong, and therefore excluded from the herd.
Oh, by the way, this works not only for a strategy, but in microcosm, at the smallest detail level.
When someone on a production line sees something that could be made to work better that is within their scope of power to change, they take action and change it, observe the results and adjust when necessary. For the leading hands on a line responsible for the running of the line, having a culture in place that encourages and rewards this bias to action, is like having manna from heaven.
Stop talking and start doing!
Header cartoon courtesy of Scott Adams, and the wisdom of Dilbert
Sep 16, 2020 | Governance, Innovation, Strategy
A short while ago I felt very sad, and uplifted at the same time.
Weird.
I was watching my 4 year old granddaughter play , keeping herself company in her own fantasy world, jumping from one thing to another without any hesitation, no sense of self consciousness, but following a ‘logic’ only she could see, hear and feel.
Creativity being expressed in a totally natural way.
I am pretty sure most people have seen this, at some point, and felt uplifted. Then I realised, that in a few months, she would be going to school, and that joy of random thought, learning by experience, feeling absolutely free from judgement was about to hit the wall.
School works with a set of disciplines. Numbers, regulated behaviour, nominated time slots for scheduled activities the kids did not choose. It teaches organisation, discipline, and a ‘top down’ awareness to these rapidly developing brains consistent with what ‘conventional wisdom’ has decreed as appropriate for the future life kids will lead.
Who knows anything about the future life of my granddaughter?
Watching her, I also recalled that I had seen the previous week the announcement of the death of Sir Ken Robinson. That made me sad again, all over,
For those few on the planet who do not know who Sir Ken was, just google ‘the most watched TED talk’ for a dose of his verbal and philosophical magic.
Asking how schools kill creativity in kids, and how to fix it, was his life’s crusade. His TED talk at the time of writing has 69 million views, several of which have been mine, and a much larger number have been those I have persuaded, cajoled and pushed to watch.
Here, in front of me was the living reason he took on the world of education academia.
It also occurred to me in those minutes of reflection, that over time, my granddaughter may be pushed into doing the things she was good at, in preference to the things those she liked to do.
That is how the world now works.
Most people have things they are good at, but do not particularly like doing. I certainly have. To meet the outside markers of success, most go with those things, and use their free time for the things they really like doing. In those times, hours seem to pass like minutes; somehow, you have entered what some would call ‘a flow state’ where time seems compressed, and the output, is just for its own sake.
Joyous.
Wouldn’t it be fantastic if the things we like become the things we spend our days doing to earn a living?
Imagine living your life in a state of ‘Flow’
My granddaughter was in a state of flow playing, and it seems like my duty to extend that as far as possible.
A lucky few get to feel it for themselves every day, and as a result, have a chance of both being as happy as they can be, and changing the world.
