Sep 4, 2023 | Change, Innovation, Strategy
If strategy is all about choice, and I strongly contend that is so, the challenge for responsible management is to imagine first what those choices may be.
This ambiguous mindset requiring choices to be made with less than full information never happens by itself, as it makes people uncomfortable. It must be pushed, being uncomfortable must be made a significant part of the status quo, making change along with its risks and downsides a normal part of the culture.
Ask yourself what could be true in five years?
Chances are you will not get much right, but the process of thinking about and resetting the status quo to a state ready and able to welcome change will be immensely valuable.
In 1985, few predicted that microprocessors would be everywhere, from rockets to fridges, from phones to toys.
In 1995 few predicted the Internet would become ubiquitous, and in 2005 few predicted their kids would get all the news they could consume, and wanted to consume, from social platforms.
Ask yourself what could be true that would alter the shape and dynamics of your industry.
Step forward and embrace the possibility of those changes occurring in the way you manage your business. By so doing irrespective of how accurate you have been, the business will be much better able to respond to and leverage the change.
Aug 23, 2023 | Strategy
The libraries written about strategy, the advice, templates, ‘revolutionary’ ideas, and all the rest, have made ‘strategy’ a cliché that means little to most of those trying to run a small business.
How do you get the time to understand, let alone implement all the sage advice given?
The absence of an explicit strategy, something against which you can measure the impact of decisions being made, means you are always at the mercy of immediacy.
Decisions are almost always taken in the absence of full information, and therefore lack certainty. The best we can do is consider probabilities, based on data, domain knowledge, and experience. Having an unambiguous strategy which is understood by all who need to make operational and tactical decisions, irrespective of the level and type of those decisions, removes at least some of the uncertainty. Importantly, it also gives you a means to measure the impact of the choices being made.
The presence of an explicit strategy offers a framework against which to measure any decision being contemplated. This applies equally to the ‘corner office’ decisions, as it does to the operational decisions daily on a factory floor, or office.
‘Will this choice deliver a result that adds to the achievement of the long-term goal?
When the answer is ‘yes’: proceed, with the appropriate due diligence. When the answer is ‘No,’ irrespective of how attractive the opportunity appears in the short term, you should not proceed.
So, how do you fashion a robust strategy?
There are many tools and templates around that will help the thought processes. However, relying on them to give you the answers is a mistake. The best they can do is prompt the questions that need to be answered. Developing a robust strategy, requires a measure of ‘Strategic thinking’, not an easy skill to develop.
Such thinking evolves from consideration of the interaction of the capabilities and aspirations of your business, those of the opposition and potential opposition, and trends in the marketplace likely to impact demand, supply, and how it is satisfied.
‘Strategic thinking’ should not be a once in a year exercise, as it often is. The most successful enterprises find ways to build such thinking into their every-day activities. While the strategic objectives should not change much, they are the core of long-term resource allocation choices that drive the direction of the enterprise. The means by which they are achieved can change as the conditions and context of the market evolve.
As a framework for such thinking, the following six questions should be regular agenda items, and subjected to critical analysis on an ongoing basis.
- Which markets are we focussed on, and spending resources to reach?
- Which products and services are we delivering to customers?
- How are we going to deliver those products to customers, and receive payment?
- Why would a customer buy from us and not someone else?
- What are the few capabilities at which we need to excel to be able to deliver unique value in that market?
- How do we improve operational and financial performance over time?
Each of these six questions have many layers that a diligent and strategically aligned management will pursue.
Success, as well as failure, generally comes incrementally, bit by bit. However, both are also compounding, each outcome building on the back of the previous. Having a framework against which to measure the outcomes of decisions, and then adjust and/or double down quickly, makes a huge difference to the long-term outcome.
Decisions all compound until reversed, and as Einstein observed: ‘Compounding is the most powerful force in the universe.’
To simplify even further, every operative in an SME should ask themselves 3 simple questions every day, as they make the daily tactical choices necessary to get the work done.
- To whom will this action add value?
- How will it add that value?
- By what means do we get a return from that value?
There, Strategy development in a blog post.
Header credit: a very old cartoon by Hugh McLeod before he became famous and corporatised.
Aug 9, 2023 | Change, Operations, Strategy
Almost every SME I visit or work with needs to one degree or another to be moving down the path towards ‘digitisation’.
For some, this means considering how the sudden appearance of LLM trained AI will impact on their competitive position, for others, it is still how to write a simple excel macro, and move bookkeeping from Mavis in the corner to a cloud package.
Just what does ‘digitisation’ mean?
For most of my clients it means automating some or all of the existing processes driven by bits of unconnected software and spreadsheets, liberally connected by people handing things over.
It is usually a real mess, and the evidence of incomplete solutions, misinformation, and shattered hopes lie everywhere.
The world is digitising at an accelerating rate, so keeping up is not only a competitive imperative, it is a strategic challenge. To survive you must evolve at least the same rate, just to keep up.
On of my former clients is a printing business, an SME with deep capabilities in all things ‘printing’ that enabled the company to be very successful, in the past. Their capabilities are terrific, highly competitive, if we were still in 1999.
If I use them as a metaphor for most I work with, there is a consistent pattern.
They do not see digitisation as an investment in the future, rather it is seen as an expense. This means that the challenges are not considered to be strategic. There is no consideration of the application of digital to their product offerings, beyond the digital printing machines, services beyond those that made them successful 20 years ago, and their business models, beyond what is demanded by the two biggest customers, who between them deliver well over 35% of revenue.
They have not considered digitisation of operational processes, beyond a 20 year old ERP system, which has not been updated in any meaningful way for a decade, and they still only use a portion of the capability. The reason for this is simply a lack of internal capability and awareness, and the lack of cash to invest for the long term.
They have not modified their organisational and operational culture. No digitisation effort can succeed without the support of an operating culture that encourages ongoing change. Organisational processes can be modified by decree, but they will not stick. It takes everyone in the boat to be pulling in the same direction, in unison, to make the forward progress proposed by the digitisation nirvana. This takes leadership, and a willingness to be both vulnerable internally, and a strong ability to absorb the stuff from outside. You need to ‘get out of the building’ not to smell the roses, but to see the lie of the land, and understand where the opportunities and challenges are hiding.
The recognition of the critical necessity of change is where you get given one point out of a possible 10. The other 9 are reserved for taking action. A daunting prospect for most.
Following are the 5 steps necessary to become ‘match fit’.
- Map the existing operational processes so you know what you are changing. The starting point!
- Map and change the mindset of the people, so everyone understands the extent of the challenge to the business, and to them personally. This will prove very tough for some, so expect push-back.
- Take small and incremental steps along a path that all understand leads to a digital future, which means that a lot of collaborative planning has been done. Look for some low hanging fruit where early wins are likely.
- Ensure that there are the necessary opportunities for all stakeholders, but particularly employees to grow and change with you. Those that choose not to, also choose to work elsewhere. There are no free rides.
- Ensure the resources of time and money are allocated uncompromisingly to the long-term outcomes. It is just too easy to put aside something that is important but not urgent for something that may seem to be urgent, but is not important to the transformational effort.
Most need outside help to get this done. Usually that help in the early stages is not found amongst software vendors who have a dog in the fight. It is amongst those who have ‘been there, done that’. It will also be a resource hungry beast, but assuming you feed it, and you have the right mix of project management and technical capabilities, the investment will generate returns quickly, just not tomorrow.
Header cartoon credit: Tom Gauld
Aug 4, 2023 | Governance, Strategy
Every year the American History Business Centre a non-profit run by Gary Hoover, puts out a chart that updates the market capitalisation of Americas top 20 public companies.
The 2023 version has just arrived in my inbox.
I find the path of the evolution astonishing, even in the relatively short time since the turn of the century to now.
A few things that pop out, at least to me.
- The acceleration in the rate of increase since 2000
- The absolute dominance of the Tech giants Apple, Microsoft, Alphabet and Amazon, that has driven the market cap, especially since 2010. The growth rate is so fast that the numbers are already out of date. Apple broke the 3 trillion dollar mark, the first to do so, in January. It has bounced around that benchmark a bit, but is today is 3.011T.
- The emergence of Tesla from nowhere 5 years ago to 7th today, a market cap bigger than the other US carmakers combined, who outsell Tesla by a big margin. However, Tesla unit sales have taken off with the opening of Chinese manufacturing, delivering 710k units worldwide in 2022.
- The absolute contrast to Australia’s top 20, dominated by financial institutions and commodities.
Have a look at the graphs in the link, and consider the implications for the competitive position and ‘re-industrialisation’ of this country.
The most recent Harvard economic complexity report puts Australia at 93 on the list, bracketed by Uganda at 92, and Pakistan at 94. Stellar company indeed.
The government appears to be taking the problem seriously, with the $15 Billion National Reconstruction Fund announced in the October 2022 budget, but is it enough, and is the support the right kind of support required to stimulate the domestic economy to build the complexity that will act as an insulator to the types of global disruptions that seem now both inevitable and more frequent?
While we are distracted by short term political wrangling, point scoring and pushing of social agendas that are truly relevant only to minorities, the big-ticket items, those that will determine the shape of the country over the coming decades, go begging.
Our so-called leaders lack the vision, commitment, and coconuts to take a hard look at what needs to be done, and then get on and do it, short term political polling be damned.
Jul 31, 2023 | Innovation, Strategy
Strategy development is driven by the need to make difficult choices with less than complete information. The successful see a problem to solve before anyone else realises there is a problem, and reap the rewards.
When you think you have all the information you need to make a risk-less choice, my advice would be to look again. Either the path you are contemplating is tactical rather than strategic, or you are simply following some orthodoxy that will not lead you anywhere new or different.
The great and unusual skill is in nurturing the capability to generate an insight that makes a difference. It is challenging to see a situation as presenting a problem to be solved that others did not see, until you have solved it. Then they rush to follow, often commoditising your insight in the process. The classic case here is iTunes, a solution to a problem nobody saw until Apple made it obvious there was a goldmine hiding behind the fence. Apple built a first mover advantage, and by not stopping the innovation process, ensured competitors followed without catching up. Competition just added to the breadth and depth of the market Apple continues to dominate.
Every major behaviour changing innovation I can think of has solved a problem that either nobody else saw or had failed to solve. In the latter case, Thomas Edison and the light bulb are the classic case. Many people had been working on solving the problem of the filaments burning out with a flash when a charge was applied, but it was Edison who came out with the solution first, and is therefore remembered as the ‘inventor’ of the light bulb.
Anybody for a faster horse?
Jul 28, 2023 | Change, Innovation, Strategy
So, Elon Musk surprised everyone, again, by killing Twitter and launching X.
Whatever X is.
Everyone in the marketing, strategic and management world generally seems to have had a go, except me, so here goes.
He must be effing crazy!
(Psst.. He is, but is it crazy smart or just crazy?)
Twitter had a range of problems, magnified since Elon sent the previous owners an offer to buy the joint for an absurdly large chunk of change. It was so large that the then board almost killed themselves racing to sign before he changed his mind and halved the offer. This might have been closer to the value, albeit still overly generous.
Having failed to wriggle out of the offer to buy, he then cut staff numbers 80% from the staff of 7500. Meanwhile ad revenue continued to tank, the rate just increased, dramatically.
Surprisingly, twitter still worked.
Estimates of the value of the twitter brand pre-execution vary a lot, but commonly vary between 5 and $6 billion. That is a lot to just flush down the dunney for no apparent reason.
Competitors must be rejoicing, particularly Meta that just launched ‘Threads’ as a twitter competitor, only to find the gorilla in the garden has been turned into a gnome.
Musk, and everyone else in this space has watched what WeChat has achieved in China, and into the Chinese diaspora, and wanted to emulate it. Given the original source of Musk’s wealth was PayPal, he would be in as good a space as anyone to make that happen. That makes sense, but why sacrifice twitter in preference to starting a separate company?
It simply does not make sense.
There are a few other things that do not make sense, until they did.
Re-useable rockets were not possible, until he did it.
Tesla electric cars at volume did not make sense until he did it.
Tesla as a public company would never make it, until it did. (Tesla now has a market value more than all other US manufacturers and Toyota combined, and continues to climb)
Gigabattery factories did not make sense until he did it.
Distributed recharging infrastructure did not make sense until Tesla reached scale and persuaded Detroit to sign up, a fortnight ago.
Based on his history, betting against Musk is a mugs game, no matter how little sense it makes to the rest of us.
