Posts filed under 'Execution'
At the beginning of April StrategyWorld pointed out Circuit City’s foolish strategy to fire experienced employees to cut costs.
Now it’s time to fire the decisionmakers who came up with this bright idea.
According to the Washington Post:
“…the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.
The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.”
Will they never learn?
Perhaps they need to attend our FAST strategy webinar… although I doubt anything can help this kind of blindness.
Speaking of ethics, how about Duke’s cheating scandal?
Listen to this:
A survey released last year by Rutgers University professor Don McCabe showed 56 percent of MBA students acknowledged cheating in 2005. In other fields, 47 percent of graduate students said they cheated.
Note: these were graduate students, not undergrads.
May 2nd, 2007
When I work with senior executives, they express a real conflict: they know strategy is important (strategy, like IT, does matter) but they have a growing sense that traditional approaches to strategy are simply not up to the challenge of coping with increasingly uncertain business environments. What to do?
EDITOR’s NOTE: see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”
My first piece of advice: throw out two basic tenets of business strategy. First, reject the notion that strategy is sequential – that detailed strategic blueprints need to be laid out before a company can proceed with operational implementation. Secondly, abandon the traditional strategy view that the relevant time frame for strategic planning is a five-year horizon.
My second piece of advice: implement a FAST approach to strategy. FAST in this case is an acronym for Focus, Accelerate, Strengthen and Tie it all together. This approach urges executives to move along parallel paths, operating on two very different time horizons: one horizon takes a five to ten year view of the business and the second horizon zooms in to a much more tactical six to twelve month view of the business. The one to five year horizon that is so loved by traditional business strategists actually receives very little attention in the FAST approach.
Focus is the key activity on the five to ten year horizon. This requires senior management to develop a common view on two key questions for their business. Five to ten years from now, what will the markets that we participate in look like? Then, what kind of business we will need to have in order to continue to create value in these markets? Unlike strategic approaches of the past, Focus does not require management to develop a detailed view of the future, but it does require management to develop a clear, high level view specific enough to help the company make important near-term choices.
To illustrate the high level nature of the view of the future, look at Microsoft. Back in the late 1970’s Bill Gates defined a Focus for Microsoft that could be summed up in two sentences. First, computing power is inexorably moving from centralized mainframes to desktop computers. Second, to be successful in the future, a computer company will need to “own” the desktop. Simple and succinct, yet specific enough that it helped Microsoft to answer the unexpected call it got from IBM to help IBM develop an operating system for a new desktop computer it was developing, rather than the twenty other calls it undoubtedly received on that same day. This Focus helped to guide the company for two decades. It only began to need retooling in the late 1990’s as the advent of the Internet set into motion fundamentally new forces.
On the six to twelve month horizon, Accelerate and Strengthen are the key requirements. By Accelerate, I mean identifying a few key operating initiatives that have the potential to significantly accelerate the movement of the company towards the long-term Focus. Once these initiatives are identified and agreed upon by senior management, the question is what can be done to help these initiatives increase their impact over the next six to twelve months? Management needs to set aggressive and measurable operating performance objectives for these initiatives over the next six to twelve months.
On the same time horizon, Strengthen also comes into play. Here, management needs to ask, what are the major organizational obstacles that are preventing us from moving even faster to achieve our operational objectives? Then the question becomes, what can be done over the next six to twelve months to “de-bottleneck” the organization and strengthen our organizational capabilities so that we can move even faster in the next six to twelve month cycle?
Tie it all together integrates these three streams of activities. The key to success with the FAST strategy is to frequently iterate back and forth across these two time horizons and refine efforts on all streams based on the results of efforts to date. The near-term operating initiatives will provide management with much more information regarding both the market place and the capabilities of the company. This should help to refine the longer-term Focus view. In turn, this refined Focus view will be helpful in selecting and shaping the next wave of near-term operating and organizational initiatives. Senior management must actively monitor progress on all three streams and play an active role in shaping initiatives and setting objectives.
The FAST strategy approach respects the need for both near-term performance and longer-term direction, learning and adaptation. It favors incrementalism but recognizes that, without direction, incrementalism will inevitably sub-optimize relative to longer-term opportunities. Properly focused, incrementalism provides significant advantages relative to more tempting “big bang” transformational initiatives:
- Provides clear, near-term operational performance metrics to assess progress
- Focuses management on delivery of significant near-term operating results consistent with longer-term direction
- Enhances ability to fund major strategic thrusts by emphasizing the need for tangible returns early – initiatives potentially become self-funding
- Helps to build organizational support for longer-term direction by demonstrating tangible returns quickly while at the same time helping to neutralize opposition
- Accelerates organizational learning by providing clear metrics and creating rapid performance feedback loops
- Strengthens ability to adapt based on new information gained from near-term operational and organizational initiatives
Few companies today have adopted anything like a FAST strategy approach. You can use five questions to determine whether a company is pursuing this approach:
- Does senior management have a common view of what their markets will look like five to ten years from now and what the implications are for the kind of company they will need to develop? Some of the common issues companies confront here are:
- Management avoids the issue entirely, claiming that the future is too uncertain
- Management aims too low, under-estimating the amount of change that will occur and the size of the opportunities (and challenges) created by this change
- Management fails to align around a common view – if interviewed individually, senior executives would offer very different views of the long-term requirements for success
- Has this view of the future been adequately communicated throughout the organization? Some of the common issues at this level are:
- Management under-invests in communication of the long-term view
- Management fails to make this long-term view tangible to the organization by not offering specific examples of how near-term choices will be affected
- Management communicates through the ranks rather than directly to the rank and file, leading to divergent and confused views as the message becomes distorted with each level of communication
- Is there sufficient focus in the near-term on a few (3-5) high-impact operating initiatives that, over the next six to twelve months, can materially accelerate the company’s movement towards the long-term destination? Common challenges here are:
- Management supports too many near-term operational initiatives, in part as “insurance” against uncertainty, with the result that initiatives are under-resourced and rarely achieve the impact anticipated
- Near-term operational initiatives are not clearly tied to the long-term destination
- Explicit six to twelve month operating performance objectives are not established
- Is senior management identifying and addressing major organizational obstacles that prevent even more rapid movement towards the long-term destination? Some of the issues here are:
- Organizational changes rarely tied to high impact operating initiatives
- Explicit six to twelve month performance objectives are not established – how will management know whether the organizational changes are having the desired impact?
- Are there systematic processes to assess near-term operating performance relative to the requirements defined by the longer-term destination? One of the most frequent issues here is:
- Operating performance rarely assessed systematically in terms of implications for long-term direction
The FAST strategy approach provides a robust framework for incremental innovation. It offers a useful context for understanding how to create strategic advantage through sustained innovation in business practices enabled by IT capabilities. It also helps us to understand the deep business significance of the emergence of a much more flexible distributed service architecture. This new IT architecture will help businesses to accelerate their near-term operational initiatives even further. In doing so, it will provide a solid foundation for radical incrementalism.
EDITOR’s NOTE: For more on FAST Strategy, see our webinar with John Hagel on May 9th: “FAST Strategy: How to Get Results in Disruptive Markets”
April 28th, 2007
Lee Iacocca, former Republican?
That’s the verdict if you read the excerpt from his new book on leadership:
Where Have All the Leaders Gone?
Iacocca’s book describes the “Nine Cs of Leadership”:
- Curiosity
- Creativity
- Communication
- Character
- Courage
- Conviction
- Charisma
- Competence
- Common Sense
Wait, there’s more: the ability to deal with a Crisis
Maybe Iacocca ought to go buy Chrysler.
The book is written in his unmistakable voice:
Am I the only guy in this country who’s fed up with what’s happening? Where the hell is our outrage? We should be screaming bloody murder. We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got corporate gangsters stealing us blind, and we can’t even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, “Stay the course.”
He’s right. Much more here >>
April 14th, 2007
The management shuffle announced by
Yahoo recently is only the latest evidence of
strategy decay that pervades the leading ranks of the Internet business world. Yahoo says it made the changes to allow the company to move faster.Fine, but in what direction do they want to move? What does Yahoo! want to be when it grows up? And what does that imply for what it will choose not to do?
In our celebrity culture, we love to focus on people. Decker gained, Rosensweig is out, Braun is out, Semel’s still there, Yang’s mentioned, but where’s Filo and who the Hell is going to head up the audience group (and why can’t Yahoo find anyone internally to take this on)?
People matter, of course, but in this context strategy matters even more. Faster movement is dangerous if you have no sense of direction. It just means you do more things more quickly, spreading that peanut butter even more thinly. To paraphrase an old quote by Casey Stengel: “if you don’t know where you are going, you will never get there.”
And let’s not just single out Yahoo. I have a growing sense that all the major Internet players – Google, MSN, Amazon, Ebay and AOL – have lost their sense of direction and differentiation. Rather than carving out and rapidly enhancing areas of distinctive advantage, these major players appear to be leaping like lemmings into the red ocean.
Here are some of the red flags that give me cause for concern:
- Rather than helping people to connect more effectively with resources across the Web, they all seem increasingly focused on aggregating their own resources.
- They are becoming more and more obsessed with advertising revenue and risk losing focus on what is required to add more value to users. Advertising revenue is a dangerous narcotic – it shifts you more and more into a vendor mindset rather than a user mindset.
- They are investing large sums of money on infrastructure, further diverting time and attention away from development of new services for users (infrastructure services like Amazon’s EC2 and S3 are a very different business).
- They seem to be looking more and more at each other and trying to replicate each other’s services rather than focusing on the user and trying to be truly innovative in terms of new services.
Now, this growing homogenization of the leadership ranks might be understandable if the Internet were a maturing business arena. Given the rapid and sustained pace of innovation in the underlying technology, the rapid growth of usage, the continuing shift of spending to the Internet and the proliferation of new businesses created on the Internet, I find it hard to characterize this space as “maturing” – my sense is that it is still in its infancy.
Some observers have even begun to hail the emergence of “Internet conglomerates” as the wave of the future. Looking from the outside in, one can make explicit the assumptions that seem to be driving the investments, business initiatives and strategies of these leaders. These assumptions seem to converge on this view of the future: leading companies will be vertically integrated and horizontally integrated, offering a broad range of their own resources to users who will “settle” into their spaces. Certainly, the strategies of these companies seem to assume that Internet conglomerates are the wave of the future. Is this really the way the Internet will evolve as a business platform?
As I have written in Harvard Business Review, I believe that a quite different future will unfold, marked by a distinctive process of unbundling and re-bundling of firms. This perspective suggests that all the Internet leaders confront the same difficult choices that more traditional companies also face. Over time, will these companies choose to be customer relationship businesses, product innovation and commercialization businesses or infrastructure management businesses? None of the Internet leaders appear prepared to confront these choices yet.
Of course, there’s another interpretation of the initiatives pursued by the Internet leaders. They may be explicitly avoiding any view of the future and instead spreading their bets across many initiatives in the hope that some of these bets will pay off while others will prove to be dead-ends. Nick Carr refers to this as the spaghetti strategy – “throw a lot of stuff against the wall and see what sticks.”
As uncertainty increases, this has become the preferred “strategy” of many companies, not just in the Internet sphere. While strategy used to be viewed as the discipline of making choices, this approach proudly rejects the need to make any choices. It is a particularly seductive approach for large companies with lots of resources.
And yet this approach stands in sharp contrast to the strategies that enabled the Internet leaders to carve out their leadership positions in the first place. Unlike the thousands of other dot.com start-ups that embraced hustle as strategy and speed without direction, the founders of these companies started with a very clear, even though high-level, long-term destination in mind. It helped them to make difficult choices in the near-term and to launch waves of initiatives that cumulatively built very large and successful businesses. It has stood them very well in the first decade of their business.
In my own work, I use a FAST strategy methodology. It emphasizes the need to have a clear, but high-level view of a long-term destination while in parallel focusing on a limited number of high impact initiatives in the operations and organization that can accelerate movement towards this destination. What the Internet leaders seem to have lost is any distinctive long-term view of what kind of business they will need to build to remain successful in a rapidly evolving business landscape.
People can be moved in and out of executive positions. Large, high visibility acquisitions can be announced. “Strategic” relationships across leading companies can be negotiated. But without a clear and differentiated sense of long-term direction, all of these initiatives will make for good newspaper copy, but count for little in terms of sustained value creation.
February 2nd, 2007
Here’s a report you’ll be interested in: The Globalization of White-Collar Work: The Facts and Fallout of Next-Generation Offshoring from Duke’s Fuqua School of Business and Booz Allen Hamilton.
The news? Apparently offshoring is no longer “all about moving jobs elsewhere; increasingly, it’s about sourcing talent everywhere.”
And: “…what used to be a tactical labor cost-saving exercise is now a strategic imperative of competing for talent globally. White-collar work can be performed where it makes the most sense and saves the most cents. More important, a looming shortage of technically trained talent, such as engineers and computer scientists, in advanced economies will require the ability to source and manage such talent globally.”
Here are the 5 main points:
1. Labor arbitrage is giving way to accessing talent as the primary driver of next-generation offshoring.
2. Offshoring high-skilled functions does not replace jobs onshore.
3. Companies look elsewhere because they can’t get it at home.
4. Where you offshore depends on what you offshore.
5. The obstacles to successful offshoring are increasingly internal and organizational.
The reports also says that higher skilled jobs (like R&D, Marketing, and Design) won’t go away because of this growing global talent shortage. Instead firms will compete globally for brain power, regardless of location.
Sorry, I don’t buy that. China’s working hard on educating the next generation of designers, and in India you’re going to see the next generation of innovation. (I’ll get John Hagel to talk about this soon.)
December 25th, 2006
Teaming is one of the two disciplines for achieving performance in small groups.
In addition to keeping groups small, the team discipline revolves around needed skills, shared sense of purpose, goals and how to get along and work together, and mutual accountability — all of which make these findings from Grovewell must reading for folks in cross cultural teams.
We are all human — we bring with us beliefs and behaviors that reflect ‘how we do things around here’. Increasingly, more and more of us absorb and practice such values in organizations.
Still, the forces of national and ethnic culture remain the starting point because of family, because we ‘grow up’ in contexts heavily influenced by those cultural dimensions. The shift from place to organization going on around the globe holds both promise and peril — but surely one potential advantage comes from blending the best of various cultures into ‘how we do things around here’ in our organizations. Teams are powerful crucibles for making this happen because they are small thick we’s with an orientation toward performance — toward some objective purpose that brings us together meaningfully.
As the Grovewell research shows, achieving performance requires small cross-cultural groups using the team discipline to grapple with how to get the best from values that are seemingly at odds, such as:
1. Individualism versus group orientation
2. Hierarchical versus democratic distribution of power
3. Content-focused versus context-focused communication style
4. Formality versus informality
5. Punctuality versus flexible sense of time
6. Task and goal orientation versus relationship orientation
7. Deductive versus inductive reasoning
8. Holistic versus linear thinking
9. Confrontation versus diplomacy/face-saving
10. Short-term versus long-term viewpoint
11. Competition versus cooperation
12. Loyalty to particular people versus obedience to universal rules
13. Self-determination versus acceptance of fate/circumstance
14. Religious versus secular worldview
15. Permissiveness versus strict rules/regulations
16. Pragmatic flexibility versus adherence to detailed plans
17. Achieved versus ascribed status
18. Change as positive versus tradition as revered
19. Youth orientation versus age veneration
20. Male dominance versus gender equality
21. Rigid class structure versus social mobility
22. Action/doing versus contentment with being
Much turns on the attitudes with which these questions are approached, especially how best to respect differences while finding a shared path to performance that matters.
Folks who jump straight to ‘good versus bad’ step into unpromising territory.
In contrast, those who take the time and make the effort to understand nonjudgementally will build the initial respect and trust required for more difficult choices about the best path to performance.
The Grovewell piece speaks specifically to cross-cultural teams. Over thirty years of experience with small groups, however, suggests to me that several of the items listed apply just as much to folks coming from different organizational cultures (e.g. in a post-merger integration team) and different functional/expertise cultures (e.g. marketing versus engineering).
December 20th, 2006
Booz Allen Hamilton’s annual study of the world’s 1,000 largest corporate R&D budgets uncovers a small group of high-leverage innovators who outperform their industries.
Specific findings include:
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Deep pockets can be dry wells. Analysis of the 2005 Global Innovation 1000 confirms the major finding from our initial study last year: Money simply cannot buy effective innovation. There are no significant statistical relationships between R&D spending and the primary measures of financial or corporate success: sales and earnings growth, gross and operating profitability, market capitalization growth, and total shareholder returns. Gross profits as a percentage of sales is the single performance variable with a statistical relationship to R&D spending.
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Less than 10 percent of companies are high-leverage innovators. Compared with others in their industries, only 94 of the companies in the Global Innovation 1000 produced significantly better performance per R&D dollar over a sustained period.
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Companies are getting better at squeezing benefits from R&D spending. R&D spending by the Global Innovation 1000 rose last year by more than $20 billion, but revenues rose more.
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Bigger can be better, even if it doesn’t boost breakthroughs. Scale provides advantages to R&D spenders. For the largest 500 companies, ranked by revenue and indexed by industry, median R&D spending was only 3.5 percent of sales in 2005, compared with 7.6 percent for the 500 smallest firms.
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Patents generally don’t drive profits. Boosting R&D spending can increase the number of patents that a company controls, but there is no statistical relationship between the number or even the quality of patents and overall financial performance.
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Masters of the innovation value chain have an edge. The high-leverage innovators and the companies with best overall performance distinguish themselves not by the money they spend, but by the capabilities they demonstrate in ideation, project selection, development, or commercialization.
December 15th, 2006