Wednesday, March 31, 2010

Strategic Decision-Making: Bottom-Up or Top-Down?

One of the many challenges facing business leaders when changing strategic direction or reviewing new opportunities is knowing how or when to involve the company at large in the process. It used to be that strategy was strictly for the Board of Directors or the most senior executives and it's true that the final decision -- the buck -- stops with the CEO and perhaps a few executives at the top. However, there is a golden opportunity to engage the workforce up front so that they know what they are going to execute and why. This approach also can make for better decision-making.

A few thoughts below on why gathering ideas and information as well as assumption-testing and implementation is a Bottom-Up process while the final decision is Top-Down.

Diversity of Thought: Once we get to the top of wherever we are, we tend to share the space with others who think like us. Introducing other people who are at the front end with customers and suppliers or who have a unique perspective like Human Resources, Marketing, etc. will provide a broad spectrum of information and insight that is invaluable when evaluating opportunities. Experience tells me that there is always at least one person who brings a point of view so different from the business leaders and so on the mark that it changes the course of strategy development for the better.

Utilize Bias: Rather than thinking of bias as a negative, consider it a necessary part of evaluating strategy and opportunities. Our experiences and the work we do shape our perspectives; we recognize other peoples' biases and tend to view them unfavorably unless they mesh with our own. The leader's job is to acknowledge the biases, including her own, balance them with good dialogue and help the contributors have their say without dismissing their ideas prematurely.

Use Scenarios: It's a rare thing to find that a strategic decision is correct 100% of the time. There are complex ideas, a lot of information and many assumptions that go into the process. There also is a need to avoid paralysis and make the best decision in the time available. That's why it's critical to have all assumptions documented with alternative scenarios or plans in the wings to course correct. The worst case is having the company execute the strategy, get a long way down the road before it's discovered that certain assumptions were incorrect and the strategy is flawed. Aside from wasted time and resources, employee could see the failure as their own and will be reluctant to get behind the next important decision. It's important to let employees know that testing assumptions is part of strategy execution and that raising a red flag is a critical part of their jobs. This is how successful strategies are designed: they aren't perfect 100% of the time at the outset but there is a process to modify and move on.

Make Timely Decisions at the Top: That's the job of the CEO. It's why they are called decision-makers.

Use Strategy Maps, Metrics and Scorecards: Translating complex ideas into visual representations and creating metrics that test the success of a strategy are both helpful tools for the business leader and employees who have to implement. It isn't necessary to invest in sophisticated technology. Below are a couple of examples using only the software on our laptops (thanks go to my business partner, Cathy Missildine-Martin, SPHR for creating these).

Scorecards should be created at the lowest level that can be properly measured and aggregated. Metrics are relevant to that level (can be aggregated or disaggregated) and are designed to help everyone understand what is being done, what they are responsible for and how they are contributing to the success of the company. Isn't that the definition of engagement?

So, the final decisions including those that pull the trigger or the plug as well as the tools and the responsibility for idea gathering is still Top-Down. Idea generation, testing assumptions and providing feedback on what's working and what isn't is Bottom-Up. It's a two-way street.

Tuesday, March 23, 2010

Better. Faster. Cheaper: The Evolution of Competitiveness

I've been getting ready for a webinar on how to design a winning strategy, which meant some research to emphasize the point that strategy isn't dead or even on life support. It's just that for some, the last decade meant getting real big (and rich) real fast; and strategy seemed so yesterday. Who had the time? Maybe if those responsible for two bubbles in the last ten years had taken time to figure out how to really create wealth and not play shell games, the global economy wouldn't be in a shambles.

When I first started in strategy development, it was called "corporate planning" and while it was valuable for decision-makers, it also had such a long cycle that the plan was out of date before it was bound (yes, we had nice binders). So, the planning part had to go away but in the process, the real substance of strategy got lost for a while.

I put my research into a timeline (see below) and it was impossible to lose sight of the enormous changes in the business climate since WWII. During each major cycle, lasting about twenty years, companies adapted to the forces shaping the economy and the climate for business. Each cycle was created by unique circumstances and the successful companies developed new strategy as well as tools and techniques that not only ensured survival but in many cases, created a unique advantage and wealth. Businesses were getting Better. Faster. Cheaper.
As the business climate entered a new cycle, what was a competitive advantage or a winning strategy had become at best, the cost of doing business and at worst, a commodity.

As we enter the 21st century, we've wrung the efficiencies from process reengineering; we've de-layered and downsized people; off-shored jobs and invested in the same technology everyone else has. Now what? Where is growth coming from?

I think companies will set themselves apart by living up to their Mission (Purpose) and by standing up for their Values. Their real competitive advantages will be people, even though the traditional workforce may not exist. Ideas will be the new currency and innovation the new capital. Even economists are using tools called "Behavioral Economics" to explain market forces instead of relying on traditional financial tools. Companies that develop strategies for this new cycle before anyone else will be Better. Faster. Cheaper. Then, I had an epiphany: this is what the Engagement Thing is all about. It's not a program or slogan or campaign. It's about design: integrating elements that are unique to you and creating a company that Engages. This could be your winning strategy for 21st century growth and business results.

Or, if you think it won't happen, sit back and watch what all of the burned out employees, self-starters, young entrepreneurs and Boomers looking for an encore career do with Engagement.

Is your business ready for this new cycle? How are you going to be Better.Faster.Cheaper. Is your company Engaging?

Monday, March 15, 2010

Values Matter: Is Your Compass Pointing to True North?

I read an interview the other day with the CEO of a major retailer who talked extensively about the impact of the company's values, called Foundation Principles, on how the company is run. I consult with clients on strategy, so I'm interested in companies that 1) have actually thought about their Values; 2) have articulated them; and 3) lead by them. Values can be the compass that guides business decisions, large and small and in my view are necessary precursors of a well designed strategy.

There are seven Foundation Principles according to the web site and each one is articulated in detail. It is interesting that the CEO blogs on the site, so at some level, he models the Leadership=Communication Principle. Job postings on described the company history and its Principles, a departure from the usual list of job requirements. That seemed to follow the 1=3 Principle whereby one great hire is better than 3 good ones. The posting would attract those who feel a fit with the culture.

There are a lot of leaders who truly believe that their companies are run according to established values so I decided to do some research to find out if employee and customer comments mirror the Principles. Customer comments and reviews that I found were full of high praise and good reviews so the Principles of Creating Mutually Beneficial Relationships and an "Air of Excitement" seemed to be part of the customer experience. Then I looked for employee feedback and found quite a few recent ones that unfortunately were not all positive. On a 5-point scale, employees rated the company a 3.1 and gave the CEO a 47% approval rating. Why the disconnect with the other data?

Extreme views generally get posted but as there were as many 5's as 2's, the scores were not negatively skewed. Not one negative comment was about pay. Many mentioned a new scheduling system; others talked about their manager or losing a benefit or lack of a career path. They talked about how things "used to be". It's easy to dismiss disgruntled employees' rants except that sometimes, they are leading indicators of something amiss internally. Unhappy employees today; unhappy customers next week.

The funny thing about values is that when you talk about them, institutionalize them and use them as key differentiators, people tend to take them seriously. Especially employees and customers. They think you'll really do what you say. This company's values don't need to change. That's the point of values: they are enduring. They guide and are the foundation of culture, strategy and engagement. They are a bulwark against lapses of judgment. A couple of thoughts:

  • Listen to your employees. Let them talk and be involved. If they are involved in a dialogue internally, it's less likely they will be ranting externally.
  • Walk the talk. At all levels. Middle managers are accountable, too.
  • Clear, credible communication. Communicate the tough decisions in a way that employees understand the "why".
  • When your employees describe your values as "Kool-Aid", it's time to take a long look at your culture. It could be broken and that is hard to fix on the fly.
Is your company built on a foundation of values? Can your customers sense them in their interactions with your employees? Do your employees believe that your values are more than a plaque on a wall?

Wednesday, March 10, 2010

Too Loyal to Fail: 4 Ways to Inspire Customers

Ray's Candy Store stands on the corner of Avenue A and Seventh Street in New York City. It's an all night slice of life on the east side of Greenwich Village that for the past 37 years has delivered all kinds of food 24/7 -- essential if you've ever lived in Manhattan.

For the past few weeks, customers have been helping out at the store, running deliveries and staging two fund-raisers to help the owner, Ray Alvarez, pay overdue bills. Other customers are helping to sort out an insurance issue by providing the labor to install a necessary piece of equipment so he can continue to provide his Belgian fries, a staple of his operation.

Ray Alvarez has built up a huge store of social capital in his neighborhood. At a time when some businesses are "too big to fail", others struggle to survive. Businesses of all sizes should stake stock of their own stores of social capital if they are going to enjoy the kind of customer loyalty today that will fuel growth. Ray Alvarez's tale holds lessons for all of us who run a business, no matter what size it is.

Know Your Customers (And Let Them Know You): Nothing makes us buy more and tell people about it than companies who make us feel special. When people feel a business knows them, it creates an important emotional connection. Customers buy from companies they've researched (so feel they know), have heard about or have experienced. How are you connecting with customers? Are they part of a larger community you've created for them? Are you using social media to be part of a networked customer base? It's much more than slotting buyers into marketing segments.

Give Customers an Experience They Can't Get Anywhere Else: What experience do your customers expect from you? Does your culture support an experience your customers deserve? Ray's delivers any time of the day or night and has created an oasis of old New York in a neighborhood taken over by expensive wine bars and chain coffee shops.

Customers' Memories Are Long; Don't Forget It! The adults who now are rallying to preserve Ray's Candy Store were the children and teenagers who remembered getting a break from the owner when they didn't have the money to pay for their orders. What memories of your company do you create for your customers?

Don't Squander Your Social Capital: Over the years, Ray has employed people from the neighborhood and they've stayed for decades. His customers describe his store as "an icon of our childhood" and think of him as a friend. Even Ray's landlord, who could have attracted another trendy retail outlet to his building, is working with his tenant to ensure that the store remains part of the fabric of the neighborhood.

Social capital is a currency that is easily devalued by the memory of poor experiences and a sense of buying from a company that acts too big to care.

How are you creating memories, networks and connections for your customers? Do you really know them? Do they really know you?

Tuesday, March 2, 2010

The Wisdom of Strategy

In his Wisdom Manifesto, Umair Haque shreds the idea that strategy development is anything other than a wallet grabbing scam for consultants. I'm trying not to be hurt by this sentiment, but it's hard. The author suggests that strategy be replaced by organizational "wisdom" and goes on to offer some rather pithy contrasts between the two concepts. My question is: why is it either/or? Why can't strategy design and wisdom co-exist? I don't believe they have to be mutually exclusive. In fact, where would strategy be without wisdom and vice versa?

Let's start with some definitions to establish whether strategy and wisdom are exclusive. Wisdom is the ability to discern or judge what is true, right or lasting; insight. Strategy is a plan of action designed to achieve a particular goal. Logic dictates that applying wisdom to a business opportunity is absolutely correct. An example of strategy without wisdom is the Dot Com bubble, when a sock puppet could appear on television to persuade you that buying pet food over the Internet instead of the grocery store was an idea whose time had come (RIP, Sock Puppet).

Umair Haque suggests that wisdom ignites, energizes and channels. Maybe, but to what end? As Walter Kiechel, author of The Lords of Strategy suggested recently in a Harvard Business Review interview, "If you don't think strategy is important, look at what happened to GM and Chrysler when they forgot about their customers and how to meet their needs." And then there's Toyota, who seemingly abandoned a 60-year strategy that frankly had been working well, and pursued a growth-at-all-costs strategy (and what a cost) without bringing its considerable wisdom to the opportunity. Strategy without wisdom is not confined to the auto industry, sadly.

Strategy allows businesses to think about their people, operations, customers and opportunities in an integrated way. It doesn't have to be painful or drawn out or rely totally on numbers. As Walter Kiechel suggested, a new way of thinking about strategy design today is bringing together people and analytics in a systematic way to be more granular and to become adaptive.

A process I've used for twenty years, adapted over time because of shifts like globalization and prcess engineering and the like, strongly relies on organizational wisdom.

  • Values: know your Purpose and what you are about. In a crunch, do you stand by your Values or jettison them?

  • Know where you are now: your competitive environment, your market(s), competitive advantages, customer base and internal resources including debt structure and access to financial capital.

  • Frame the opportunity(ies) that are present. Assess the risks to your existing environment that each opportunity presents and the rewards that could accrue.

  • Close the gaps so that your existing business is not strained beyond it capacity to absorb the inevitable change that new opportunties bring with them.

  • Develop scenarios ("What if...") Changes in strategic direction never happen in a vacuum. Assumptions should be documented and become the source of a Plan B, Plan C, etc. Scenarios allow swift course correction when necessary.

  • Use action plans to execute the strategy and metrics/scorecards to measure the reality against expected results.

  • Keep on keeping on. Strategy design should be on the agenda of every Executive Committee and Board of Directors meeting. This is not a once a year project.

Does your business engage in systematic thinking about your future? Do you apply organizational wisdom or fly by the seat of your pants? Or, do you think the environment is too complex to design a long term strategy?