Archive for February, 2011

Adaptive Strategy – A Way To Profits In The New Normal?

Monday, February 28th, 2011

The types of strategy required to be successful in an economy and society, in which there is more uncertainty and a faster pace of change than ever before, is generating a lot of discussion. (See Why Strategy Is Still Worth A Business Owner’s Time.)

Adaptive Strategy is an alternative developed by The Boston Consulting Group (BCG)1. Here’s how I think it applies to owner managed businesses.

Adaptive strategy is built on the 3 R’s required in a changing environment2.

1. Responsiveness (or agility). Means a company can respond quickly to changes in the market and begin to act while plans are still being finalized; is flexible in process and structure; and can deal with short cycle times. This should be an advantage for small to mid-size owner managed businesses which, by nature, can react to change more quickly than corporations.

2. Resilience (or robustness). Is a characteristic of owner managed companies which have strong balance sheets and good cash flow. They also must be good at thinking through all of the alternatives, having contingency plans and hedging bets. This gives them the ability to withstand any surprises.

3. Readiness (or anticipation). Is a result of how well a company stays in touch with its market – the quantity and quality of information it obtains from customers, suppliers and other industry players. This can’t be left to front line people. The owners and managers must get out there – they are the ones who use the information to think through different scenarios and improve forecasts.

An adaptive approach is applied using a 4 step closed loop process.

An adaptive strategy is a dynamic approach in which better-fitting strategies continuously evolve in response to change. It is applied via a 4 step process.

Step 1 – Variation (or innovation). A company continually looks to vary the status quo by targeted innovation; natural or proactive modification of internal practices; responding to signals from the economy, customers, competitors; and by leveraging the innovative capabilities of external resources e.g. suppliers.

Step 2 – Selection. The most promising variations/innovations are selected by e.g. pilot projects, limited and full-scale tests conducted directly in the marketplace.

Step 3 – Amplification (or scaling up). Those which show the greatest potential are quickly scaled up. They become a permanent part of the company’s routines and offerings by e.g. allocating resources to them.

Step 4 – Modulation. Modulation is simply fine tuning the application of the first 3 steps in response to what is happening in the marketplace and the company’s goals.

You may feel that you’ve seen each of the steps before. But BCG argues that the way in which they’re combined and applied is what makes adaptive strategy unlike classical strategy in a number of respects.

Practically, the most important difference is that the adaptive approach largely removes the distinction between planning and implementation, since successful strategies emerge from practice rather than from analysis and design.

It’s almost an extreme form of strategy by evolution.

Last words.

Can adaptive strategy be applied in owner managed businesses?

BCG has identified 4 situations in which adaptive strategy can be applied and well-known corporations which fit those situations. I’m not sure if the corporations pro-actively employed adaptive advantage or if BCG is fitting their actions to the model.

I’m waiting for more evidence.


1 Kilian Berz, Managing Director of The Boston Consulting Group (BCG) Canada  – presentation to the Canadian Association of Management Consultants (CAMC) and Cost and Management Accountants (CMA) in Toronto on 16 Feb 11.



Too Early To Tell If It Will Be A Good Year? Think Again!

Saturday, February 26th, 2011

Do you think mid-February – only mid-way through the first quarter (Q1) of the 2011– is too early to tell if you’ll have a good year? Keep reading and in the next 3 minutes you may have an answer.

The first 2 warning signs are based on the answers to questions we asked in our November 2010 survey. Do they apply to your business?

1. A surprising warning sign. 

Feeling confident because you have a planning process in place and you completed it early enough to get your forecasts and budgets finalized and distributed?

When 50% of the respondents to the survey said they would miss their goals and expectations for last year, 2010, we were tempted to think that it was a result of poor planning. But a sample of individual responses revealed that many of them said they had a structured planning process and finished their planning before the start of each new fiscal year.

This raises some questions about the effectiveness of their process;
• How well did they know what their customers were thinking?
• Were the assumptions underpinning their goals/forecasts too optimistic?
• How well did they actually execute on their plans – by turning intentions into actions?

Clearly, you can’t assume that because you follow a planning process you’ll get the results you want.

2. A not so surprising warning sign.

Almost 38% of the respondents told us that they only finished their planning for the year during the first month or later. So, if we assume that they finish planning before they begin executing, when do they actually start taking action? It must be well into Q1.

If companies that have a structured process and plan well in advance of a new fiscal year still miss their goals – what chance do those who only finish in January have?

3. A related warning sign.

Tibor Shanto, who trains sales managers and their teams, quotes some research in his latest newsletter which suggests that how a sales team executes in Q1 will determine whether or not they will make their year. It concludes that a sales manager should know by the end of Q1 whether she/he will make their year or not.

4. What does this all mean for you?

Over 50% of our respondents expected their profits will be higher in 2011 than in 2010. We believe some of them are going to be disappointed.

Will you be amongst them?

You should know by now if your Action Plans are being implemented on schedule. Comparing your actual results/progress against them may tell you if they’re going to work. But that still leaves the question of whether they are the right ones.

By the way, if you want a quick, inexpensive objective opinion of your planning process and Action Plans, our Tune Up delivers exactly that.

Strategy – Don’t Think It, Experience It

Monday, February 14th, 2011

1. You need to feel the strategy.

Getting employees to buy in to a strategy is considered key to its success. To do that, business owners communicate their strategies so that each employee thinks about what it means for her or him.

But now there’s an argument that this isn’t good enough and that there’s a better way(1) .

The current approach hasn’t solved the problem of turning strategy into results. Execution fails because thinking isn’t enough.  Behavioural change is required in order for strategies to work and to get that employees need to experience the new strategy at an emotional level.

2. How on earth can you feel a strategy?

Strategies are intangible; they’re ideas and images of how to move from the current reality to a future state. So how can they be experienced?

For a start people seek out things that feel real to them – even although they know its part reality and part fantasy, for example, “reality TV” shows. Research says viewers aren’t looking for the truth, but the satisfying authenticity when reality interacts with desirable situations.

Next, remember that intangibles take on form and concreteness when they are expressed in words. So a strategic intent – combining the current reality and the idea of a better future – can be expressed as a story about the company’s future. Not entirely a new idea, I hear you say.

But a story isn’t enough to bring about behavioural change.

The story has to be strong enough and presented in a way that it can’t be ignored. It has to catch employees’ attention. Research shows that things people consider interesting gets their attention – and they don’t even have to be true!

People consider a story that combines the familiar with the novel interesting. Not because it states the obvious but because it offers the possibility of something not at all obvious. It can’t be too radical or employees won’t believe it – and the goal is to suspend disbelief. Employees have to want, or desire, the better future.

For example, when a new leader took over the New York Botanical Gardens he started the planning process by declaring “We are a museum of plants, not a park.” Employees easily understood the difference between the two and had the desire to change the Gardens from a park to a museum as a way of escaping from dogs, cars and picnics.

And it’s the shift from seeing the outcome as goals to be achieved to an emotional desire that drives the behavioural change required to execute successfully.

3. How do you develop a strategy you can feel?

Two things have to change. The argument goes like this.

The current strategic planning process stifles creativity and innovation because of its analytical approach and it favours incremental over substantive change. It is not in tune with the fast-moving, fast-changing world we live in. (Where have we heard that before?)

The process described above will enable employees to feel the company’s strategies are meaningful and compelling at a personal level. Once they care about the strategies they’ll adopt the new behaviours required to execute them.

4. Let’s sum all that up.

According to this new school, strategy as thought – effective communication of strategic plans that have been developed by top management and using metrics to measure the implementation of the outcomes – doesn’t translate into execution.

On the other hand, strategy as experienced – dialogue involving as many people as possible, using stories and metaphors, sustaining itself by the energy it produces – drives behavioural change.

I like the concept of strategy as experience but I’m having a hard time with the implementation.

What do you think?

(1) “Strategy As Experienced”, Jeanne Liedtka, Rotman Magazine, Winter 2011, page 29.

A Vision – Is It Worth Investing The Time?

Thursday, February 3rd, 2011

1. Yes, and you don’t have to take my word for it.

We are regularly met with a lot of scepticism when we talk to business owners about the need for a vision. But developing one can yield a tremendous return for the time invested.

And you don’t have to believe me.

There’s an article called “Step Into The Future” in the current issue of Inc. magazine written by Ari Weinzweig, a co-founder of Zingerman’s Community of Businesses in Ann Arbor, Michigan.

2. Three reasons why a Vision is worth having.

The original business opened in 1982, almost 30 years ago. Zingerman’s Community of Businesses now has annual revenues of around $37 million, 500 employees and 17 managing partners. They are successful by several different standards of measurement.

“It’s safe to say that we wouldn’t be where we are without visioning” according to Weinzweig.  He’s asked regularly for business advice, often by people looking for the silver bullet. While that doesn’t exist Weinzweig says “There is one thing I wish I had understood more clearly from the get-go – the power of visioning”. And that is one very compelling reason for investing the time.

“When we do effective visioning, we’re moving toward the future we want……..” Weinzweig gives an example of a vision they wrote in 2005 for a new venture that had still to get off the ground. Three years later the successful business actually mirrored the vision in key respects.

Having a vision is fundamental to developing and executing an effective strategy. The vision lays out where the company is going; the strategic plan tells everyone how the company will get there. It also becomes easier to choose which opportunities to pursue when they arise. The first question is always “Will it help us achieve our vision?”

“A great vision is inspiring” and gives everyone a reason to come to work. Weinzweig uses a great analogy. He likens a vision to a cathedral, a lasting monument, the tangible evidence of a group’s dreams and hard work. (Fans of Ken Follett’s book “The Pillars of the Earth” should find it particularly easy to relate.)

3. Three ways to make effective use of the time.

Eight Steps to a Vision is the name Weinzweig gives his process. Three of the steps involve drafting and re-drafting with gathering data and assessing trends etc. saved for strategy development.  So it doesn’t require a lot of time to complete. 

His structure is similar to many others, including our own. Most are easier to use than business owners imagine.

Use questions to get things moving. Asking questions about specific aspects of the future make it more tangible. Weinzweig lists 14 questions covering topics you would expect – such as how to measure success – and some topics you wouldn’t – e.g. what the owner does all day.

In our process, we circulate a few questions to key participants in advance. It helps them feel prepared, which makes it easier for them to participate.

Don’t sweat the details. Inevitably, at some point, the discussion will move to the action steps required to achieve the vision. Save these for the planning session. They’re great input but not required during visioning – which is more about passion than detail.

4. Wrapping it up.

I think one reason for scepticism is that business owners confuse visioning – a process – with the vision – an output. 

And a few years ago developing a Vision was the fashionable thing to do, a fad, a silver bullet. As a result framed Vision Statements, many of them meaningless platitudes, littered reception areas.

But Weinzweig and Zingerman’s are evidence that visioning works and that the ROI on the time can be very satisfying.

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