Archive for March, 2012

Strategy, Productive Paranoia and Boiling Frogs

Tuesday, March 27th, 2012

A friend of mine, who is a social media strategist, talked in a recent blog post about what happens when companies hang on to a strategy for too long.

Jeremy Miller believes that they either:

  • Never live up to their potential (even if they make a profit and do good work).
  • Or they stagnate and decline.

The reason they hang on to their strategy, he says, is because it’s hard for owners and their teams to accept that they need to change when things – top and bottom line – are going well.

I know that’s true from my experience over the last 10 years at ProfitPATH – and also from  my corporate days, where I experienced it first-hand.

Jeremy mentions that, in the book The Lean Startup, Eric Ries argues that a business must constantly evaluate whether to persevere with their strategy or “pivot” to a new one.

But how do you know when to pivot or change a strategy?

I think the need to change (and therefore the timing) is driven by events. I gave some examples of them in early February 3 Times You May Need To Change Your Strategy

But, if it’s driven by events, is waiting for them to happen leaving things too late? Yes, possibly – maybe even probably.

So how do you anticipate events before they occur?

Ries’ theme of constant evaluation is echoed by Jim Collins, in his book Great By Choice. Collins’ research shows that one of the things the leaders of successful businesses do is instill a “productive paranoia” in their culture. They and their teams are always thinking about and discussing things that could change in their world – and how those changes would affect them.

This type of paranoia is productive because it gives successful companies the opportunity to consider their response – as opposed to reaction – to the events beyond their direct control.

But to be productively paranoid the owner and her team must refuse to succumb to 2 temptations.

The first is to simply be paranoid – in the conventional sense. Owners who do that are in a constant state of (over) reaction and are likely to change strategies too soon and too often.

Remember, there’s a world of difference between a response and a reaction.

The second is the temptation to become complacent. It is hard enough to accept the need for change when a company is successful. And the longer the success continues the more likely it will produce feelings of security, even invincibility and, that least attractive and most destructive of human characteristics – arrogance.

So what’s an owner to do?

No owner sets out to become complacent – that’s not the issue.

The issue is that it can be hard to recognize a problem when you’re right in the middle of it. In fact they even have a name for that.

It’s called the boiling frog syndrome.

So when someone tries to tell you something about your business which you think is wrong, misinformed, or even ridiculous, take a moment to do the “Man (or Woman)  from Mars” test before you dismiss them out of hand.

Don’t know what the “Man (or Woman) from Mars” test is? Call me and I’ll be happy to tell you for the price of a cup of coffee.

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Do You Know What You Don’t Know?

Friday, March 16th, 2012

It’s really important to know what you don’t know.

But it’s even more important to be able to admit it to yourself.

When I started my company almost 10 years ago I made a list of everything the consultants I’d hired in my previous life had done which annoyed me.

ProfitPATH’s values statement is to do the opposite of everything that is on that list.

Something that really annoyed me was….

….having a consultant tell me that they could do something when they knew there was someone else out there who could do it better.

It meant that I paid them to learn, or perfect, a new skill or technique. Then they inflicted a sub-standard (compared to the more knowledgeable or experienced third party) performance on my company.

In the best case they wasted time, slowing me down while they got up to speed. Meaning it took me longer to achieve the results for which I was accountable.

In the worst case they didn’t master the topic or process well and that adversely affected our performance.

I felt so strongly about this type of behaviour that it was near the top of my “hate” list.

Not doing it became one of our primary values. One, I know, that has cost us revenue over the years. But I’m comfortable with that – we didn’t get into consulting for the short term and we’re not in it for the short term now.

But what happens when…

….a business owner, a potential client, knows what they don’t know – but won’t admit it to themselves or anyone else?

One of the things I’ve learned, now that we’re the consultants, is that this situation does arise – in companies of all sizes.

In my experience there are 2 possible outcomes.

The first is that the owner will go ahead and make decisions or take the company into areas that they’re not equipped to deal with. And, sooner or later, they will make a mistake.

How wide ranging the impact will be depends on a number of factors.
In the best case it might mean a minor setback. In the worst case it could seriously affect the company’s ability to operate and the livelihood of the employees.

The second possible outcome is that, rather than seek out or listen to advice, the owner will do nothing. It could be argued that this is the better alternative.

However, it’s not, it’s also a mistake. It means avoiding decisions, or putting a halt to initiatives, which could have benefited the company and the employees. And doing it knowing there are people out there who have the skill, knowledge and experience required to be successful.

If the owner continues to take this approach she or he could be the factor that limits the growth of their own company.

The moral of the tale is…..

My Mum used to say that 2 wrongs don’t make a right.

Here we have 2 different parties – consultant and business owners – doing the same thing wrong.

The result, the outcome will be the same. And it won’t be the best one for the company.

That’s just not right.

It Starts With A “Corny” Story

Friday, March 9th, 2012

Ever been in a situation when you see or hear something – and then a few days later you see or hear a variation of it?

That happened to me this week.

It started when I read a blog post called “What You Can Control in a Tough Business Climate” by Karie Willyerd.

A “Corny” Story

She describes how, as communism came to an end in Romania, bureaucratic decision making resulted in a cornfield being divided amongst local farmers.

Each farmer was given 2 rows.

They didn’t – or wouldn’t – collaborate so the results of each individual’s work could be easily compared with those of his or her contemporaries.

When the following summer came, the quality of corn which grew varied widely. Some rows produced knee-high, healthy plants. Others produced shin-high plants which were sad to see.

Willyerd’s point is that everyone had been given the same seed and fertilizer and so the difference in results was caused by the people and the decisions they made.

And now to business….

Next she describes a study she conducted with some colleagues.

The goal was to determine if simply executing a business strategy, regardless of what it is, would make a difference to the value of a company.

They focused on the 4 variables they believe are the foundations for the ability to execute. And they found that improving any of them produced an increase in the company’s value.

But they found that 2 of them – aligning goals throughout the organization, top to bottom and across; and identifying and treating high performers differently than low performers – produced the greatest increase.

Putting it together

Willyerd believes that in business, as in farming, there are many factors which can’t be controlled – e.g. drought and the performance of the economy.

So the key to success is to focus on those that can be controlled.
A company’s ability to execute its strategy is definitely one of those.

Two other controllable factors are:

  • Whether the owners, and their management teams, communicate explicitly with every member of their team and align them behind the company’s goals (derived from the strategy). If they don’t parts of the company may meet the business owner’s expectations, but others won’t.
  • People are the seeds of the growth, and ultimately the value, of a company. Owners should, therefore, surround them with resources and nurture them with benefits – particularly the high performers.

The Variation

As you know if you saw my last post, I’m reading Jim Collins’ book Great by Choice. In it he compares pairs of companies in 7 different industries to determine why one did well in uncertainty, even chaos, while the other did not.

Collins’ main theme is that the successful companies focused exclusively on the things they could control. And they kept on doing it no matter what was happening to the things they couldn’t control.

The final chapter talks about the role of luck – and it’s not what you might think (read the book)! In the summary, Collins talks about the importance of finding great people and building deep and enduring relationships with them as a means of creating good luck.

Final thought

You could argue that focusing on what can be controlled and getting good people aligned behind the goals is common sense. But, while Willyerd’s study confirms that they do produce results, Collins’ study demonstrates that companies routinely ignore them.

Where’s the sense in that?

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