Archive for the ‘Planning’ Category

One Big Reason Why Strategies Fail

Tuesday, September 9th, 2014

Money in the PocketI often argue that a strategy isn’t important.

It’s the benefits a strategy delivers – more profit, increasing the value of a company – that are important. They put more money in the owner’s pocket.

To reap those benefits the strategy must, of course, be successful.

A strategy can fail for many reasons.

It could just be a lousy strategy. But that happens less often than you might think.

Even a poorly conceived strategy can deliver results – if it’s executed with focus, energy and passion.

I believe the main reason a strategy fails is based in how it’s executed.

For example:

  • There’s no link between the strategy and the actions which have to be completed if it’s to be successful.
  • Most people don’t know what the strategy is – and the part their job has to play in making it successful.
  • People, at all levels, do know what their role is – but there’s no accountability if they miss targets.

Some examples are less evident.

One in particular is quite insidious. It goes like this.

After intense discussion, the owner and management team reach a consensus on the strategy for the next 3 years. Everyone goes off determined to do the right things to execute it successfully.

However, since much of their time is taken up with running the business day-to-day, after a while, that begins to affect their perspective.

And that gradual, subtle change in perspective can have a major impact on the execution of their strategy.

It is possible to detect it and fix it. But that requires the discipline to do 2 things.

First, hold regular strategy review meetings. Second, keep the agenda off day-to-day stuff, and on measuring progress toward the 3-year goal.

Any shift in perspective can be spotted by asking one question. “Are all of the projects being discussed integrated/aligned with the strategy we chose for the next 3 years?”

The odds are there will be some drift.

That’s because the company is made up of people. And people tend to have their own priorities, concerns, agenda, and goals – which may be directly opposed to the next person’s. In the face of day-to-day pressures, people find it hard to keep the whole company perspective in mind.

But it can be restored – and one big reason why execution fails can be easily avoided.

If you enjoyed this post you’ll also enjoy Strategy Execution – How You Do What You Do

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Jim StewartJim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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3 Growth Strategies That Always Work

Tuesday, September 2nd, 2014

Here are 3 strategies that work for privately owned businesses in any economic conditions.

sales growth

Guaranteed.

I’m going to be really bold and also say they will work in any industry.

Interested?

1. Keep costs down – but quality up.

Twenty small and medium-sized companies, based in the U.K., managed high growth by keeping their production costs under control and their prices competitive.

Even when the economy slumped, they kept their quality up even though that meant their prices were slightly higher than their competitors.

That way they kept their customers satisfied – and avoided price wars.

2. Differentiate on tangibles – not intangibles.

Thirteen of the companies were consistent innovators, regularly introducing new products, services or processes.

Five of them, all manufacturers, consistently allocated a large percentage of revenues to developing new products.

In contrast, 15 of the 20 spent relatively little on traditional marketing activities, using their sales force and the Internet to keep customers up-to-date on their new products or services.

3. Customization.

Almost half of the companies stayed very closely in touch with their customers, delivering solutions tailored to specific needs and adapting products as needs changed.

Even those who produced standardized products invited small changes or provided complementary services.

Flouting conventional wisdom, 75% of the companies spurned niches for the broader market. They took time to figure out their competitors’ strengths and weaknesses, then exploited their knowledge to increase their market share.

The 20 companies in the study grew at a consistent rate over a 4-year period—outpacing their competitors by more than 50 percent while operating in declining industries – for example, the clothing industry.

Think about it – keep your costs under control; understand what your customers need, and then give it to them; introduce new products and services regularly.

Put that way it almost sounds like common sense.

So, if these approaches work in a tight economy or mature markets, why wouldn’t they work in good times and healthy markets?

The short answer is that they will.

I’ll make 2 more points as a wrap up.

  • These 3 approaches aren’t mutually exclusive. In fact, the British companies used a combination of them – usually the second and third.
  • The authors of the study commented that the owners and managers saw the situation as offering a challenge and lots of opportunities. As they say – attitude is everything.

If you enjoyed this post you’ll also enjoy The Keys to Executing a Strategy and Getting Results.

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Jim StewartJim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

 

Stick to Your Knitting or Reinvent Yourself? What’s the Right Answer?

Tuesday, August 19th, 2014

Don't knowIf you focus on what you do best, you’ll prosper. Look at Coca-Cola or Southwest Airlines or Disney.

So, understand your core competencies and stick to your knitting.

Good advice, correct?

But what about companies like Kodak and Nokia? They stayed focused on what they did best. And it really didn’t work so well for them.

So, perhaps it’s not such good advice after all.

My Dad used to say “rules are for the guidance of wise men – and the blind obedience of fools.”

Just because we drop that magic word ‘strategy’ – as in strategic consistency – into a rule, that doesn’t make it an exception to be followed blindly.

Kodak, Nokia, and a host of others like them, did understand their core competencies. But they either didn’t see, couldn’t understand – or simply ignored – a reality.

Something else started going on in their industry that made those core competencies obsolete or insufficient. In Kodak’s case, it was digital photography; in Nokia’s, the advent of the smartphone.

Perhaps a better rule for business owners is to stick to the knitting, but keep looking outside of the company in case something fundamental begins to change.

And as soon as that change becomes evident, begin reinventing – around the capabilities that brought success to the company in the first place.

That’s what Lou Gerstner did at IBM and Andy Grove did at Intel. (Much as I dislike using only large corporate entities for examples in my blog posts, they are usually well enough known for everyone to be aware of them.)

So the reinvention comes from adding new capabilities to the ones that brought success in the first place.

Ken Favaro, who wrote the article, that inspired this post and for whom I have the greatest respect, says that if you do this, you can manage the tension between strategic consistency and reinvention.

Perhaps I’m over simplifying but I see it as using common sense to deal with the changes that have, and always will occur in an industry.

But, as Stephen Covey pointed out, common sense is not that common. And it’s particularly difficult to hang on to it in the face of never ending pressure to make deadlines, maintain quality, fight off competitors, keep staff motivated – and, of course, make the payroll.

 

If you enjoyed this post you’ll also enjoy Strategy Working? Then Don’t Make These 5 Mistakes

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Strategy And The Evil ‘Gang Of 5’

Tuesday, August 12th, 2014

Ken Favaro calls them the “Gang of 5”.the evil 'gang of 5' adversely affects strategy

He talks about them with reference to large, public companies.

But every business owner we’ve dealt with over the last 13 years would recognize them.

That’s because entrepreneurs are only too familiar with the challenge of making this year’s top and bottom line, while simultaneously investing in the future.

The Gang of 5 draws its strength from the:

  • Resulting competition between the needs of short and long-term priorities and,
  • The belief that this trade off has to exist.

Let me introduce them and you’ll see what I mean.

Let’s begin with the 2 members that cause too little investment in the future.

1.  Financial engineering – or working the numbers by cutting costs to make the current year’s bottom line or continually postponing expenditure on, for example, training, hiring or replacing aging equipment, from one year to another.

2.  Price leadership – or price-cutting. This is worse, because it’s a very public tactic. Once you’ve lowered prices, how easy is it to put them back up again? It’s not.

Then there’s the 3 members who show up when a company does spend – but unwisely or excessively.

3.  Innovation leadership – gone wrong. Symptoms of a misguided approach to innovation are, for example, not launching a product until it is “perfect”; expecting customers to buy a service developed without their input; cost overruns and products launched way behind schedule.

4.  Cross selling – can be a good thing but not if it leads to the development of products which are “bundled” for sale at reduced margins to a few “key” accounts. Double jeopardy occurs when the customers’ business changes or key decision-makers leave.

5.  Market leadership – or “we have to be the biggest” comes from the misguided belief that to make maximum profits, a company has to be the market leader. We’ve worked with many companies that quietly carve themselves a specialized niche in a market and make superb margins as a result.

The reality is that a business has to find a way to make a profit and invest in the future every year.

How do you, as a business owner, do that?

One way is to have a clear picture of where you want your company, not just your sales, to be in 3 years’ time. Then, before making key decisions, asking how the outcome will help get you there.

 

If you enjoyed this post you’ll also enjoy 2 Things That Cause Bad Strategy

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Is “Crushing The Competition” A Strategy?

Tuesday, July 22nd, 2014

Saying you’re going to crush the competition may provide the emotional fire to drive a sales team to beat its short-term revenue targets.It is possible to win without crushing the competition.

But as a strategy for the whole business, it’s not only ineffective, it’s dangerous.

Here’s why.

1.  It puts the focus in the wrong place.

A successful strategy focuses on customer needs; the value proposition with which the company satisfies those needs; and the resources and capabilities required to deliver it.

Trying to crush the competition puts the focus on doing things “better” than they do.

It puts competitors, not customers, front and centre. It substitutes action based on original thinking, with reaction to someone else’s thinking.

2.  It sacrifices the long term for the short term.

Two common tactics for crushing the competition are providing more features for the same price and cutting prices.

However neither of them creates new value for customers, nor do they help the company’s long-term margins.

Businesses reap the biggest rewards when their strategies provide previously unrealized value for consumers and users by, for example, introducing new, or enhanced, products or services.

That, however, takes time and the willingness to take risk. It may also open up new parts of the market for everyone.

The iPhone, for example, didn’t just help Apple, it broadened the market for mobile devices. Fracking not only breathed new life into the U.S. oil and gas industry, it benefitted suppliers to the industry.

3.  Business isn’t like war.

Originally, strategy had its application in winning battles and wars. And the only way to win is to beat the other side; the more crushing the defeat inflicted on the loser, the better.

But in business, it is possible to win without crushing the competition.

How? By finding an untapped opportunity. For example, Starbucks redefined the coffee drinking experience and Jet Blue redefined discount travel.

In order to do that, both had to understand their competitors’ value propositions – a more productive, more effective, even healthier, way to deal with competitors.

I’m not suggesting that competitors can be ignored – but they have to be kept in context.

4.  Emotion replaces logic.

Finally, when leaders go to war with their competitors, emotion often overwhelms business logic. If it can happen to Steve Jobs – remember the repercussions from iMaps – it can happen to anyone.

In case you’re curious about what set me off on this particular rant, it was a post by Ken Favaro, one of my favourite writers on strategy.

 

If you enjoyed this post you’ll also enjoy Putting The Horse Before The Cart – That’s Strategy!

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

ProfitPATH’s Top Ten Blogs – First Half 2014

Tuesday, July 15th, 2014

 

1.   6 Challenges Fast Growing Companies Face

I’ve mentioned Inc. magazine www.inc.com several times before. It’s a great resource. There’s a well-researched article in the current issue about 6 challenges fast growing companies face. They’re all about execution – and if the owner doesn’t deal with them well any one of them can be fatal. more

 

 

Strategy is not planning and the importance of knowing the difference2.   The Difference Between A Strategy And A Plan

I want to talk briefly about what I think is one of the worst mistakes – confusing strategy and planning. Roger Martin wrote a post for the HBR last month in which he dealt with this very topic. I frequently hear business owners talk about the need to do “strategic planning” in order to create a “strategic plan”. Some talk – every year – about holding a “strategic planning meeting”. more

 

3time for a change in the direction you are heading, focus on center of compass....   3 Times When You May Need To Change Your Strategy

Changes to a well thought-out, well-crafted strategy shouldn’t be driven simply because it’s been in place 1, 3 or 5 years. A strategy shouldn’t necessarily be changed even if it isn’t producing results. In this situation I always look at how well (or badly) the strategy is being executed before I look at the strategy itself. So when should a company review its strategy? And what makes that review and any subsequent adaptation, revision or recreation necessary? Here are three occasions. more

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

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. Can adaptive strategy be applied in owner managed businesses? more

5.   6 Ways A Business Owner Can Influence Culture

I wrote last week about the relationship between Strategy, Culture and Leadership. As a result we’ve had some questions about how a business owner can influence the culture in his/her company. Here, in no particular priority, are 6 ways that it can be done. more

6.   6 Things We Can All Learn From Family-Owned Businesses

The 6 things I’m going to talk about come from a study of 149 large, publicly-traded, family-controlled businesses. However, stay with me because we’ve seen the same characteristics in the successful family-owned businesses we’ve dealt with – and none of them are publicly traded. Another thing – the study looked at 1997 – 2009, covering some good and some very tough times. Guess what? The family-controlled businesses, on average, turned in better long-term financial performance than non-family businesses – in multiple countries. So what are the 6 things we can learn? more

7.   6 Tips For Finding The Right Buyer

Last week I was one of three speakers at the Toronto Star’s Small Business Club event, “Exit and Succession Planning”. My talk included 6 things a business owner can do to ensure she/he finds the right buyer or successor. more

8.   3 Ways Human Nature Sabotages Strategy

Ask 10 people how long it will take them to complete a task and I’d guess 7 or 8 of them will underestimate the time required. That proportion might increase if the 10 are all type A personalities – i.e. business owners or entrepreneurs. We see this when we take teams through our strategy and business planning processes. For example, at a specific point, we prioritize the things they need to do to close the gap between their company’s current state and where they want it in 3 years’ time. Typically the teams want to tackle more items than is humanly possible given their resources. There’s no ideal number of items – the complexity of each item is only 1 of the variables – but we’ve seen time and again that completing a few key tasks produces better results than taking on too many. more

9.   5 Traits Effective Business Owners Share

I believe the single biggest thing that separates companies that grow from those that don’t is the owner’s awareness of the need for change and their willingness to do so. So, I was interested in a recent post about traits that effective entrepreneurs share. Sure enough, it contained a quote saying that if owners commit to learning more about themselves and becoming the best that they can be, they’ll find that challenges are really opportunities. But what other traits, according to the post, do effective entrepreneurs have? more

10.  Strategic Planning – 3 Things That Are Wrong With It

We all know that picking a strategy means making choices. But that means making guesses about that great unknown, the future. What happens then if we make the wrong choice? Could we destroy a company? That’s why, according to Roger Martin¹, we turn choosing a strategy into a problem that can be solved using tools we are comfortable with. And we call that strategic planning. But, Martin says, companies make 3 mistakes when they confuse strategy and strategic planning. more

 

 

Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Strategy Execution – How You Do What You Do

Tuesday, July 8th, 2014

Twice in a week.Business strategists echo what we've been telling our clients about strategy execution

That’s how often I’ve encountered credible, experienced business strategists echoing what we’ve been telling our clients.

First, it was the Wall Street Journal (WSJ), now it’s Roger Martin.

Both of them express their points of view in a way that’s different to the other and to us. In Martin’s case, it’s through the lens of his own approach to strategy execution.

Despite that, we’re all saying the same thing.

In my last post, I explained how the WSJ’s approach dovetailed with ours. Here’s how I think Roger Martin’s does.

Martin says that:

  • “…it is absolutely critical that each person in the organization knows what it means to take actions that are consistent with the intent of the strategy as asserted.”
  • To do that every person has to think about 4 things – the strategic intent of their managers/leaders; the key choices they make in their work; how to align those choices with those above them; and how they communicate the reason for their choices to their reports.

How does that align with our approach, which says that to execute its strategy successfully, a company has to avoid 4 Risks?

•  Since a strategy has been “asserted”, then Risk #1 – No Clear Growth Path – has been removed.

•  The title of Martin’s post is “Strategy Isn’t What You Say, Its What You Do” and he talks specifically about taking “action” in the quote above and on several other occasions. Risk #2 – No Link To Action – is dealt with.

•  Risk #3 – No Buy In – means that employees are not motivated by the strategy or engaged in its execution. To get buy in, we say the strategy, the initiatives required to execute it and the actions and goals which will turn the initiatives into results, must be linked directly to the goals of each department and individual employee in the company. The 4 things that Martin says every person has to think about cover precisely that.

•  Our fourth Risk – No Accountability – isn’t discussed in Martin’s post, but I’ve seen enough of his work to believe that he considers accountability as critical as we do.

Finally, in the interests of full disclosure, I should say that I think:

  • Roger Martin’s book “Playing To Win” is one of the most logical, easy to understand and practical approaches to strategy I’ve read.
  • The WSJ’s statement of the main requirements for successfully executing a strategy is nice, clear and succinct.

 

If you enjoyed this post you’ll also enjoy 5 Reasons Why I Love Execution

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

The Keys To Executing A Strategy And Getting Results

Tuesday, July 1st, 2014

I really liked a recent post in the Wall Street Journal (WSJ).The keys to executing a strategy and getting results

It said that the main requirements for successfully executing a strategy are:

  1. Clear goals for everyone in the organization, that support the overall strategy
  2. A way to regularly measure progress toward those goals
  3. Clear accountability for that progress.

That’s a very nice, clear, succinct way to put it.

I must admit that I was a little relieved when I saw their next sentence, which said that these 3 “are the basics”.

That clarification allows the discussion to continue, so that additional factors can be included. The authors themselves went on to say that good execution also requires facing reality and a strong culture of execution.

Those are 2 of the points made by Larry Bossidy and Ram Charan in “Execution”, one of the best books ever written on the subject.

On the other hand, I was pleased to see the 3 main requirements.

Why? Well, they correspond nicely with the 4 Risks I’ve talked about in recent posts. Here’s how.

Risk #1 – No Clear Growth Path:  The ‘overall strategy’, mentioned above, incorporates the path a company takes to grow to size in the future.

Risk #2 – No Link To Action:  A key step in linking a strategy to action is to develop clear goals. The best goals are specific, measurable, and attainable and have deadlines. They are also a result of prioritizing everything that has to be done so that limited resources can be allocated to get the best return.

Risk #3 – No Buy In:  Giving every employee clear goals, which support the overall strategy, is an important factor in getting buy in. Involving employees in developing those goals is another. A third is frequent, ongoing communication so that everyone understands how achieving their goals will help the organization achieve its goals.

Risk #4 – No Accountability:  A process for measuring progress toward goals and regular review meetings are the foundations for accountability. They enable the reasons for progress – or lack of it – to be assessed objectively. Those accountable can be recognized, paid bonuses, even promoted – or they may leave the company.

So I’m delighted that the main requirements for successfully executing a strategy, identified by the WSJ, are the same things we have been helping companies with for over 12 years.

 

If you enjoyed this post you’ll also enjoy 5 Traits Effective Business Owners Share

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Risks 3 and 4 to Growth – And How To Avoid Them

Tuesday, June 24th, 2014

During the last 12 years we’ve worked with well over 100 companies ranging in size from less than $1 million to over $300 million in annual revenues. They were

  • In a variety of industries, from manufacturing to software development.
  • All at different stages in their lives, for example in some, growth had stalled, while others were growing quickly – too quickly.Risks 3 and 4 to business growth and how to avoid them

In a recent post, I talked about the 4 things we’ve done for the ones that we know, with the gift of hindsight, achieved the results they wanted.

Was their success solely attributable to what we did for them?

I can’t prove that. But I can say this, ignore these 4 things and you will not get the results you want and your company will not achieve its potential.

Last week, I talked about 2 of them – having a clear growth path and linking it to action – in some detail. Here are the other two.

3.  Get Buy In

How often have we seen a team of committed people do the apparently impossible?

When people participate in the development of the growth path and understand the role they must play in making it a reality, they become fully engaged in achieving the company’s goals.

Some of the things which make that happen are:

  • The owner and management team get representatives from across the company involved in building a picture of what the company will look like in 3 years time.
  • The picture, and annual goals, is communicated throughout the company – repeatedly.
  • Departmental and individual goals are linked to the company goals.
  • Progress toward goals and targets is communicated and updated continuously.

4.  Accountability For Results

Moving a company or division along a growth path involves identifying and completing a number of initiatives, made up of specific, measurable steps or actions.

The individual who has overall responsibility for each initiative and those involved in completing the steps, must be held accountable for the success or failure of their efforts.

This is achieved by:

  • Using a process – it can be a simple Excel spreadsheet or a sophisticated, cloud-based execution management system – to track the progress of each step.
  • Holding regular, quarterly meetings to review progress and adjust plans and budgets where necessary.
  • Reflecting every individual’s performance in their compensation, promotion – or even their continued employment with the company.

So how can you tell how well your company or division is doing all 4 things? I’ll tell you more about that next time.

 

If you enjoyed this post you’ll also enjoy Sustainable Growth – How To Achieve It

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

2 Risks To Business Growth – And How To Avoid Them

Tuesday, June 17th, 2014

We’ve worked with well over 100 companies since we started ProfitPATH.2 of the 4 risks that affect business growth and how to avoid them

A couple of posts ago, I commented that we did some, or all, of the same 4 things for the companies that achieved the results they wanted.

Was their success solely attributable to what we did for them? I can’t prove that with certainty.

But I can say this,

  • Ignore these 4 things and you will not get the results you want and your company will not achieve its potential. (That’s why we call them the 4 Risks.)
  • On the other hand, if a company deals with all 4 regularly, it will improve its results.

Here are the first 2 and some tips on how to deal with them.

1.  Have A Clear Growth Path

Having a clear growth path means having a picture of what you want your company to look like in 3 years’ time.

The best pictures are rich in detail and sharp in focus. In this case:

  • Detail comes from the depth of analysis that goes into building the picture.
  • Focus is a result of the choices that are made about the initiatives required to get there.

Using other language, this is your Vision, your Mission and your Strategy.

Bear in mind that we update photos of things we love – children, pets – as they grow and change. The same applies to a company.

2.  Link It To Action

The 3-year picture is what you desire. Turning it into reality takes action which yields results.

The key is to break what has to be achieved in 3 years into 3 sets of annual goals. Figuring out what has to be done in 12-month bites provides the flexibility to adapt as you learn more than you knew when you started out.

However, this requires a process and the discipline to use it every fiscal year.

  • Where must we be in 12 months? Where are we now? What’s the gap? How do we close it?
  • Prioritizing the list of “to do’s”; allocating resources to the high leverage items; and putting action plans in place to complete them.

This process drives the annual financial budgets – not the other way around.

I’ll touch on the other 2 Risks next time. For now, ask yourself this: “Where do you want your business to be in 3 years’ time?”  And, “What do you think you have to do to get there?”

 

If you enjoyed this post you’ll also enjoy A Vision – Is It Worth Investing The Time?

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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