Archive for the ‘Strategy Development’ Category

Good Strategy Execution Pays Off

Tuesday, October 28th, 2014

I’ve believed for many years that how a company executes its strategy is more important than how it develops the strategy.Good strategy execution pays off well when you focus on these 7 key capabilities

I’m talking about the business strategy, the one that deals with all parts, departments or functions of a company.

My point could also apply to departmental or specific strategies; for example, sales or marketing strategies, since theoretically, these all flow from the business strategy and are integrated with it.

Previously, I’ve never had any evidence to support my belief since common sense, apparently, does not qualify as evidence.

No more.

Earlier this year, no less an authority than McKinsey & Company¹ gave me evidentiary support for my arguments.

They used their Implementation Capability Assessment to separate companies that are good at execution from those that aren’t. The survey then found that good implementers:

  • Maintain twice the value from their prioritized opportunities after 2 years.
  • Score their companies 30% higher on a series of financial performance indicators.

So there! Executing well pays off – literally.

How do you know if your company is a good implementer or a poor implementer?

McKinsey identified 7 key capabilities for executing well. Every company may have them to some extent. Yet businesses which are good at execution, are almost twice as good at them.

The 7 capabilities are:

  1. Ownership and commitment to execution at all levels of the company.
  2. Focus on a set of priorities.
  3. Clear accountability for specific actions.
  4. Effective management of execution using common tools.
  5. Planning for long-term commitment to execution.
  6. Continuous improvement during execution and rapid reaction to amend plans as required.
  7. Allocation of adequate resources and capabilities.

Finally, here’s the good news. Good implementers believe that execution is an individual discipline, which can be improved over time.

Does this confirm my belief that how a company executes its strategy is more important than how it develops the strategy?

Partially. More importantly, it does demonstrate that time spent improving a company’s ability to execute is time well invested.

As for the comparison to developing a strategy – I’ll just have to keep on looking.

______________________________________
¹ “Why Implementation Matters”, McKinsey & Company Insights, August 2014

 

If you enjoyed this post you’ll also enjoy To Grow or Not To Grow – That Is The Question

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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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How Do You Know If Your Company Will Fail?

Tuesday, October 21st, 2014

Let me go back almost 20 years to give you some context.How do business owners know if their company is on the path to decline?

My last real job (that’s what my wife calls the jobs I had before I became a consultant) was running the Canadian subsidiary of a 100-year-old, multi-national corporation.

Our owners, a much larger, publicly listed corporation, had bought us years before as a ‘cash cow’. There was, therefore, very limited investment in any aspect of the operations.

When I joined, the core business was rapidly being replaced by a new technology. We developed a new strategy for Canada and quickly set about executing it.

But, even when we appeared to be having some success with the new strategy, I used to ask myself if it was already too late – and how I would know if it was.

Now let’s return to the present day.

I’m re-reading Jim Collins’ book “How The Mighty Fall”. It was written as a result of a CEO asking how he would know if his company, successful as it had been, was already on the path to decline.

Imagine me asking the same question as the CEO of one of America’s most successful companies – several years before he asked it. It would indeed be remarkable, were it not for a few important details.

Clearly the circumstances were different. The CEO was being more farsighted than my employers had been.

And, more importantly, I’ll bet that many business owners have worried – and still worry – over the same question. I’m sure they started long before I asked it and some are still asking it now.

So why even raise the topic?

For one thing, if Collins’ book had been available in the mid-1990s, I would have had my answer. I would have known that, in time, the company would be sold to a competitor and, when that didn’t work, be absorbed by another competitor and almost completely disappear.

For another, “How The Mighty Fall” should be mandatory reading for all business owners. Or at least for those who understand that their past successes offer no guarantee, or even protection, for the future.

One point that caught my attention – and I’m only on page 48 – is that complacency was responsible for only one of the failed companies.

Another is that being an innovator was no protection from failure.

I would have assumed the opposite in both cases. So, perhaps I’m not as far ahead as I thought…………

 

If you enjoyed this post you’ll also enjoy Targets Are Targets, Results Are Reality

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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

Knowing and Doing – The Difference Affects Results

Tuesday, October 14th, 2014

There are advantages to getting older.Knowing the right thing to do and doing it to get results

Knowing the right thing to do.

One is you realize that to be successful, you only have to apply a few simple principles, most of which contain an element of common sense.

Another is that you learn that applying those principles is surprisingly difficult to do.

This last pearl of hard-earned wisdom helps when I read articles and posts about ways to improve business results, that we’ve known about for years.

It prevents me from becoming cynical – even when the authors package them as a new breakthrough that only they were capable of making.

Why is that?

It’s because I know that we – owners, executives, and even consultants – are constantly blind-sided by the day-to-day pressures of running a business. And that makes us lose sight of these fundamentally simple, common sense concepts.

So there’s a real benefit to having them repeated.

Doing the right thing.

Someone much smarter than I am once said “Knowing the right thing to do isn’t difficult. Doing the right thing is what’s difficult.”

I know that’s true.

We work every day with business owners and their teams who often know what to do to be successful (they have a good strategy) but who have difficulty actually doing those things (executing their strategy).

We’re no smarter than they are.

But we have the benefit of being able to focus on linking their strategy to action, helping them get buy-in throughout their organization and then holding them accountable for doing what they said they would.

No distractions for us.

Staying focused on a manageable number of activities which will have a high impact on the future and produce a high return on the resources invested in them, produces good business results.

No surprises there, right?

I could have used a bunch of big words to make the same point.

Or I could have proclaimed this was a new technique that would guarantee results.

But it’s not. It’s wisdom that’s been well proven over time.

Something, however, that bears repeating by a third party that, because of their perspective, can see woods without being blinded by the trees.

It’s worth thinking about as many of us head into annual business planning season.

 

If you enjoyed this post you’ll also enjoy A Lesson in Strategy Execution from a Successful Business Owner

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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

7 Ways to Hold Consultants Accountable Now

Tuesday, September 23rd, 2014

7 ways to hold consultants accountable nowMy wife will tell you I like giving other people advice.

That’s probably why I’m a management consultant.

But even consultants have to take some of their own advice – and change in order to grow.

For example, we must find a process for linking our compensation to our results in a meaningful way.

There’s no doubt this is hard to do. But that’s no excuse for refusing to try.

However, at the risk of making a huge understatement, it’s going to take time.

So, while we’re waiting, what can a business owner do to make sure the consultants they hire actually deliver results?

1. I talked about our own solution to linking compensation to results last year in a post called “Let’s Hold Consultants Responsible For Results”. It isn’t perfect, but it’s better than the traditional model.

2. Four years ago I suggested how owners can keep control when they work with consultants.

3. Around the same time I highlighted 3 reasons why consulting engagements fail. It’s really not difficult to avoid making them.

4. Look for consultants who have had practical, “hands on” experience operating a company. They have 2 clear advantages over consultants who have spent their entire career in consulting roles, as I pointed out in 2011.

5. There are also clues that you can listen for. Consultants who are effective tend to say certain things.

Here are 2 more things that I thought about this week.

6. Yesterday I was talking to a business owner who had been referred by an existing client. He asked if I would go out and meet him. I agreed immediately because that’s the only way to determine if there’s any chemistry between us.

Some people might consider the idea of “chemistry” to be foolish. But I can tell you from experience, that without it, the risk of a project failing increases dramatically.

7. Ask what success will look like. It’s more than just a description of what the consultant’s going to do and the services they’ll deliver. It’s about knowing how, when and what they will do to help you get the results you want.

Success, they say, comes not from doing one big thing well, but from doing many little things well. Perhaps change is like that too.

We at ProfitPATH, and lots of other consultants, are chipping away, doing the necessary things that will bring change to our business.

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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

One Big Reason Why Strategies Fail

Tuesday, September 9th, 2014

the main reason a strategy fails is based in how it’s executedI 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

3 Growth Strategies That Always Work

Tuesday, September 2nd, 2014

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

3 strategies that work for privately-owned businesses in any economic conditions

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

 

Strategy And The Sales Force

Tuesday, August 26th, 2014

“It’s as plain as the nose on your face!”Funny glasses

One of my aunts used to say that when one of us kids overlooked something by not looking at a situation in a complete way. We saw the obvious – but missed the subtle message.

I was reminded of that yesterday.

I was reading about how, in the mid-1990s, Xerox missed an underlying technological change taking place in their industry.

The sales force was focused on maintaining market share in the face of lower cost competitors like Canon.

But, even though they were visiting companies every day, they missed the fact that people were beginning to use PCs and printers to produce copies.

How did this happen? How could something, so evident in retrospect, have been missed?

One answer is that sales and strategy are separate worlds, often disconnected from each other.

No doubt that’s true. But it’s not just a process or functional issue.

Before becoming a CEO, I spent time in sales and then managed sales forces.

I also worked in companies which had entrenched positions in their industries and which failed to respond to structural shifts.

So here’s my question. Even if the sale force had spotted the change, would anyone have listened to them?

Market dominance can breed a culture in which owners and management develop the belief that they can do no wrong. Their attitude is…….

We’re doing what we’ve always done and that’s resulted in success for many years now. If growth slows or sales actually decrease, that must be because the sales force have stopped being effective.

Instead of complaining about products not having enough features or prices being too high, the sales people need to focus on making calls. What’s needed is a sales training program. And if that doesn’t work, then we’ll replace a few of them.

If things still don’t turn around, we’ll have a look at our marketing programs.

By which they really mean the promotional programs, if any, because they’ve forgotten that marketing also includes pricing and product strategies.

I was on the receiving end of attitudes like these when I worked in corporations.

And, in the last 13 years, we’ve worked with many privately owned companies after sales training and marketing programs failed to restart growth.

So, before reaching for the process or functional solutions, take a moment to check the culture and attitudes. However improbable, that might lead to the answer.

 

If you enjoyed this post you’ll also enjoy Is Crushing the Competition a Strategy?

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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

Family Businesses Outperform – Until Disputes Occur

Tuesday, August 5th, 2014

“Once families turn to lawyers and courts, it is very difficult to restore trust in a family”.rebuilding trust in the family business after disputes occur

Now there’s an understatement.

Did you know that family businesses account for two-thirds of all businesses in the world and about half of the largest companies in the United States?

I didn’t.

I did know that studies done in a number of countries indicate that both public and private family companies:

  • Perform, on average, significantly better than non-family businesses.
  • Are stronger financially, have higher stakeholder loyalty, live longer, and are more trusted by the public.

All of that said, do a Google search on Market Basket.

That, and an excellent article by John A. Davis, will tell you everything you need to know about the ‘dark’ side of family business.

When things go wrong they often go spectacularly wrong, to the extent that an otherwise healthy business is broken or collapses.

Here’s the rub – it usually has nothing to do with their business strategy – and everything to do with people and human nature.

Here are some highlights of the Market Basket situation:

  • A shareholder agreement that didn’t have a clear-cut buy-sell process or a mandate to manage disputes privately.
  • Some family members taking a stewardship approach (growth for future generations, take only affordable dividends).
  • Others taking an investor approach (good dividends and increasing stock valuations).
  • Ongoing bitterness about the outcome of a 4-year court battle – which finished in 1994.

Who is losing out in this situation and others like it?

Everyone involved – customers, employees, suppliers and, of course, the family members themselves. Disputes like this destroy wealth.

I’m glad to say that we haven’t seen too many situations like Market Basket in the past 13 years. But where we have, they’ve been most memorable for the depth of antagonism between the family members.

Can anything be salvaged from these situations? Yes, but in our experience, everyone involved loses something, often a great deal.

Can trust be rebuilt in the family? Apparently it is possible.

Davis goes on to describe some of the things the family Board chairman did to rebuild unity and family commitment at Clark’s shoes, a venerable, old British company.

That, and my suspicion that the number of family companies that become involved in disputes that are as intense as the one at Market Basket is relatively small, gives me hope.

 

If you enjoyed this post you’ll also enjoy Why Conflict In A Family Business Is Bad For 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

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