Posts Tagged ‘business strategy’

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.

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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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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

Strategic Music

Thursday, January 26th, 2012

There are many, many different kinds of music – e.g. rock, country and western just like there are many, many different sorts of companies – e.g. software companies, manufacturers etc.

And I’ll bet that everyone can think of at least one favourite tune.

So what has a favourite tune got to do with a business?
Bear with me for a moment and I’ll tell you.

Let’s go back to music first. I’ll bet my favourite tunes won’t be the same as yours. Mine might be classical (or bagpipes) yours might be heavy metal or hard rock. So they won’t sound the same.

But the funny thing is, although they don’t sound the same they will have some things in common.

Such as what you might ask?

Well, with a few exceptions, they probably feature more than one musical instrument. Perhaps there’s someone singing, in fact there may be backup singers as well.

Our favourite tunes will also have a musical score and – where required – lyrics for the vocalists.

The score is a great thing. It not only tells the musician which instrument to play – and when – it also tells them how the instrument must be played. Pretty detailed action plan wouldn’t you say.

Lyrics are also essential for anything other than a pure instrumental. They tell the vocalists – lead and backup – what to sing and how to emphasize the words.

OK so where am I going with this?

Well, I was listening to one of my favourite tunes the other day and a few things occurred to me.

Although each piece of music is different, like companies in different industries, they do have things in common.

The instruments – guitar, drums, key board – are like the different parts of a company – sales, operations, finance. They can play by themselves but when they work together the result can be amazing.

The score is like the strategy – it determines how the band/orchestra will get to the final result. It tells every instrument/musician how to work together while giving them a plan in the form of the notes and chords to be played.

In the better bands, the individual members have input to the score. Sometimes the situation allows them to improvise (you could say the plan is flexible). In some situations improvisation – and even innovation – is required. Jazz springs to mind.

But no individual instrument or musician has a role (departmental plan) that is more important than the score (business strategy). Think of an orchestra for a moment. The musicians in each section – e.g. strings, wind and percussion – see their own part in the piece. But only the conductor has the full score.

And that brings me to my last couple of points.

Every band has a leader – lead guitarist, lead singer, band major – who keeps the focus on the score or lyrics. Rather like the role of the CEO or business owner. He or she doesn’t have to know how to play all of the instruments; the specialists are there for that.

Some bands or orchestras become more popular than others. And, while individual players/musicians may come and go, some bands perform for a long time – years, decades or longer. Innovating and working with new material but maintaining superior quality of output. Why – because the culture, amongst other things, fosters that type of environment.

Finally, the public – you and I – doesn’t pay for the score. We pay for the result – the sound, the music, how it makes us feel.

And that’s an important perspective (particularly for consultants). No one pays for the strategy, they pay for the results – and how the results make them feel.

So, what kind of music are you going to make in 2012?

If you enjoyed this you will also enjoy Design Thinking and Strategy Development.

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2 Key Questions Every New Product Must Answer

Friday, June 10th, 2011

1. It Failed!

Everyone can think of companies – large and small – that have committed resources and spent money on new products/services only to fail.

Does anyone remember Sony’s Mini-Disc or the Apple Newton? Then there are those high profile classics New Coke and Crystal Pepsi.

How do large, credible organizations make mistakes like these?  And if they can do it, what chance do smaller, owner managed companies, with significantly less resources, stand?

2. Here’s A Reason Why.

One reason for these lapses is that the team members making the key decisions (who often spend most of their time in the company’s offices not in the field) believe passionately that the idea is going to work. That’s because, when you’re close to something it’s easy to become convinced you’re right. And when you feel that way you tend to push on regardless.

Maybe their research was faulty, or maybe they just didn’t do any.

Or maybe they didn’t take the time to take a step back and ask the question “What role can our product/service play in the market?” before committing resources to the initiative.

That’s not just a marketing strategy question – it’s a business strategy question. Because if it’s a bad idea and it fails, money and other resources that could have been deployed elsewhere are wasted. And the reputation of the company as a whole – and the people backing the project – is damaged.

3. Products Have To Earn The Right To Exist.

A company’s new products have to earn the right to exist. They do that when the answers to the following 2 questions are “Yes!”
• Do the products provide value that is perceived to be unique compared current offerings?
• Can they generate sufficient revenue, profit and cash to be sustainable?

As a business owner you can find the answers to the questions in a couple of different ways.

The first is by posing them in the early discussions about the products. Finding the answers will generate a lot of the information that will be required to assess the target market, develop a marketing mix, complete financial forecasts and weave them all together in a business case. So it’s hardly a waste of time!

The second is to wait and look for the answers when the business case has been completed.

4. The Important Thing Is………

Both approaches have their advantages and disadvantages. The important thing is to choose one and use it.

If you proceed without answering the 2 questions then you are taking unnecessary risk with your money and other resources – and your reputation.

Leading Business Plan Execution

Thursday, April 21st, 2011

Brian Brennan is a Chartered Accountant and an experienced leader in the business community. He is a Chair with TEC Canada where he works closely with numerous CEO’s to help them become great leaders in their organizations.

Imagine being at the top of an organization – calling the shots and being where the buck stops. What a thrill!

Leadership is exciting, invigorating and tremendously motivating for those who are in positions of authority and prominence in an organization.

Developing business strategies is a key function that leaders fulfill and executing them well is a tremendous responsibility. The long term success of your company depends on it.

The process of business planning is often conducted annually and is completed in one or two meetings of the senior management team. Too often this is as far as executives go with their well-considered plans. When the meetings are over it is back to the rigors of running the business.

Strategies need to be carefully thought out and passionately executed.

In their book, Execution – The Discipline of Getting Things Done, Larry Bossidy and Ram Charan present the leader’s role with business plan execution as this – “The leader has to be engaged personally and deeply in the business. Execution requires a comprehensive understanding of a business, its people and its environment….only the leader can make execution happen, through his or her deep personal involvement in the substance and even the details of execution.”

The vast majority of business planning fails at the execution phase. Some estimate that the failure rate is as high as 90%. That is astounding considering the quality of the people involved in strategic planning.

I think that Larry Bossidy and Ram Charan have it right. Successful business plan execution requires passionate leadership from the CEO and senior executive team working together. Solid teamwork is a caveat, something that cannot be ignored if business planning is to succeed.

Those who will be responsible for executing strategy will need to be intimately involved in its development. As a CEO or business owner it is your responsibility to direct the activity, stay close enough to understand it thoroughly and ensure that strategic initiatives are followed through.

Keeping your senior team focused and on track to achieve the results that you expect is critically important. Coaching and assisting your team where necessary is all part of the process.

Leadership is all about providing direction and assistance wherever and whenever it is needed – with passion and a deep sense of commitment.

For more information on Brian Brennan visit www.maxpotential.ca and www.tec-canada.com

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