Posts Tagged ‘flexibility’

10 Strategy Tips From……

Thursday, January 19th, 2012

Tony Hsieh, a man who has taken a company from a start-up and sold it for multiple millions of dollars – and who has done it twice.

You really can’t argue with those kinds of results. While doing it once may involve some luck, I think doing it twice meets the important criteria of consistency.

Hsieh spent some time between building LinkExchange and Zappos.com learning how to play poker. He realized that there were many similarities between the game and business and so he made a list of the lessons he learned from poker that can be applied to companies.

Here are the ones that deal with strategy¹ :

  1. Don’t play games you don’t understand, even if you see lots of other people making money from them.
  2. Figure out the game when the stakes aren’t high.
  3. Don’t cheat. Cheaters never win in the long run.
  4. Stick to your principles.
  5. You need to adjust your style of play throughout the night as the dynamics of the game change. Be flexible.
  6. Be patient and think long term.
  7. The players with the most stamina and focus usually win.
  8. Differentiate yourself. Do the opposite of what the rest of the table is doing.
  9. Hope is not a good plan.
  10. Don’t let yourself go “on tilt”. It’s much more cost-effective to take a break, walk around, or leave the game for the night.

I particularly like #5 for 3 reasons.

Firstly, it’s particularly relevant – therefore easy for people to accept – given the current global economic situation.

Secondly, it makes the point that the need for flexibility isn’t new – it’s been around for at least as long as poker (Wikipedia says the game was first reported in 1852) but in reality much longer.

And, finally, flexibility is only one of the 10 points – you also need the other 9, for example long term thinking and differentiating yourself, to be successful.

Hsieh goes on to talk about the second biggest business lesson he learned.

He realized that the game had started before he joined it. So the most important decision he could make was which table to sit at. In business, one of the most important strategic decisions a business owner or CEO has to make is what business to be in.

But Hsieh had a further insight. In poker, while you can always change tables, you can only choose from the tables which already exist. However in business you can define your own market – which is what, for example, Southwest Airlines, Apple’s iStore – and Zappos – did.

My son gave me a copy of the book for Christmas and I’m only mid-way through it. But if you haven’t read it, get a copy. It’s an easy read packed full of wisdom. And, yes, I may have another post or two from it.

_____________________

¹Delivering Happiness: A Path To Profits, Passion and Purpose, page 65

Share

Why Strategy Is Still Worth A Business Owner’s Time

Sunday, January 23rd, 2011

1. Is strategic planning still worth doing?

A couple of months ago I asked our LinkedIn Group the question “Is the strategic planning process as we know it still relevant?” That was because I’d seen articles and blogs arguing that strategic planning;
• Uses tools which are no longer relevant or
• Is no longer worthwhile because everything changes so quickly now.

2. What do the big names think – and is that important?

So a question in the recent McKinsey Quarterly caught my eye. Asked “What’s the new thing in strategy?” the answer was “there’s always new stuff out there, and most of it’s not very good…… it’s probably better to be thorough about what we know is true.”

McKinsey is a thought leader on the topic of strategy. So the answer kicks the point about the tools no longer being relevant into touch doesn’t it?

Then last week I found an article containing 5 video clips from a presentation given by Jonathon Goodman of the Monitor Group – another authority on strategy. The title is “Why Strategy Matters, And Now More Than Ever”. And that, by itself, disposes of the question of whether strategic planning is no longer worthwhile.

You can argue that McKinsey and Monitor work with large corporations so what they say offers no benefit to smaller, privately owned companies.

But I disagree; after all we founded ProfitPATH to adapt the tools used by corporations for owner managed businesses. If what McKinsey and Monitor say about strategy makes sense, then it makes sense for everyone.

The difference between corporations and owner managed businesses lies in how to apply what they’re saying.

3. Three things for business owners to think about.

I’ve picked 3 quotes from Goodman’s presentation. Each one makes an important point that’s easy to overlook or ignore.

“Strategy is the filter to distinguish distractions from opportunities.” Monitor views strategy as the outcome of making an integrated set of choices about, for example the company’s goals; its target markets; how it will win (its value proposition, sources of competitive advantage etc.);and its capabilities.

For a strategy to be successful each choice must reinforce the others so that all of the pieces of the strategy are aligned. The strategy drives resource allocation and is the thing that connects all parts of the organization.

It makes sense to compare any new initiative which arises to the strategy. If the initiative supports the strategy, it really is an opportunity. If it doesn’t, it is simply a resource wasting distraction.

But how often do we miss applying this critical test as our eyes glaze over with excitement about the profits the new initiative can generate?

(ProfitPATH will shortly introduce a new service to help clients focus on opportunities and avoid distractions.)

“It is useful to produce different versions of the future and ask – what would it take to win?” Business owners can use trends which might emerge or events that could shock any aspect of the environment to create 2 or 3 different versions of the future.

Goodman suggests asking 3 questions about each version. Will our current strategy be effective? If not, what will it take to win? What is the difference between what it will take to win then and what it takes to win today?

“Being flexible is not a strategy.” Monitor argues that the changes in the business environment make developing a coherent strategy more important than ever.

Companies that have one can determine the areas in which they can be flexible e.g. by knowing where to seed opportunities for new products and markets and by building flexibility into capabilities so that they can be deployed in different ways.

But despite the emphasis being heaped on the need for flexibility it cannot, by itself, form the basis of a strategy.

4. Wrapping it up.

Strategy and strategic planning will always be critical to long term success and increasing the value of a company. The big guys can’t be right all of the time – after all who is? But their experience and resources have to be worth something.

3 Ways To Test Your Strategy

Tuesday, January 18th, 2011

An article I read recently showcases 10 tests of a strategy that apply some of the best thinking that’s been done on the topic.  It was published in the McKinsey Quarterly and is called “Have You Tested Your Strategy Recently”. You have to register to read the full article but it’s worth it.

I want to focus on 3 of the tests which I think are particularly valid for business owners.

The first one asks the question – does your strategy put you ahead of trends? That new trends develop in any market is a fact. The issue is the length of time it takes for them to become apparent. A major technological breakthrough or a significant change in, e.g. the economy/demand or regulations/legislation can drive a rapid transition.

But most trends develop so slowly that business owners only react when their profits are affected. At that point it may be too late to respond effectively (think about the travel agents who ignored the rise of online competitors). The cost of missing a trend can be heavy, but seeing it early can pay off.

So how do you spot new trends? Keep an eye on customers who have been quick to adopt new products in the past. What are they doing? Think about the impact the new trends would have on your financial position – and the decisions you would make if you were certain they would happen. How do the results of those decisions compare with your current priorities?

The second test looks at how well your strategy deals with uncertainty. A challenge for business owners is to know which choices to make now, given that the outcomes will take place in a future they can’t control. The authors suggest breaking uncertainty into 4 levels.

The first gives a reasonably clear view of the future with a range of outcomes tight enough to support a firm decision. At level two, there are a number of identifiable outcomes for which a company should prepare. The possible outcomes in the third level aren’t specific but fall into a range resembling a probability distribution. And level four features total ambiguity, where even the distribution of outcomes is unknown.

Most companies assume they are facing either levels one or four while they are usually dealing with level two or three. The authors suggest quickly ruling out impossible outcomes and then looking for those which are either mutually supportive or which are unlikely because they undermine one another. A tool like scenario analysis can be applied – by the owner, management team or consultants like us – to the remainder.

The third test, asks if the strategy balances commitment and flexibility. Commitment and flexibility are opposites – if you’re very committed to a course of action you may have very little flexibility.

Making the best trade-off between them requires understanding that, of all of the decisions a business owner has to make, only strategic decisions result in commitment – through hard-to-reverse investments in long-lasting, company-specific assets.

But in this world of uncertainty, strategy is not only about where and how to compete, it’s also about when. Committing too early reduces flexibility, leaving it too late can allow competitors to gain advantage.

A market beating strategy will do 3 things. Take big bets, or make commitments aimed at gaining significant long-term competitive advantage; make no-regrets moves, which will pay off whatever happens; and maintain options, that involve relatively low costs now but which can be turned into a higher level of commitment as changing conditions warrant.

Why did I choose these 3 tests? Because they are, I think, the most relevant right now as a result of the fall-out from the financial crisis and recession and the hardest for business owners to deal with. (Although I was tempted by Test #8 – Is your strategy contaminated by bias?)

If you would like someone to talk the tests over with, drop me an e-mail or give me a call. I’d be happy to spend half an hour chewing them over with you

Execution – Flexibility In Practice

Wednesday, December 22nd, 2010

There’s been a lot written about the need to be flexible now that uncertainty plays such a part in the new normal. And, like so much else, it sounds like good, profound advice. Especially when you’re giving it, which, as strategy consultants, is something we have been doing for some of our business owner clients.

But, every now and then, life hands us a very practical opportunity to practice what we preach.

For example, for a number of reasons, I have to go to the U.K. at Christmas. For the first 5 or 6 years I did this my travel plans went smoothly. Last year I had a few weather related challenges coming back to Canada. Still, it was manageable.

But this year I have already been handed an opportunity to develop my flexibility – and I haven’t left yet!

I was supposed to fly out last Sunday night but, that morning, my flight was cancelled. Not a “biggie”, I reworked my strategy, developed an action plan and began to implement it.

I had to react quickly because there were lots of competitors also trying to grab the available seats. I had to alter my route, but I saw that as an opportunity to avoid Heathrow and the ongoing threat of bad weather there. And I may have saved a few dollars on the cost of the original fare. Bonus!

As in business, there were “knock-on” effects. But I rearranged the rental car and called in additional resources – my relatives. Their offers of help were gratefully accepted.

Now, it looks as if we (my wife is also scheduled to leave tomorrow night) are going to continue to have opportunities to work on our flexibility. Will our connecting flights be operating and will the roads on the final leg of our journey be passible? Then, in 10 days’ time, we have to get back home.

However like, I suspect, some of our business owner clients I find the mechanical aspects of being flexible – e.g. changing schedules or the start or completion dates of action plans or modifying budgets or forecasts – relatively easy.

But developing and executing an action plan to deal with the intangible aspects is more difficult. Chief amongst the intangibles in the case of my example is the impact on the person we are going to see – my Mother. She’s 82 years old, lives alone and her health is not as good as it used to be.

Reassuring (while not promising) her that everything will be fine and that we will be there for Christmas requires different “skills” than re-booking a flight or a rental car. Recent changes in her health have created new threats because she lives alone and mean that, while we’re there, we have to find new opportunities to provide support for her.

I find that responding to the requirements of being flexible is much harder when I’m managing people and their needs and expectations. I suspect that some of our clients find that too.

So perhaps being reminded that there’s more than one dimension to flexibility is the real lesson of the last few days. It’s an essential one because people are much more important than anything else.

And so my first New Year’s resolution is to bear that in mind when I work with our clients in 2011.

Post History