Posts Tagged ‘industry’

3 Reasons Why Strategy Isn’t Dead In The Water

Tuesday, February 3rd, 2015

I hate sweeping generalizations.Is strategy dead, or dying?

Strategy is dead is one that I particularly dislike.

To say that, it seems to me, is to say that it’s a complete waste of time for every company, regardless of size or industry, to have a strategy.

An article appeared in the Globe and Mail late last year, headline “Why Strategy is Dead In The Water.” It was based on an earlier article in Forbes magazine, headline “Is Strategy Dead? 7 Reasons The Answer May Be Yes.”

We’d gone from strategy might be dead to signing its death certificate – in the space of two headlines.

Here are 3 of the reasons the Forbes author offers to support his argument.

1.  Incrementalism has been disrupted by disruption. The argument is that managers talk big but really focus on delivering incremental change. Hopeless now when, for example, companies like Uber disrupt an industry. Disruptive change isn’t new – otherwise we’d all still be driving horse drawn buggies – but is it realistic to expect it in every single industry, simultaneously?

2.  Innovation is occurring with high variance outcomes. Contingency plans are used to deal with the most likely market reactions to a strategy. Now, it’s argued, there are too many possible outcomes to anticipate, never mind plan for. Assume that intuition, common sense and gathering information can no longer help us isolate all of the possible outcomes. Does that prevent a business selecting one or two of the most likely ones and running with them in a controlled, limited way i.e. hedging its bets?

3.  The past is no longer a good predictor of the future. Because life expectancy has increased, consumer behavior has changed and we are able to quickly access data, it is argued that the future no longer looks anything like the past.

Could that not have been said about the rise of consumer spending in the 1950’s, the shift to low cost, offshore production, or half a dozen other seismic changes that have taken place?

Has the past ever been a good predictor of the future? The old adage is, if we don’t learn from the past, we are doomed to repeat it. Isn’t adapting a way of learning?

Isn’t the entire argument that strategy is dead, or dying, rather like throwing out the baby with the bathwater?

I’ll comment further next week.

 

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

Click here and automatically receive our latest blog posts.

 

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

Share

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

Click here and automatically receive our latest blog posts.

 

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

Entrepreneurs Lack Empathy – Really?

Tuesday, April 9th, 2013

A new study reveals entrepreneurs, business owners lack empathy and analytical problem-solving skills.4 key skills entrepreneurs lack including empathy

Is this just telling us what we already know?

Most importantly, from my selfish point of view, how does this affect the way in which they approach strategy?

Apparently, there are 2 reasons why entrepreneurs are below the norm when it comes to analytical problem-solving. They’re motivated by, for example, potential future gains, money and new products or ideas. And they have a sense of urgency when it comes to making decisions.

So they don’t “have time” to collect and analyze data and, because people who tell them their ideas won’t work use numbers to do so, they think numbers just get in the way.

That easily translates into impatience with the strategy development process. Which may be OK in those cases where the business owner’s knowledge of an industry, or a gap in a market, gives them an almost intuitive sense of what to do to win.

However it could explain why some businesses have early successes and then begin to fail. There comes a point where figuring out what the industry, the market, the competitors are doing and the correct sales/marketing and operations/delivery response gets too complex to be done “on the fly”.

And I didn’t even touch on hiring the right skills, acquiring the necessary resources and building a healthy culture, etc. – or how to finance those activities.

Two other skills entrepreneurs lack are self-management and planning and organizing. Reading the post describing the research, the difference between the two blurred a little for me.

A couple of phrases did strike a chord though.

For example, “entrepreneurs typically have many projects underway at one time…. need assistance managing everyday tasks and should… delegate them to someone who has mastered this skill.” The Action Plans, which are developed at annual business planning sessions, play a key part in the successful execution of a strategy.

Making sure they’re completed requires consistent, regular follow up with the Champion. It also requires empathy, which is required to be understanding and supportive when things go wrong and deadlines slip. This helps get the Action Plans back on track.

Will knowing the extent to which entrepreneurs and business owners lack these 4 skills make it easier for those affected to accept solutions?

Based on my 16 years of experience working with business owners and entrepreneurs I’d have to give the typical consultants’ answer – yes and no.

Some individuals – the ones who realize they have to change in order for their companies to grow – get it. And some don’t.

But that’s human nature.

You can find the full blog post with the results of the study here.

 

If you enjoyed this post you’ll also enjoy Where Do The People Fit?

Click here and automatically receive our latest blog posts.

The Single Biggest Thing A Business Needs To Grow

Tuesday, March 12th, 2013

I’ve been working with business owners for almost 15 years. So, when someone asked me…The need for, and a willingness to change in order to grow successfully

“What’s the single biggest thing that you think separates companies which grow successfully from those which don’t?”

…I realized that I needed some time to think about it.

As I weighed one thing, then another, over the next few days, I came to the conclusion that the answer is NOT about having:

•    Plenty of cash
•    A price advantage
•    Top quality products and services
•    Products or services protected by patents
•    A broad customer base, not just 1 or 2 really big ones
•    A presence in several markets
•    Great people (which you will know, if you read this blog, I think is huge)
•    A winning strategy
•    A great culture.

Yes, you need all of those things – and others I haven’t mentioned. But they become worthless if one thing is missing.

The single biggest thing that I think separates companies which grow successfully from those which don’t IS…the business owner understands that he or she personally will have to change, and they are willing to make those changes.

At first I thought the answer was just the owner understanding that she or he needed to change.

Then I remembered that we’ve worked with entrepreneurs who have demonstrated that. But they have subsequently been unwilling to make the changes.

In some cases, what we perceived as unwillingness may have actually been inability to change – either because they couldn’t see the need or they lacked the skill to make the changes required.

The owner’s role remains constant – to provide the direction and to put the people, processes and other resources into place in order for the company to grow. However, as each revenue plateau is reached, the way in which they do that has to change in order for the company to successfully scale the next one.

They not only need to learn new things and hire people with the skills they lack, but they may also have to adapt their management/leadership style and even their behaviour.

And they have to do that while ensuring that the other challenges – for example, adapting to changes in the market or industry; funding growth; maintaining product/service quality; recruiting good people, fending off competitive action – are dealt with.

This is not easy. So it shouldn’t be surprising that some owners either choose not to do it or that some simply can’t.

I don’t believe that it’s for us, or anyone else, to judge a business owner by whether or not they do or do not grow their company. Just starting and building a business requires courage and the willingness to accept a level of risk that many people can’t, or won’t, take.

So that’s not my point.

It’s simply my opinion that the single biggest thing that separates companies that grow successfully from those that don’t is the owner’s understanding and willingness to change him or her self.

 

If you enjoyed this post you’ll also enjoy 3 Times When You May Need To Change Your Strategy

Click here and automatically receive our latest blog posts.

Why Would Anyone Hire A Management Consultant?

Tuesday, June 19th, 2012

 I gave a presentation last week on the topic – “Why would anyone hire a management consultant?”

I think the topic the organizer actually had in mind was – why would anyone in their right mind hire a management consultant? But they were too polite to be that specific.

Many members of the group I talked to know business owners whose companies have between $3 and $5 million in annual revenues and who have been in business for anything from 5 to 20 years.

So, I customized the presentation to that situation, which wasn’t difficult, because owners of businesses like that often face an intriguing situation.

They’re successful by any measure. They’ve grown their businesses to a respectable size, provided employment for others and soundly beaten the odds of failure (80% of new businesses don’t make it beyond the second year).

But, at around $3 to $5 million, something changes and annual sales stop growing. The exact point at which it happens varies depending on a number of things e.g. the industry – but it does inevitably happen. It’s not that sales go into free fall, they just stay flat or go up one year and down the next.

The owners’ first reaction is to focus on their sales team. They may, for example, try to get their salespeople to make more calls or they even make personnel changes. They may also try some marketing – by which they generally mean promotional – programs.

Most of the business owners have never encountered this situation before. And because they’ve always been successful up to this point, they believe they can figure it out for themselves.

However, life is full of situations we’ve never experienced before. The analogy I used in my presentation was falling in love for the first time.

Lots of us (particularly males) don’t understand what’s happened. We focus on the symptoms – the churning stomach, the same tune playing endlessly in our head, the picture of the other person we can’t get out of our mind and the grin that’s fixed firmly to our face no matter what else is going on around us.

It may take a good friend, who is already in a long-term relationship, to alert us to the situation – we’ve finally met the “one”.

An experienced management consultant can play the same role for a business owner. An objective third party, they use the symptoms to find the root cause of the situation.

For example, we had a client in an industry in the early stages of consolidation. The bigger players were beginning to buy up the smaller ones, changing several aspects of how the game was being played. We spotted that because we’d seen it before – unlike our client.

I’ll tell you about a couple of other situations when hiring a management consultant will help in my next post…….
 

3 Times When You May Need To Change Your Strategy

Thursday, February 2nd, 2012

We all do things that are crazy.

One of my things is telling people that they shouldn’t be changing their strategy.

I do it when business owners – or CEOs – say things like “It’s time for our annual strategy meeting”. The implication – for me at any rate – is that they change their strategy every year.

But that would be just plain wrong.

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.

1.    When the company has outgrown its strategy.

There’s research which suggests that companies can “plateau” when they achieve certain levels of revenue. Depending on the industry those levels are around $5 million, approx. $10 -12 million, somewhere between $18 – 30 million and so on.

Typical symptoms of “plateauing” are upward spikes in revenue which can’t be maintained, increasing lead times delivering the product or service, decreasing levels of customer satisfaction and higher employee turnover.

The plateauing occurs because the things – e.g. strategy, processes – the company has done up to that point in its life can’t support any more growth. It’s like expecting a teenager to fit into the clothes they wore when they were eight.

To rekindle growth the owner either has to change the strategy, the way it’s executed – or both.

2.    Significant internal change.

This occurs when, for example, a company develops a game changing new product or service or finds a new way of doing its existing business. This gives it an edge over its competitors by e.g. reducing costs or increasing efficiencies.

To reap maximum benefit from this new competitive advantage the owner will have to adapt or change the existing strategy.

3.    Significant external change.

In this case the owner or CEO has to react to e.g.:

  • A competitor who is taking advantage of a significant internal change.
  • The industry “maturing”. In other words the business has been around long enough for a number of competitors to have become large enough to e.g.:
    • Reduce their costs and pass this on as reductions in the selling price or,
    • Buy up smaller players who introduce game changing technology or process improvements. This is also known as industry consolidation.
  • Major changes in e.g. the economy, labour pool, legislation governing the industry, or all of the above.

Continuing with a “business as usual” approach under any of these situations is clearly not going to be effective.

To be fair, when business owners and CEOs say “It’s time for our annual strategy meeting” they usually mean that it’s time to start the annual business planning process. That is something that must be done every year.

And, since we have services which can make the annual business planning process more effective, perhaps I’m not as crazy as I look – I mean sound…….

If you enjoyed this you will also enjoy 2 Things That Cause Bad Strategy

Click here and automatically receive our latest blog posts

Don’t Let The Summer Heat Cause A Winter Chill

Thursday, July 21st, 2011

It’s almost the end of July, it’s hot and it’s vacation season. The heat saps your energy and getting ready for; switching off during; and scrambling to catch up after vacations takes most of your attention.

Together they make it easy for business owners to lose sight of fact that it’s the end of the second quarter and planning, budgeting, whatever you call it, for 2012 will be starting soon.

So what, you ask? Here’s what – your annual business planning/ budgeting/ whatever you call it process is the engine that drives your growth. If you don’t approach it with that in mind you’re setting yourself up to underachieve in 2012.

Based on mistakes we’ve seen made repeatedly in 10 years of strategy consulting there are several things you need to think about now. Here are a couple to get you started……

1. Don’t postpone the second quarter/mid-year review. Hold it ASAP.

Quarterly reviews are a reality check. What’s really happening in the industry, to our customers and with our competitors? How does that compare to our assumptions and how has it affected our forecasts? What can we do to leverage this reality in the next 2 quarters?

How many of the programs we planned have we actually put in place? Are they yielding the results we wanted? What has worked well that can be we build on? Which programs are behind time and how do we adjust for that?

The answers to these questions and others like them, asked in the quarterly review, will allow you to put form around what the situation will be at year end and give you a jumping off point for forecasting sales and bottom line in 2012 and beyond.

If you haven’t been doing quarterly reviews, or have let them slip, this is the time to start or re-start them.

Don’t let vacations be an excuse for postponing them.

2. Waiting until the week before the annual business planning session to start thinking about next year isn’t nearly good enough.

You’re going to make as accurate a guess about what the future holds as possible. To do that you’re going to have to make assumptions which will underpin your financial forecasts, priorities and action plans.

On what information will you base the assumptions? Something you read in an economic outlook from a bank or industry association or in articles about your industry or competitors on the web?

Or are you going to get out and talk to your customers and suppliers about what is happening in their world and what that will mean for you? Why not put a simple but systematic process in place to ask the same, key questions from several sources?

But that will take time; it can’t be done in the week or two before the planning session. Who is going to see whom and ask them what has to be decided soon – using output from the second quarter review. And the meetings will have to be arranged – and everyone has a full, busy schedule.

If information is power – or at least confers power – why settle for anything less than the best information available? Decide what you need and how to get it now – then start collecting the information soon.

3. Quick tip.

Dealing with the summer heat and vacations, doing the things that are urgent, can take the focus off preparation for the thing – the annual business planning process – that is important. If that happens and business catches a chill next year, it will not be this summer’s heat that’s to blame.

More in future posts, but today is the hottest day so far this year – so I’m off to get a Frappuccino. Staying cool is hard work!

5 Reasons Why I Love Execution

Thursday, November 25th, 2010

I think I may be in love.

I’m reading Larry Bossidy and Ram Charan’s book “Execution – The Discipline of Getting Things Done”. Although I’m only one third of the way through it, I believe it’s the most rational, practical book about strategy that I’ve read in years.

Why do I think that? Well, for a start I buy into their fundamental premises. Here are 5 that I think are particularly important:

1. The difference between a company and its competitors is often the ability to execute.

All business owners have access to the same business books, webinars, training programs, coaches and consultants etc. Why then do 2 companies in the same industry, operating in the same markets and with similar strategies, produce different results?

The only remaining variable is execution. Which doesn’t mean the market leader is executing well – they’re just executing better than the other players. As an old friend used to say – “In the kingdom of the blind the one-eyed man is king”.

Some of you may argue that we haven’t considered culture or leadership. In that case, read on.

2. Execution is the biggest issue facing business today – and nobody has explained it satisfactorily.

Bossidy and Charan make several great points. Over the years, a great deal of thought has been given to strategy development – the result of which has been thousands of books and articles. You can hire a strategy consulting firm (including mine) who will guide you through the various “models”. The same is true – or rapidly becoming true – of leadership development and culture.

But how much thought has been given to how to execute? Not much. (Although, I have to say, our firm has always emphasised it). Perhaps execution has been neglected because it’s traditionally been confused with tactics. But it’s not – execution is integral to strategy.

You could argue that the field of project management is concerned with execution. But is it? Or is it concerned with how to manage the projects that someone else decided have to be executed?

3. Execution is the major job of the business leader. The leader who executes puts in place a culture and processes for executing.

If execution is the biggest issue in business today it had better be the #1 job of every business owner. But there are a couple of bear traps here.

Entrepreneurs have to avoid the temptation to execute or do everything by themselves. They also have to avoid micro-managing or being too hands-on. If the owners don’t do that they lose sight of the forest and only see trees. They stop being strategic and get lost in tactics.

The authors say the most effective approach is “active involvement”. That means getting things done through people. But having such a detailed knowledge of how the business makes money that an owner can constantly probe and ask the right questions – leading people to develop the right solutions.

The owner/leader has to find the correct balance if she is to lead by example and make execution part of the culture.

4. Execution is a discipline, a specific set of behaviours and techniques that, if mastered, will give you a competitive advantage.

The “easy” parts of the statement are that there are specific techniques, they can be mastered and, if you pull that off, you will gain competitive advantage.

The more difficult part is that there are a specific set of behaviours to be mastered also. Human nature being what it is, changing behaviour – even our own – usually takes far more effort than learning a technique. But perhaps that’s where the discipline is required.

5. Execution includes mechanisms for changing assumptions as the environment changes.

This is my personal favourite. Many of the owners and management teams we work with get the intellectual concept of “no fault, no blame” when following up on plans and finding they haven’t worked quite as intended.

But even they find it hard to put guilt and value judgements aside when targets are missed because assumptions were “wrong”. The authors’ stress need for “realism” in running a business. Realistically then, has anyone ever been able to accurately predict the future? Let’s put the fault, guilt, and blame away for good.

In case you hadn’t noticed, I’m excited. There is just so much common sense in this book I’m looking forward to reading the rest of it. I should have read it years ago………but there goes the guilt thing again!

Give Yourself A Chance in 2011

Thursday, November 18th, 2010

Last week we sent a survey to over 600 people in our database and asked for their input on 6 things that we think may impact their performance in 2011. They were the Canadian economy; the US/global economy; changes taking place in their industry; competitors’ actions; finding people with the right skills and experience; and the ability to secure financing.

We also asked the respondents if they expected their profits to increase in 2011. Over half of them said yes. Their fairly positive outlook is similar to, but more cautious than, the mood in recent survey by accountants PriceWaterhouseCoopers (PwC)[1]

When we asked the participants how they thought they will do against their goals and expectations for 2010, half said they would miss them.

We closed the survey by asking 2 questions about a key internal process for growing companies – business planning.

About a third of respondents told us they finish planning 2 or more months before the new fiscal year begins. Another 30% complete their planning during the month before the fiscal year begins. The remainder only complete their planning during the first month of the new year, or later.

Then we asked the participants if they used a structured planning process, an unstructured process, or no process at all.  Almost 40% said that they have a structured process, while only around 15% have no process at all. The remainder said they have an informal process.

The answers to the last 2 questions could be influenced by the size of some of the companies responding to our survey. However, it is tempting to speculate that the companies (every participant works for a different company and 75% of the respondents said they were the owner of the company) who expect to miss their 2010 goals are the same ones who leave planning late and have either an informal process or no planning process at all.

But a sample of individual responses showed that many companies who will miss their 2010 goals say they have a structured process and finish their planning before the start of the fiscal year.

Clearly this raises some questions, such as;

  • How well did the companies gather information about the external environment?
  • How realistic were they about their strengths and weaknesses and the quantity and quality of the resources they had?
  • Were the assumptions which formed the basis for their goals/ expectations/forecasts overly optimistic?
  • How well did they actually execute on their plans?
  • Is some combination of these 4 at work?

And if the companies which have a structured process and plan well in advance of a new fiscal year still miss their goals – what chance do those with an informal process who leave planning to the last minute have?

I wonder how many of those companies will actually increase their profits in 2011!

Give yourself a chance next year, download our 2011 Business Planning Checklist

If you want more information about the survey, or would like to participate in the next one, contact us at growprofits@profitpath.com


[1] “The new business as usual. The Business Insights Survey of Canadian Private Companies 2010” PriceWaterhouseCoopers

Have You Ever Seen a Business Plan that Worked?

Saturday, October 3rd, 2009

Well have you? Personally, I’d say “Yes, but….” But what you may ask? Well, firstly the plan wasn’t written from the back forwards. In other words it wasn’t written as a result of a statement like “We need to get $X thousand/million from the bank/lenders.” Secondly, it wasn’t written because someone (I hope it wasn’t a consultant) said “A company of our size should have one”. Thirdly, once written it wasn’t put on the shelf and forgotten for the rest of the year. And, finally, no one expected things to happen exactly, and I mean exactly, the way the plan predicted.

A plan that starts with a look at what’s going to happen in the industry and then at how the competition are positioned, helps highlight opportunities and threats. Combine this with an honest assessment of the company’s own strengths and weaknesses and you’re on the way to developing a fairly logical strategy. Using that to develop three financial forecasts – a “best case”, a “worst case” and a “most likely case” helps keep people’s feet on the ground. It also helps if the assumptions made in each case are carefully recorded. Compare this approach to starting to write a plan knowing what the final financial numbers have to look like and you can figure out, fairly quickly, which of the two plans is most likely to “work”.

A good reason to write a plan is to figure out the answer to a question – like “What would we have to do to increase our profits in each of the next 3 years?” People will be more motivated to approach the process in a logical, thoughtful way than if we’re doing it because “we should have one”. Part of the answer is working out what the company will have to do – for example buy plant and equipment, add people, and change the way things are done. Those things would probably be written down somewhere anyway – with, once again, all of the assumptions made – so why not put them in a plan? If the money we’ll have to spend and the people we’ll have to hire are related to the increases in sales they’ll help to generate, it becomes easier to see them as investments instead of expenses.

Plans that work are dog eared. Why? Because they’re pulled out regularly and reviewed. During the planning sessions the “big” goals – increase sales by $500K – are broken down into smaller actions – introduce a new product, hire new sales people. Action plans – with SMART (specific, measurable, attainable, realistic and time related) objectives – are developed and written right into the business plan. Someone is designated as the “champion” for each action. She/he is responsible for getting it done. It’s easy to check, for example once a quarter, whether well defined actions like these have been completed. At the same time actual developments in the economy, industry and marketplace are compared to the assumptions and the strategy updated. Financial results are compared with the forecasts and adjusted if necessary. These are “no blame” sessions – if there are performance problems with some individuals they’re dealt with separately – just an opportunity to update some projections with reality.

Why aren’t these guilt filled, finger pointing sessions? Because the people who did the planning know that they can’t predict what the weather will be tomorrow, what the stock market will do next week or how their favorite sports team will finish the season. They measure how well their plan has worked by how close their estimates came to reality. If any of us could exactly predict the future – well, I wouldn’t be writing this and you wouldn’t be reading it.

I tell myself that one of the advantages of getting older (there have to be some surely) is that you gain a lot of practical experience – both good and bad. A couple of the things I’ve noticed, along the way, are related to business plans. Firstly, the companies that I’ve been involved with which had good business plans always performed better than those which didn’t. Secondly, those companies hadn’t written their plans to meet some predetermined outcome; they’d written them to help answer key questions affecting the future of the business. Finally the owners had a realistic approach to forecasting the future and, most importantly, they made their plan come to life.

Post History