Posts Tagged ‘priorities’

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

 

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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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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

3 Ways Human Nature Sabotages Strategy

Tuesday, February 4th, 2014

Human nature is a wonderful thing.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.

One point teams overlook is that the items that didn’t make the cut aren’t going anywhere. They’ll still be on the list when the top priorities have been dealt with, and can be tackled later in the year.

People don’t believe us when we tell them this. Why, because in our hectic world there are so many distractions that it’s becoming unheard of to finish a project that takes more than 10 minutes to complete.

So, we tell people to block off time in their schedule 2 or 3 days a week to work on the priorities. And we tell them to allow nothing – not voice mail; not email, not their colleagues, not even their boss – to distract them during that time.

A company’s culture can be an incredibly powerful, positive force. But it can also multiply the negative impact of human nature.

This dark side prevails when, for example, carrying a superhuman workload is considered to be the only way to prove your commitment to the company.

A negative culture is often unwittingly fostered, and maintained, by the business owner or management team. So we work on them by, amongst other things, reminding them that Michael Porter said, “the essence of strategy is choosing what not to do”.

Does that work? Do people change?

The smart ones do and, strangely enough, there appears to be a direct correlation between leaders who change and companies being successful.

 

If you enjoyed this post you’ll also enjoy The Single Biggest Thing A Business Needs To Grow

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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

Don’t Shoot Your Strategy In The Foot

Tuesday, June 21st, 2011

1. It’s Still Going On.

What chance does a strategy have if the top people in the business aren’t 100% behind it? Over half of the respondents to a recent Booz and Company survey, quoted in Making Your Strategy More Relevant a recent HBR blog post, said they don’t feel their company’s strategy will lead to success.

How can that be, you might ask? Didn’t they develop the strategy in the first place? Or is it that old argument that things are just changing too fast now for committing to a strategy to be effective.

But some companies have done really well by sticking to their strategy. For example, 2 consumer companies which spring to mind are Alberto Culver, acquired by Unilever earlier this year, and Coca-Cola.

2. How To Do It.

We’ve argued in the past – see Why Strategy Is Still Worth A Business Owner’s Time – that the problem isn’t with strategy or strategic planning processes but with how they are applied. The need to be flexible and adaptive has never been more important.

But, the authors offer another reason for strategies failing – the core strategy has been diffused (and weakened?) over time. Multiple strategic initiatives, each developed with the best of intentions, have resulted in the management team having too many conflicting priorities.

Some examples of those initiatives are – developing a strategy based on the annual budget and not making the long term investments needed for success; setting “stretch” goals while continuing to do things the same old way; and investing in risky new products or markets in order to get growth while neglecting the core business.

One of my own personal favorites – and one we see surprisingly often – is having parts of the company like sales or marketing develop their own strategies without integrating them with the overall priorities.

82% of the survey respondents say that their growth initiatives lead to waste at least some of the time.

3. How To Avoid It.

But it all comes back to a couple of points we made earlier this year – tips 4 and 5 in 6 Tips for Getting Better Results in 2011. Avoid attempting too much and you’re more likely to be able to commit enough resources to each initiative to be successful.

Once again the authors offer an additional insight. Consider what your company does better than anyone else and how you provide value for your chosen customers now, today. Your strategy must then answer 2 questions – how do you expect to create value in the future; and what changes do you need to make, to the company overall, to get there?

4. Last words.

Arguably the business world is more volatile than ever before and growth will always be important. But being reactive in the face of turbulence and the pursuit of growth is not as effective as proactively working on what you do better than any other player to deliver value to customers.

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