Strategy Execution

Wishing won't make it happen

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Getting things done in organizations can be difficult. There seem to be a million reasons why people don't deliver. Among our favourites are the promises made during or after meetings like, "I'll get that done prior to our next meeting" or, "I'll get to that this week." And then the vow is quickly forgotten and not delivered. Sometimes the same vow is made over and over and continues to go unfulfilled!

Research lead by Peter Gollwitzer shows that vowing to do something is often useless. What works is making concrete and vivid plans that include answers to the following: "What is the problem you have to confront?" "When will you follow through on your plan?" "Where will you do it?" and "How will you do it?"

Further research conducted by Dr. Gail Matthews provides empirical evidence that writing goals down, making concrete action plans, and sharing them with others generates the highest levels of accomplishment.

Based on our own research, we would go even further to suggest that adding an specific, externally verifiable metric which accurately gauges success (or lack thereof) will also deliver higher levels of accomplishment, or at the very least drives learning.

Otherwise, you're more likely to fall into the human tendency to rationalize any outcome as more or less what you expected.

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Closing the Science-to-Business Gap

 If you think of the items we have outlined in the Noise section as symptoms, the Science-to-Business Gap should be classified as one of the diseases that causes these symptoms. I'll write about four other diseases in future posts (Sublinear Productivity, Strategy-to-Performance Gap, The Engagement Gap and Organizational ADHD). Each of these produces a number of unwanted symptoms and impediments to good performance in your organization. If you can head these off before they take root then you'll be ahead of your competitors.

“If we want to strengthen our companies, elevate our lives, and improve the world, we need to close the gap between what science knows, and what business does.”

Daniel Pink

Drive: The Surprising Truth About What Motivates Us

Closing the gap between research and practice (or what science knows and what business does) represents a change from the dominant approach to management behaviour – which operates more on intuition, anecdote and experience. 

“Most managers are notoriously subjective, prone to manage by anecdote, quick to adopt best practices, and fond of big, visible initiatives...” McKinsey Quarterly, 2006, Number 3

And if we want to move away from commonly used management practices, we need to understand that change itself is a difficult process.

According to the authors of Switch and Made to Stick, “the primary obstacle is a conflict that's built into our brains. Psychologists have discovered that our minds are ruled by two different systems—the rational mind and the emotional mind—that compete for control. The rational mind wants a great beach body; the emotional mind wants that Oreo cookie. The rational mind wants to change something at work; the emotional mind loves the comfort of the existing routine. This tension can doom a change effort—but if it is overcome, change can come quickly.”

The second part of the challenge is answering the question, “what do we change TO?” If you are operating based on experience and intuition now, what approach do you rely on? Do you just pick one of the billion books out there trying to sell you on the latest management fad (while selling out theatres on the rubber chicken circuit)?

Our goal is to avoid any whiff of a fad and stick to the properly-researched territories. So, rather than follow any “model” which espouses particular techniques, we like the approach of Evidence-Based Management, which “is a commitment to finding and using the best theory and data available at the time to make decisions.” We see this as a practical way to bridge the gap between science and business.

The 5 Principles of Evidence-Based Management

  1. Face the hard facts, and build a culture in which people are encouraged to tell the truth, even if it is unpleasant.
  2. Be committed to "fact based" decision-making -- which means being committed to getting the best evidence and using it to guide actions.
  3. Treat your organization as an unfinished prototype -- encourage experimentation and learning by doing.
  4. Look for the risks and drawbacks in what people recommend -- even the best medicine has side effects.
  5. Avoid basing decisions on untested but strongly held beliefs, what you have done in the past, or on uncritical "benchmarking" of what winners do.

There is a significant movement in medicine to apply Evidence-based Management. We think it's time for businesses to catch up.

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Roger that: Roger Martin on Management Systems

I'm looking forward to getting my hands on Roger Martin and A.G. Lafley's upcoming book Playing to Win: How Strategy Really Works, which is due out later this month. But in the meantime I've been reading a couple of their teaser articles in HBR and Rotman Magazines. This passage caught my attention:

The last of the five essential questions is about management systems – the systems that build, support and measure a strategy. This last question is typically the most neglected, but is no less crucial to effective strategy than the others. Even if the other four questions are well answered, a strategy will fail if management systems that support the choices and capabilities are not established as well. Without supporting structures, systems, and measures, the strategy will simply be a "wish list" – a set of goals that may or may not ever amount to anything. To truly win, an organization needs systems in place to support and measure the strategy. It needs robust process for creating, reviewing, and communicating about strategy; it needs structures to support the core capabilities; and it needs specific measures to determine whether the strategy is working (or not).

The article this was excerpted from is called A Playbook for Strategy: The Five Essential Questions at the Heart of Any Winning Strategy, and was published in the Rotman Magazine Winter 2013. As always, Roger has produced some well considered and thought provoking work. You should give this article a read for a quick preview of the book's content.

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No Ambiguity with Ambiguity

We're big fans of Dan and Chip Heath's work. You'll see it referenced in our materials frequently as they undertake very solid research and present their findings in readable and interesting ways.

We were especially pleased when they highlighted one of the behaviours we have identified as organizational Noise which waste people's time, resources and potential:

Good leaders excel at converting something ambiguous into something behavioral. Take Terry Leahy, one of the leaders responsible for reversing the fortunes of Tesco, now the U.K.'s No. 1 grocer. One of Tesco's ambiguous goals was to do a better job "listening to customers." Leahy broke down that goal into a set of specific actions. For instance, cashiers were trained to call for help anytime more than one person was waiting in the checkout line. In addition, Tesco received 100,000 queries per week from customers. Leahy's team made sure that all Tesco managers had access to customer concerns. (If you want to listen to customers, you had better make sure your managers can hear what they're saying.) As a result, they learned counterintuitive lessons, such as that customers dislike stainless-steel refrigerators, which remind people of a hospital -- not an ideal association for a grocer.

Ambiguity simply isn't good for individuals, teams or entire enterprises. Read the full article at Fast Company here:

http://www.fastcompany.com/1676957/dan-and-chip-heath-say-nix-ambiguity-and-focus-lasting-change

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Five Forces vs. The Customer?

You may have seen the reports of Monitor Group's recent demise. Steve Denning of Forbes wrote a forceful blog post entitled, "What Killed Michael Porter's Monitor Group? The One Force That Really Mattered." This article has been the basis of a lot of bandwagon jumping lately. Not in a good way in my view.

I like strong opinions. As such, I like the Denning piece. But as a skeptical consumer of information, I'm not convinced that the conclusions he's drawn are correct.

Are we to believe the very approach that Porter and Monitor were famous for was exactly what lead to their demise? It may be a poetic and clever assertion, but I don't buy it for a second. You'd also have to forgive me for questioning the motive of the article itself, since Denning is clearly a management consultant. It feels a tad righteous and self-promotional as well.

But that's not my real beef with the article.

I take umbrage with anyone who thinks they can stand back from a safe distance and accurately assess why a particular business succeeded or failed. Looking retrospectively at any event, whether it is a game of schoolyard basketball or the management of a multinational, is incredibly problematic. Suggesting you have the definitive viewpoint is just plain fatuous.

There are thousands of moving pieces, decisions, people and contributing and conflicting influences that we could never appreciate or comprehend. Even if we are intimately involved in the enterprise we still don't know the totality of things that were going on around us. If you’ve ever worked in a dissolving business you’ll know what I’m talking about. Everyone on the outside has an “expert” opinion as to why the company failed. And yet, I doubt any of them are fully correct.

Just as the validity of predictive forecasting is suspect, so is the validity of retrospective analysis of business failure. It would be nice if things were as cut and dried as some would have us believe.

“When the number of factors coming into play in a phenomenological complex is too large scientific method in most cases fails. One need only think of the weather, in which case the prediction even for a few days ahead is impossible.”
― Albert Einstein

“The cord that tethers ability to success is both loose and elastic. It is easy to see fine qualities in successful books or to see unpublished manuscripts, inexpensive vodkas, or people struggling in any field as somehow lacking. It is easy to believe that ideas that worked were good ideas, that plans that succeeded were well designed, and that ideas and plans that did not were ill conceived. And it is easy to make heroes out of the most successful and to glance with disdain at the least. But ability does not guarantee achievement, nor is achievement proportional to ability. And so it is important to always keep in mind the other term in the equation—the role of chance…What I’ve learned, above all, is to keep marching forward because the best news is that since chance does play a role, one important factor in success is under our control: the number of at bats, the number of chances taken, the number of opportunities seized.”
Leonard Mlodinow, The Drunkard's Walk: How Randomness Rules Our Lives

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"Killzone" Economics. Why You Should Care.

Decreasing interaction costs and sublinear enterprise productivity could create market volatility that can be your friend, or your enemy, when building and managing your enterprise. Are they your friends?

Let’s start with some definitions.

Killzone is a military term, or at the very least a gamer term (from Urban Dictionary):


“A military term describing an area of ground that is well defended, possibly including pre-sighted machine guns, mortars, artillery, as well as a variety of obstacles such as razor wire and tripflares. (Weapons will be pre-sighted to these obstacles, as approaching troops will get caught in them, making them ideal targets.) This creates a literal "killing zone," hence the name.”


Clearly from that definition, this is not somewhere you want to end up as a company. Your odds of surviving a trip to the Killzone are low.

To understand interaction costs, you need first to understand transaction costs. Transaction costs, which were the focus of Ronald Coase’s Nobel Prize winning work in the 1930’s, include the costs related to the formal exchange of goods and services between companies, or between companies and customers (ie. How much does it cost me as a company to sell you, the customer, my goods or services?).

These costs play a critical role in determining how large your firm can grow. Coase’s work included a linkage between transaction costs and the size of a firm. Simply put, Coase’s Nature of the Firm suggested that a firm will continue to grow to the point where an internal transaction can be outsourced more cheaply than if executed within a company. When a transaction can be accomplished more cheaply outside of the firm, there is no incentive to continue growing.

Interaction costs are now more widely used than transaction costs as they include transaction costs, but also add the costs of exchanging ideas and information. Thus they cover a more full picture of economic interactions between companies and their customers. Interaction costs are comprised of search, information, bargaining, decision, policing and enforcement costs. As more and more work is information related in our economy, interaction costs can be incredibly important to watch and manage.

Most importantly perhaps, interaction costs are exactly the kinds of costs that are rapidly decreasing due to the ubiquity of connected devices and the growing power of functionality facilitated by this connectivity.

Now for sublinear enterprise productivity. Wha? Yes, sublinear enterprise productivity. In short, this refers to some interesting work done by Geoffrey West and his collaborator Luis Bettencourt recently where they discovered when studying 23,000 publicly traded companies, that as the number of employees grows, the amount of profit per employee shrinks. Corporate productivity then, was shown to be entirely sublinear. This should not be taken as the last word on the topic, but they are interesting results. In particular their assertion that, “the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy.” Furthermore, they go on to state that, “the inevitable decline in profit per employee makes large companies increasingly vulnerable to market volatility.”

So what if your firm is experiencing both decreasing profit per employee from the growth dynamic described by West and Bettencourt, and is also seeing interaction costs drop as value chain activities migrate more to information-driven interactions so as to be more exposed to interaction cost decreases? Wouldn’t that lead to even more volatility? Wouldn’t that that promote unequal rates of change inside and outside of companies?

It’s a hypothesis at this point. And it’s probably not original. I’m inclined to invoke Bob Sutton’s law in this regard, “If you think you have a new idea, you are wrong. Somebody else probably already had it. This idea isn't original either; I stole it from someone else."



 

If there is any validity to the hypothesis, it might suggest there is a systemic way to identify which markets and companies are ripe for disruption. If interaction costs are dropping around you in your market, and your profit per employee is declining, perhaps it’s time to think about disrupting yourself before someone else does? At the very least, you’d better get a grip on your interaction costs so they are in line with the market.

If you’re an insurgent, this seems to be a particularly good time. Dropping external interaction costs and decreasing profit per employee might suggest a market which is stumbling into your Killzone.

 

[Author’s note: I am not an economist. The post above is based on a hypothesis only. The underlying science surrounding transaction and interaction costs and sublinear enterprise productivity are well-known and evidence-based to the best of my knowledge. However, my leap to a meaningful connection between the two is only hypothetical at this time. Contributions and refutations are welcomed. My goal is to explore some of the possible underlying reasons (outside of the current political and monetary policy upheaval, of course) for what I perceive to be the current economic conditions for enterprises: characterized by hypercompetitiveness and increasingly volatile markets.]

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Hustle As Strategy

I was scanning through a stockpile of saved research/articles that I have accumulated on my drive over the past 25 years, and came across Amar Bhide's HBR article from September-October 1986 entitled, "Hustle as Strategy."

While I don't think this is Amar's best work (to be expected as he was a doctoral candidate at the time), it contains a nugget that I love:

"The competitive scriptures almost systematically ignore the importance of hustle and energy. While they preach strategic planning, competitive strategy, and competitive advantage, they overlook the record of a surprisingly large number of very successful companies that vigorously practice a different kind of religion. These companies don't have long-term strategic plans with an obsessive preoccupation on rivalry. They concentrate on operating details and doing things well. Hustle is their style and their strategy. They move fast, and they get it right."

It's a nice idea that you could spend your time as an executive creating and managing strategy. I've even seen fancy titles that suggest someone is the "Chief Strategy Officer." Sounds incredibly cool and rarefied.

In my experience though, it doesn't seem to matter if you've chosen to use a Competitive (Porter), Resource-based (Hamel & Prahalad), Blue Ocean (Kim & Mauborgne), Disruptive (Christensen & Raynor) or Emergent (Hamel, Mintzberg)...it does all come back to execution.

Reminds me of that old saw, "Great ideas are a dime a dozen; only execution counts."

 

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Forget Multitasking

You know the old expression "one thing at a time?" Many expressions, stories and fables tend to stick around because they resonate with us. Because there is a deep truth to them.

You'd think being a technology guy (who loves his gadgets), that I'd be all over trying to do several things at once. Believe me, I've tried. It's just that I feel like I'm running on the spot and not getting anywhere. I've marveled at people in my industry that seem to effortlessly multitask (inevitably while highly caffeinated) and have felt inadequate in their presence.

So, I did a little digging to see if I was missing some critical multitasking gene...turns out there has been plenty of decent research on the topic.

Here's a little bit: http://search.apa.org/search?query=multitasking

In short, we're just not wired to multitask effectively. Cognitive switching costs are a big part of the problem. We just don't switch from one thing to another as easily as some might think.

Whew.

Now I can go back to work. One thing at a time.

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Closing the Knowing-Doing Gap

If you've read any of the previous blog entries, you'll know I'm a big fan of anything that Jeffrey Pfeffer or Bob Sutton write. And when they co-author a book, you know it's going to be well-researched, intelligent and useful (with a couple of good chuckles - Sutton is a wise-cracker). They have a great knack for debunking commonly held business notions.

One of my dog-eared volumes from Pfeffer and Sutton is a book called, The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action. Here's a summary of eight guidelines for action:

1. Why before How: Philosophy is important
2. Knowing comes from doing and teaching others how
3. Action counts more than elegant plans and concepts
4. There is no doing without mistakes. What is the company's response?
5. Fear fosters knowing-doing gaps. So drive fear out.
6. Beware of false analogies: fight the competition, not each other
7. Measure what matters and what can help turn knowledge into action
8. What leaders do, how they spend their time and how they allocate resources, matters.

Pick up a copy if you can. You won't regret it.

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Sutton's Law

"If you think you have a new idea, you are wrong. Somebody else probably already had it. This idea isn't original either; I stole it from someone else."

Bob Sutton is a professor of Management Science and Engineering at Stanford Engineering School and a frequent co-author of Jeffrey Pfeffer, including the books: The Knowing-Doing Gap, and Hard Facts, Dangerous Half-Truths, and Total Nonsense.

If you don't have much time to read (and who does), any book by Pfeffer or Sutton is well worth your time. All meat; no filler (replace meat with chick peas if you're a veg).

I strongly advise reading Bob's blog. If nothing else, you'll get a good chuckle.

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