Breakaway Business Blog

10 Strategy Tips from the Front Line

noreply@blogger.com (Jim Musfeldt) — Tue, 12 May 2009 17:36:00 +0000

“In theory there is no difference between theory and practice. In practice there is.”
Yogi Berra, Hall of Fame baseball player and manager

Despite the insightful observations of many strategy gurus, most strategic planning processes are fraught with flaws. In essence, there is a mammoth gap between the theory and the practice of strategy.

Having observed more than my fair share of strategic speed bumps, the following list contains 10 strategy tips from the front line:

Strategy development is not about blindly following strategy gurus’ methodologies
- There is no substitute for critical thinking and rigorous analysis
- Use the gurus’ methodologies (e.g., Porter five forces, Blue Ocean) to provide different perspectives on your strategic problem – not as the ultimate source of truth
- An approach that overlays different strategic methodologies typically results in the most robust strategy
Assess the strategic landscape from an external perspective
- Strategy is not an internally-focused activity – external context is mandatory; STEEPLED / SWOT analysis and competitive intelligence can be invaluable
- What disruptive forces may affect the organization? Can the industry be reshaped (e.g., redefined, segmented, disaggregated, consolidated, market disruption) to provide an advantage?
- What customer pain points are currently unmet?
Strategy is an iterative process
- An optimal strategy is rarely developed without an iterative process; iterations drive strategic perspective and fine tune a strategy
- Iterations typically cycle through strategic options, competitive / market reactions (game theory is helpful here), and implementation feasibility
- Conduct iterations on several of the most promising strategic options; premature focus on a single option can dramatically reduce the strategic upside of an organization
An organization’s optimal strategy largely depends on its current state
- Transition and execution challenges cannot be reasonably assessed without a realistic view of an organization’s current state
- Current state includes critical elements of the organization, such as: customers, human capital, products / technology, channels, core competencies, activity web, assets, partners, market image, financial resources and availability of capital, etc.
- Time to value may be a factor for many organizations (e.g., turnarounds)
Don’t underestimate the value of activity “fit”
- Strategic positioning gets all the glory, but a consistent, reinforcing, and optimized activity web can add enormous value in even the most commoditized industries
- Superior activity fit accelerates strategy implementation, minimizes strategic drift, and enhances operation effectiveness
Strategy without realism leads to disappointment
- Optimism is a powerful (and necessary) attitude in an organization; however, overoptimistic assumptions inherently lead to poor decisions and an underperforming organization
- While innovative strategies can lead to breakthrough businesses, they can also lead to broken businesses if basic business principles are violated
Create the strategy for the long-term
- Incorporate strategic flexibility whenever trade-offs are reasonable
- Consider the option value of various strategic positions and activity webs; cheap call options are particularly valuable
- Utilize a dynamic process to reassess and reorient the strategy as required
Make the strategy real
- Translate the strategy into terms understood by the organization
- Document key business model elements, high-level functional policies, and the supporting activity web
- Realign the organization’s metrics to reflect the new strategy
- Highlight key transition and implementation activities; assess potential impact on policies, processes, organization, and systems
The “best” strategy is useless (or worse) if it isn’t (or can’t be) implemented
- Complexity is the enemy of implementation; all factors being equal, a simple strategy is preferable to a complex strategy
- To sustain execution intensity, the final strategy must have broad support in the organization
- Don’t underestimate the challenges of a strategic transition; the organization must survive the transition period and emerge strong enough to take advantage of its strategy
- At the end of the day, value is created by execution – not strategy
Don’t treat strategy as an academic exercise
- “Ivory tower” strategy exercises typically add little value; broad organizational input is required (and may even provide valuable bottom-up strategic insight / options)
- Strategy must drive business decisions; failure in this area quickly discredits the strategy and its advocates
- Strategic elements must be incorporated into operating plans and regularly reviewed in rhythmic business processes
- Strategy must be broadly communicated throughout (and understood by) the organization

I hope these tips help you develop a strategy that maximizes the long-term value potential of your organization.

Monday Morning Actions

Take a hard look at your strategy and strategic planning process. Identify and work to improve areas that violate best practices.
Reassess how the current economic environment may have changed the core assumptions behind your strategy. Is your strategic position still tenable? Refresh the strategy as required.
Evaluate the link between your strategy and the resulting execution. Explore how the strategy can be simplified to enhance execution effectiveness.

What is Strategy?

noreply@blogger.com (Jim Musfeldt) — Wed, 29 Apr 2009 04:24:00 +0000

“Strategy is buying a bottle of fine wine when you take a lady out for dinner. Tactics is getting her to drink it.”
Frank Muir, English comedy writer

The word “strategy” is commonly used in business conversations, but frequently misunderstood. Given the impact of strategy on the value creation potential of an organization, creating a broader understanding and appreciation of strategy is far from an academic exercise.

Fred Nickols provides a good overview of strategy definitions found in management literature:

‘The many definitions of strategy found in the management literature fall into one of four categories: plan, pattern, position, and perspective. According to these views, strategy is:

A plan, a "how," a means of getting from here to there.
A pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy.
A position, that is, it reflects decisions to offer particular products or services in particular markets.
A perspective, that is, a vision and direction, a view of what the company or organization is to become.’

Unfortunately, I believe much of the literature mixes strategy with strategic inputs and outputs.

From my perspective, strategy is a set of general rules and boundary conditions that enable an organization to achieve a vision, resulting in a plan and a pattern of actions over time. This definition (displayed graphically below), provides enormous flexibility and can be applied at all levels of an organization: holding company, corporate entity, business unit, function, organization unit, or process.

For example, corporate strategy is a specific approach a company takes to win in the marketplace – including customer and product selection, strategic positioning, and a consistent set of reinforcing activities (essentially answering the classic “where” and “how” strategy questions). In contrast, strategy for a corporate function is a specific approach to support the corporate strategy – including alignment of priorities, policy guidelines, and supporting activities and processes.

For more information on the differences between a vision, business model, strategy, and tactics, this chart from Harvard Business Publishing provides an excellent overview.

Critical Observations

In his classic Harvard Business Review article "What Is Strategy?," Michael Porter makes a number of critical observations about strategy:

At the corporate level, strategy is about creating a unique strategic position in the market: Distinction occurs by performing different activities from rivals, or performing similar activities in different ways. Sources of strategic positioning include: (a) variety-based positioning (produce a subset of an industry’s products or services), (b) needs-based positioning (serves most or all the needs of a particular group of customers), and (c) access-based positioning (segmenting customers who are accessible in different ways).
Strategy requires you to make trade-offs – to choose what not to do: Some competitive activities are incompatible; thus, gains in one area can be achieved only at the expense of another area. A strategic position that involves trade-offs facilitates sustainable advantage (it is difficult for straddlers and repositioners to imitate the position).
Strategy involves creating “fit” among activities: Fit has to do with the ways a company’s activities interact and reinforce one another. First order fit = consistency (i.e., alignment); second order fit = reinforcing (i.e., 1 + 1 > 2); third order fit = optimization of effort (e.g., coordination and information exchange). Fit drives both competitive advantage and sustainability.
Strategy must have some degree of continuity – it can’t be constantly reinvented: History is littered with great companies that failed to evolve as landscapes around them changed (e.g., General Motors). Consequently, strategies must evolve over time. However, frequent adjustments to strategic positioning, trade-offs, and activities (a) create confusion in the organization, (b) reduce the quality of front-line decisions, and (c) and prevent operational effectiveness. Strategic continuity makes an organization’s continuous improvement efforts more effective.
Operational effectiveness is not strategy: Efficient and effective operations (i.e., reaching the “productivity frontier”) are necessary but not sufficient to achieve superior performance. Best practices are easily emulated and do not provide sustainable competitive advantage. A siloed pursuit of operational effectiveness can actually degrade the competitive position of a company by negatively impacting the “fit” between activities.
Strong leadership is essential: Leaders must make the difficult trade-offs to develop a strategic position and complementary set of activities, communicate the strategy to the organization, drive the execution of the strategy (along with operational effectiveness), assess industry conditions and the effect on the strategy, instill strategic discipline in the organization, and defend the strategy against internal threats (e.g., growth trap).

In periods of dramatic strategic change (e.g., turnarounds), it is particularly important to assess strategic trade-offs and activity “fit.” Extreme care must be taken during the transition period between the old and new strategies to minimize confusion of customers and employees. Extensive communication and a rapid transition will help minimize the negative effects of the strategic change.

Monday Morning Actions

Assess your strategic position – have you made choices on what not to do? If not, why not? Discuss the issue with your strategic thought partners.
Make a decision on pending strategic choices. Don’t be afraid to say “no” and not pursue an opportunity.
Identify an activity that doesn’t “fit” with your strategy. Work with the owner of that activity to gain better strategic alignment.
Identify an operational improvement that may be degrading the “fit” between activities. Redirect or kill the operational improvement.
Evaluate the continuity of your strategy. Are you unnecessarily creating organization confusion and sacrificing operational effectiveness? If so, consider modifying your approach to strategic change.

What's Your Growth Challenge?

noreply@blogger.com (Jim Musfeldt) — Sat, 25 Apr 2009 21:30:00 +0000

"Be not afraid of growing slowly, be afraid only of standing still."
Chinese proverb

Despite today's challenging economic environment, forward-looking business leaders can't forget about growth. Why?

There are still pockets of growth in the economy (e.g., pharmaceuticals, clean tech)
If your balance sheet is strong, this is an ideal time to make strategic moves to enhance future growth prospects
If your balance sheet is weak, remember that the objective of a turnaround isn't just survival -- it's the resumption of sustainable, profitable growth.

However, growth is not homogeneous. As companies mature (see technology adaption life cycle and product life cycle) they face six discrete growth challenges. The chart below provides a brief overview of each growth challenge and a sample of the associated issues and pitfalls. (Note: while the chart frames growth from a product perspective, it applies equally to services.)

Challenge	Description	Common issues	Common pitfalls
1. Creation	Creating a new product and/or business model that provides a compelling value proposition to a target customer / market space Relevant to both start-ups and turnarounds Example: Aquarius Consulting Group	Capturing unarticulated customer requirements Acquiring initial customers Maintaining market (vs. technology) focus	Overemphasis on product (e.g., technology) at the expense of customer needs Failure to envision / develop a sustainable business model
2. Breaking out	Transitioning from early adapters (visionaries and tech enthusiasts) to fast followers (pragmatists) Particularly relevant for discontinuous innovation (i.e., Crossing the Chasm) Example: Tealeaf Technology Customer Experience Management Solutions	Adjusting to changes in customer purchase criteria Completing the “whole product” Maintaining market focus, not sales focus	Failure to target a specific (and strategic) market niche (i.e., pursue any sale at any cost) Refusal to adjust sales model (e.g., direct consultative sales)
3. Scaling	“Stepping on the accelerator” by selling more products (including product extensions and platforms) to existing customer segments within existing geographies Examples: Google AdSense; BMC Service Resource Planning	Formalizing processes Attracting talent Maintaining core elements of culture Upgrading infrastructure	Failure to adjust leadership and management styles Underinvestment in post-sales customer support Channel conflict as market saturation increases
4. Replication	Replicating existing product portfolio and business model in a new geographical area Examples: McDonald’s franchise; new consulting office	Developing extensive documentation on business model / processes Replicating culture in new locations Maintaining product consistency	Replication before readiness Lack of tailoring for local requirements Failure to leverage legacy talent in new locations
5. Stepping out	Establishing a presence in a new market segment (e.g., new product in a related market, derivative product in a new market) Examples: Cisco blade servers; Oracle database 11g Enterprise vs. Standard vs. Express	Tailoring existing go-to-market strategy Positioning product against entrenched competitors Sustaining commitment (e.g., budget, leadership bandwidth) for new market segments	Attempt to step out on 2 or more dimensions at once Reflexively applying legacy business model to new segment Failure to gain support of sales force / channel
6. Cross-selling	Capturing synergies by bundling or cross-selling related products to existing customers Examples: Solution selling; cable television and VoIP	Overcoming resistance of incumbent account owner Navigating customer accounts with multiple points of purchase Providing incentives to sales channel to overcome inertia	Insufficient incentives for channel Failure to frame value proposition from customers’ perspective

Start-ups typically face the growth challenges sequentially. However, mature companies pursuing simultaneous growth initiatives will likely encounter more than one challenge at a time.

For all challenges, growth is not just about hiring more people and pumping more product through the system. More often than not, there are material issues the business must overcome and pitfalls that must be avoided. Despite the current economic environment, it's our job as business leaders to overcome these challenges and position our companies for future growth.

Monday Morning Actions

Identify in which phase(s) of the growth life cycle your company is operating. What systemic issues are you facing that jeopardize success?
Drill down on key challenges. What current initiatives are addressing these areas? If possible, incorporate growth elements into these initiatives.
If your balance sheet is healthy, launch initiatives to address key challenges that have been neglected.

Turnaround Process: Flexible Approach for Corporate Renewal

noreply@blogger.com (Jim Musfeldt) — Fri, 03 Apr 2009 03:03:00 +0000

"Failure is not fatal, but failure to change might be."
John Wooden
Legendary UCLA basketball coach

In today's harsh economic environment, businesses can face a wide range of strategic and operational challenges. If the situation is sufficiently severe, a corporate turnaround may be necessary.

Every corporate leader should understand the fundamental steps involved in a turnaround for three critical reasons:

By understanding the turnaround process and tactics, you may be more effective at heading off problems that contribute to turnaround situations (e.g., unrealistic business assumptions, failure to promptly address financial under-performance, tolerating less than top-notch talent in key organization roles)
If your company or business unit is involved in a turnaround, you will be a more effective participant if you understand the process that will be followed (and in a turnaround, you definitely want to be part of the solution)
For new business unit managers, the turnaround process (absent the capital structure elements) is useful to quickly size-up the business issues and set the organization on a new path

Turnaround Process

Turnarounds involve the formulation and execution of a strategy and action plan to drive corporate restructuring and renewal, typically in an environment of financial distress.

Every turnaround is unique and merits an approach tailored to its specific needs. However, most turnarounds roughly follow the steps in the following table.

Process Step	Description	Output
1. Ensure appropriate turnaround leadership is in place	New leadership is essential in most cases Anoint an insider or outsider depending on the specific challenges of the organization Supplement gaps (e.g., legal, finance, operations) with external specialists	Change-oriented leadership with the know-how to drive a turnaround
2. Assess the situation and future viability of the business	Quickly assess the balance sheet, the cash burn rate, market dynamics, customer satisfaction, organization strengths and weaknesses, and turnover of key employees Are you making buggy whips?	Inventory of life-threatening issues
3. Communicate the case for change	Get organization leaders on board first, followed by the broader business Include rationale for change and the associated benefits Engage with key external stakeholders (e.g., creditors, customers, suppliers) Set realistic expectations (i.e., there will but pain but there's light at the end of the tunnel)	Organization readiness for swift, dramatic change
4. Implement emergency steps to stop the bleeding	Strategically reduce costs (e.g., headcount, opex, capex) Shut-down hemorrhaging business units Rescind egregious policies Stem customer / employee defection Reassess anything considered a "sacred cow"	Stabilized business with the breathing room to develop and implement the longer-term survival plan
5. Develop a strategic survival plan	Rework corporate strategy as required Assess fit of existing portfolio of business units / products / services with new strategy Develop "get well" plan for lagging operating capabilities Determine viable capital structure and create appropriate negotiation strategy with creditors Demonstrate a viable on-going business model Communicate plan to key internal and external stakeholders Identify key performance metrics Emphasize realism in all elements of the survival plan	Realistic, implementable survival plan that will position the company for future success
6. Ensure appropriate functional leadership is in place	Identify critical roles Assess fit of incumbents against requirements of turnaround Replace mismatches with internal or external talent as required to ensure "A players" are in all critical roles	Motivated, change-oriented functional leadership who are capable of executing the long-term survival plan
7. Restructure the business and execute the survival plan	Sell non-core and underutilized assets Restructure debt Raise capital Rationalize product / service portfolio Re-engineer and align key processes Invest in core elements of business model Strategically acquire to fill business model gaps Reposition corporate brand in marketplace Invest in valuable customer relationships Upgrade talent in organization	Recovering business with new strategic focus, improving operating performance, and more secure financial position
8. Monitor key performance metrics and adjust plan as required	Establish process for monitoring and publishing key performance metrics Religiously track metrics to measure momentum Initiate corrective action as required	Near-time visibility into performance with a corrective feedback loop
9. When business conditions dictate, transition organization leadership from turnaround specialists to sustaining management	Recruit or promote candidates who possess the skill set to build upon momentum created by turnaround Stagger leadership transitions to minimize disruption to the organization	Sustainable business

You may have noticed some similarity between the turnaround process and the critical catalysts for organization change. That should not be surprising, because a corporate turnaround is essentially organization change on steroids.

At the end of the day, turnarounds are built on the foundation of business fundamentals, realism, and ruthless execution -- characteristics that every leader must master.

Monday Morning Actions

If you're involved in a turnaround:

Passionately engage in the turnaround process; be a part of the solution!
Identify opportunities to reduce operating and capital expenditures; think cross-functionally to avoid sub-optimization
Invest extra effort in relationships with customers and key employees -- they are both critically important for a successful turnaround!

If you're not yet involved in a turnaround:

Quickly analyze your business from the perspective of a turnaround specialist; proactively pursue corrective action within your span of control
Initiate steps with HR to replace under-performing individuals in all key organization roles; accept nothing less than "A player" replacements
Identify one underutilized asset or unproductive sacred cow; build organization support to address it

Half Full, Half Empty, or a New Perspective?

noreply@blogger.com (Jim Musfeldt) — Thu, 26 Mar 2009 02:40:00 +0000

"One's first step in wisdom is to question everything -- and one's last is to come to terms with everything."
Georg Lichtenberg
German scientist and satirist

Is the glass half full or half empty? This metaphor is often used to talk about optimism or pessimism. However, what if we asked a different question about the glass? How might that change our perspective...and the actions we take next?

Everyone likes straightforward questions and answers, but business issues are rarely that simple (if they were, they probably would have been resolved long before now). At a minimum, strategy requires consideration of current and future market opportunities, competitive position, core competencies, key assets, and financial implications. Similarly, the messy reality of execution requires a deeper understanding of how an issue impacts a complex web of policies, processes, people, and systems. All of this requires perspective.

To gain this perspective, you typically need to assess an issue from multiple angles (e.g., various stakeholders, various levels of the organization, strategic vs. tactical). Building on the example of the glass of water, one might ask the following questions:

Is the status of the glass critical for our business? How does it stack-up to our other priorities? When is an answer required? Can the question be delegated?
The glass is actually full -- 50:50 air/water. Which do you want in the glass? Why? Is there a better alternative?
Is the water volume in the glass trending up, or trending down? Is the trend accelerating or decelerating? Is the trend positive or negative? What is driving these changes? What can we do to positively influence the trend?
Is the volume of water sufficient for our needs? Over what time period? What is the process for refilling the glass?
Is the glass over-sized for its purpose? Under-sized for future needs? Is there a better use for the glass?
Do we own the glass? Lease? Can we leverage a partner's glass?
Do we need a glass at all? Can a different approach (e.g., water fountain) meet our needs more efficiently and/or effectively?

Please note: I never advocate "boiling the ocean" or making an issue more complicated than it needs to be. Balance additional analysis against an issue's importance, value differential of options, reversibility of a decision, available resources, and desired time line. When all else is equal, simple strategies, business models, and execution plans generate the most value over time (because they are most likely to have superior execution!).

That said...When faced with a significant business situation, it's almost always wise to take a moment to "peel the onion." The perspective you gain will help ensure you're working towards the most important goals, targeting the root causes with the most impact, and executing on plans with the best chance of success.

So, is the glass half full or half empty? With a different perspective, it could be almost anything.

Monday Morning Actions

Look at your business from a different perspective. Consider the potential views of customers, partners, channels, employees (current and potential candidates), shareholders, debt holders, and potential investors. What concerns do each group have?
Assess how a private equity buyer or turnaround specialist would view the value potential of your business
Identify one business issue that may benefit from additional perspective; briefly explore the issue with cross-functional stakeholders to generate new ideas
Identify one business issue that is being overcomplicated; make a call on the issue
Mentor a subordinate on the value of perspective in problem solving

Organization Lessons from March Madness

noreply@blogger.com (Jim Musfeldt) — Sat, 21 Mar 2009 20:28:00 +0000

"A player that makes a team great is more valuable than a great player."
John Wooden
Legendary UCLA basketball coach

The traditional approach to evaluating a basketball player focuses on key offensive and defensive statistics such as a player's points per game, field goal percentage, assists, rebounds, and blocked shots. These are undoubtedly important metrics, but they only tell part of the story.

Besides the typical statistics, players that make a team great provide many of the following intangibles:

Leadership: inspiring, motivating, and driving the team to bring out their best
Team orientation: willingness to sacrifice personal statistics and do what it takes (even the unglamorous dirty work) to maximize team performance
Competitive drive: never-say-die attitude to overcome obstacles, perform when the chips are down, and achieve the team's goals
Hustle: aggressive, high-energy pursuit of objectives
Fungibility: flexible skill set and playing style that is adaptable to the competitive dynamics of the game

Talent and individual performances are necessary, but not sufficient, for a great team. Highly skilled teams without the intangibles are likely to resemble the 2004 US Men's Olympic basketball team (5-3 record, Bronze medal). Reducing the talent -- but adding the intangibles -- leads to the NBA champion 2007-08 Boston Celtics. Which team do you want your business to emulate?

Are you doing enough to hire, develop, evaluate, reward, and retain the employees that make your company great?

Monday Morning Actions

Evaluate your project teams' intangible assets; add / subtract team members as required to fill gaps.
Review hiring criteria and ensure candidates' intangible assets are explored during the recruiting process.
Provide positive reinforcement to a subordinate or colleague that demonstrates intangible value; select mentoring candidates based on intangible assets.
Incorporate softer intangibles into formal review processes. Ensure spikes / deficiencies are noted and impact final evaluations.
Create a reward specifically for intangible assets (e.g., traveling "teamwork" award, spot bonuses).
Incorporate intangibles into promotion and job assignment decisions (the more senior the role, the more important this becomes).

The Value of "In the Box" Strategy

noreply@blogger.com (Jim Musfeldt) — Mon, 16 Mar 2009 02:58:00 +0000

"Common sense in an uncommon degree is what the world calls wisdom."
Samuel Taylor Coleridge
Author

People are frequently encouraged to "think outside the box" when faced with a challenging business problem. In theory, this enables novel solutions by relaxing assumptions, looking at problems from a different perspective, and thinking creatively. Such an approach can lead to breakthrough strategies and solutions. Unfortunately, when basic principles of business are violated, it can also lead to significant value destruction.

The trick of "thinking outside the box" is making sure you think outside of the correct box. Relax self-imposed assumptions and constraints to your hearts content, but beware of violating time-tested business fundamentals.

To help keep me grounded, I like to periodically skim the book Thinking Inside the Box: The 12 Timeless Rules for Managing a Successful Business by Kirk Cheyfitz. Is the book groundbreaking? No. However, it is a valuable reminder of the fundamental principles of good business.

Cheyfitz's book provides numerous mini-case studies categorized into 12 business planks:

Some things never change: know the difference between what will change and what won't, and pay attention to the former
Profits: the first business of business is making money
Cash is everything: if you don't manage your cash, you won't be managing anything for long
Know what can be controlled and what can't: it is far better to manage expenses than pray for sales
Customers are the boss: give customers what they want, not what you want to give them
Unify the whole business: you should be selling all the time
If you can buy it, don't start it up: follow the example of virtually every big company in history and buy your way to bigness (at a reasonable cost)
Hire smart or manage hard: when it comes to people, you can either hire smart and get out of the way, or you can run yourself ragged micromanaging
Secure the real assets: find your business's real assets (the ones that generate your profits) and leverage them for all they're worth
Results are more important than the process: the end result is what really matters, so don't get bogged down in methodologies
Nothing lasts forever: always be ready to renew your business
Always have an exit strategy: make a plan to get your money out, and keep the plan updated and handy

The book is a quick read and provides a wealth of sound business fundamentals. Each chapter ends with an excellent summary that can make the book a ten minute read if required.

Monday Morning Actions

Encourage unrestricted thinking / ideas when brainstorming "out of the box." You never know where creativity will lead you!
In directed brainstorming, focus on relaxing self-imposed assumptions and constraints
When evaluating ideas, apply fundamental business principles to help screen viable paths
Before executing a plan, document and reassess core assumptions. If the plan stretches basic business principles, an objective 3rd-party assessment may be valuable

Critical Catalysts for Effective Organization Change

noreply@blogger.com (Jim Musfeldt) — Mon, 09 Mar 2009 04:51:00 +0000

In these challenging times, executive teams must frequently drive quantum-leap changes in business performance. Unfortunately, these change efforts frequently fall short of their objectives.

To maximize the chance of success, executives must ensure six critical change catalysts are in place:

Vision: Where are you trying to go with the organization? A vision provides a rallying cry for the organization and provides necessary context for the strategy.
Strategy: What is the strategy for getting there? A pragmatic strategy provides focus, a basic business model construct, and critical boundaries for the desired changes.
Action plan: What specific steps are required? To create value, strategies must be broken down into discrete steps required to accomplish the goal. Ideally, these steps should be aligned with other change initiatives across the organization.
Skills: What skill set (e.g., functional, analytical, political, IT, collaboration) is required to successfully execute the action plan? For significant change efforts, holistic skills are just as important as more tactical skills.
Resources: Are the right resources (e.g., personnel, capital, leadership bandwidth) at the right magnitude allocated to the effort? Are they actually being applied? To enable change, an appropriate level of resources must be budgeted and applied to the change effort. While all companies are resource constrained (particularly those involved in a turn-around), starving a change effort for resources is usually a quick path to failure.
Incentives: Are incentives in place to properly motivate the organization? The full spectrum of incentives should be considered (e.g., monetary, promotion, recognition). For intensive change efforts, significant incentives for key personnel may be warranted.

For incremental change efforts, most companies rely upon their existing policies, processes, and organizations to drive change. However, major change efforts (e.g., restructuring, turn-around) typically require substantial deviations from a company's norm.

Without a tailored approach, major change efforts frequently fall short due to a handful of missing catalysts:

Strategies and operating plans incorporate over-optimistic assumptions.
The team's skill set lacks holistic perspectives leading to (i) missed critical interdependencies in the action plan, (ii) mis-aligned policies, processes, or goals (e.g., sales comp plan vs. margin target, cost reduction vs. retention of key talent), and (iii) wide-spread sub-optimization in project execution.
Budgeted resources (i) are not applied in a timely matter due to over-commitment or excessively long transition-times, (ii) do not match the required skill sets (e.g., stretched "development opportunity"), or (iii) lack sufficient leadership bandwidth to provide appropriate guidance and "air cover."

While change introduces many unknowns, the six catalysts underpin all successful change efforts. Fortunately, these catalysts are largely within the control of the executive team.

Monday Morning Actions

Select a key change effort that is currently underway and identify deficiencies in the effort's critical change catalysts.
Pursue external assistance where critical skills or resources are not available within the organization.
Incorporate a catalyst assessment into the project approval/funding process.

I Can't Beat Tiger Woods

noreply@blogger.com (Jim Musfeldt) — Tue, 03 Mar 2009 16:07:00 +0000

"However beautiful the strategy, you should occasionally look at the results."
Winston Churchill
Former British Prime Minister

When I go golfing, I visualize how every hole should be played. Power draw off the tee to the right side of the fairway...lofted 7-iron just below and to the left of the hole...firm putt at the left edge of the hole...BIRDIE!

The strategy is flawless, yet it rarely happens. Why? Success in golf isn't driven by strategy, it's about execution. The golf player who executes at the highest level on the most consistent basis will win. Despite the strategic perfection in my mind, I will never beat Tiger Woods.

Like golf, superior business performance requires superior execution. Given a choice between superior strategy and superior execution, I'll take the execution every time. In fact, I'd go so far as to claim strategy enables value, but only execution creates value. That's borderline heresy from a former McKinsey consultant.

Winston Churchill was right -- results matter. Results require execution.

Monday Morning Actions

When analyzing strategic options, heavily weigh execution ramifications in your final decision.
Re-assess the value of the marginal effort you are putting into your strategy activities. Your organization may be better off focusing those resources on executing the strategy.
Examine your company's job mobility and rewards policies. Are employees in roles long enough to truly evaluate their ability to execute? Are employees with superior execution skills rewarded appropriately?

P.S. I'll never win a Masters Championship, but feel free to ask about my eagle or my 430 yard drive. :-)

Welcome to the Breakaway Business Blog

noreply@blogger.com (Jim Musfeldt) — Tue, 03 Mar 2009 06:01:00 +0000

At the most basic level, the long-term value of a company is largely determined by the strategy it pursues and it's ability to execute the strategy.

In my 20+ years in consulting and line management, I have seen enormous value enabled by sound strategy -- and destroyed by faulty strategy. A sound strategy never guarantees value creation, but it can certainly maximize the potential of an organization. However, while strategy frequently gets the headlines, superior execution typically has more influence on long-term value.

The combination of superior strategy and superior execution creates a "breakaway business" -- a business that breaks away from its competitors in terms of growth, profitability, cash flow, and customer/employee satisfaction. As business leaders, this needs to be our target.

By creating this blog, I hope to share my perspectives on both the theory and real-world lessons of both business strategy and execution . Topics will typically be based on my personal observations, current business events, and leading books/journals. In addition, I will always try to make the posts suitable for "Monday morning value."

I look forward to your feedback!