When it comes to change..speed kills

When it comes to change, speed can kill.
The desire to get things in quickly, be decisive and prove you are an action leader can create a false sense of momentum. Those change efforts appear to leap out of the blocks only to slow as the resistance builds and the lack of commitment drags the efforts of change leaders to a halt. The 12 month integration program becomes a three to five year effort that collapses morale and spurs attrition.

John Kotter, renowned change guru, has highlighted the eight steps to leading successful transformations i.e.
1. Establish a sense of urgency
2. Form a powerful guiding coalition
3. Create a vision
4. Communicate the vision
5. Empower others to action the vision
6. Plan for and create short-term wins
7. Consolidate improvements and produce more change
8. Institutionalise new approaches

These are all necessary however i would like to highlight the most noticeable resistance to change that comes from a lack of involvement by those affected.

Understanding why a change is being undertaken and how it will take shape is critical to a successful change effort. Whilst the communication of these elements are essential they do not build commitment. If you need active participation from individuals and teams you need to listen, acknowledge and explain. You need to incorporate their good ideas and explain why you are not using their other ideas. Whilst it may feel like repetition and pandering to egos it is an essential element to developing the fuel that will drive your program with increasing acceleration.

I have seen the new leader take command and dictate new strategies day 1 using new distribution channels, revised products and new markets without bothering to ask existing leaders and experts what they think. Six months later the market research confirms what was known all along that the channels proposed had no interest in taking on distribution of that product. Detailed research also confirmed the cross-sell initiative faced numerous hurdles and was also another miss.

Great leaders listen first and then decide. They do not resile from removing obstacles that may slow progress. They involve, gain commitment and drive the change through active participation, frequent communication and by highlighting progress. Their energy is focused on building support and respect for the change, removing road blocks and remaining open to feedback and accepting changes along the way. Quality is not compromised, it is enhanced through the participation, involvement and commitment garnered through this leadership approach.

So if you want fast change ..slow down and listen first!

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Starting a new role..seek first to understand

Many executives face the excitement of a new role and feel a strong sense of determination to succeed in it. It is easy to get carried away with the thought that your knowledge, skills and capabilities will launch you into the new role and you should be ready to espouse the direction, strategy and method for achieving that vision from the moment you arrive. Whilst it is appropriate that you have thought about opportunities and have some ideas about where the business/division needs to go be careful as you may be leading with no one following.

In the first 90 days I would counsel any leader to hold that rough draft of a plan loose and spend the first 30 days seeking to develop a better understanding of the business, its staff, clients, markets, strengths and history. A future state is always set in the context of a current state. You need to deeply understand the current state and why it has evolved in order to understand what you can leverage to the future state.

If the first ingredient is success you need to have listened, understood and acknowledged what has gone before – be it people, products, markets, clients or locations. The ability to respect the past whilst explaining the “why” for the changes needed is a key skill for a new leader.

Existing staff and customers will already have ideas about changes that need to be made and these are a great source of opportunity. Use these ideas to help shape your strategy and by listening to your staff and showing respect for the work that they and others have undertaken prior you will start to build loyalty and commitment to the changes you need to make.

Involve your direct reports early, work with them one-on-one and as a group to build their trust in you and your intent to preserve the core values and ethics that staff want from their leader. Where you are unable to shift individuals to the new direction required see it first as a passion for what they believe is right and listen more intently and show you understand their perspective. If they are stuck in the past and unable to accept (these should be few and far between) then your handling of their situation (changed role, reduced responsibility, exit) will be closely watched by the staff to ensure it is fair.

This building of trust and understanding of what is important to staff will provide the foundation to build in your next 30 days the project teams, initiatives, research and analysis to build the case for change.  More on that in my next post

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Innovation – Do Boards and CEO’s Understand?

How many Boards, CEO’s and Senior Managers are urging their staff to innovate yet lack the understanding of the culture, skills and processes required and the risks inherent in innovation?

Scott Anthony wrote recently in a HBR blog that companies make the mistake of assuming a lack of innovation is a human capital problem and that few of their staff are capable of innovation. From his research almost anyone can, with practice, become competent in innovation.

His ideas and approaches to avoid in supporting innovation include;

  1. Issue highly focussed challenges (e.g. Netflix offered $1m to any team that could din crease effectiveness of algorithm for movie suggestions by 10% or more. Over 250 teams rose to the challenge and 2 exceeded the goal).
  2. Beware the Googlephile approach of 15-20% off work time to develop new ideas. Whilst this has worked at Atlassian, Google and some other organisations it runs the risk of creating a lot of suggestions that are incomplete and require more research, leading to delays and staff dissatisfaction and finally reduced participation. Scott suggests we instead focus on a small number of people who are given a significant amount of time to develop innovations.
  3. Lets go to the moon” – such bold visions may stimulate a big idea but more likely the ideas will be high risk and, given Board risk aversion, and their desire to prove the future, these will often be considered high risk and not pursued.
  4. Wing it – no need for a budget– lets just grab money from elsewhere if the idea is good enough. This rarely works and companies need to budget for the time and resources to support the innovation/enquiry.

There is no single solution to creating an innovative workplace so it is important to approach innovation from a range of perspectives.  In the Innovators Dilemma Clayton M. Christensen describes his theory of “Disruptive Innovation” and shows how large successful companies, in all types of industries, had been beaten by much smaller start-up companies.

These small companies would get a foothold by starting in market areas that were not attractive to larger players. The start-up, by focussing on lower cost, lower value products that still met the needs of the target customer segment, would then march their way up the value chain. Where these start-up companies did NOT adopt the big company models, but instead leveraged their start in unattractive markets to add superior value that incumbents could not match, then the strategy was “disruptive”.

To predict the success or failure of a new business initiative Christensen suggested four rules;

  • An incumbent that launches an innovation that targets the needs of its current customers can expect to succeed (Sustaining Innovation)
  • An incumbent that seeks to disrupt its own markets can expect to fail
  • An entrant that launches a sustaining innovation – one that targets the most valuable segments of an established market – can expect to fail
  • An entrant that launches a disruption can expect to succeed

“Disruption,” used in a technical sense, is a theory of innovation—of how particular types of new products and services, or “solutions,” come to achieve success or dominance in markets, often at the expense of incumbent providers.

Michael E Raynor, who co-authored with Clayton Christenson The Innovators Solution, has recently published The Innovator’s Manifesto.  According to Raynor Disruption is a theory of innovation that explains how particular types of new products and services come to achieve success or even dominance, often at the expense of once-powerful incumbents.

“From the rise of the telephone in the late 19th century to automobiles for the masses in the 1920s to restaurant meals available to all in the 1950s to Intel in the 1970s, personal computers in the 1980s, low cost airlines in the 1990s and social media sites today – disruption captures the essence of the “creative destruction” that has long characterized modern American capitalism.”

“in 2009 and 2010 by conducting controlled experiments to test the predictive power of different approaches to evaluate the survival odds of early-stage businesses. Test subjects were asked to predict outcomes based on whatever approaches they felt might be appropriate. The results were no different from random chance. When test subjects were instructed on a specific framework – Disruption theory – and were directed to use that framework on a new set of business plans, they improved their predictive accuracy by as much as 50 percent.’

The reality for most companies is that new products/services, new markets and growth initiatives are inherently uncertain and many therefore go for incremental growth. The tools provided by the Disruptive Innovation model may assist in evaluating these initiatives and provide a framework for focussing effort.

Who innovates?  We probably believe most innovation comes from big corporations (Apple looms large in the consumer mindset) but innovation is often undertaken by passionate consumers whose needs are unmet by current suppliers and therefore develop their own solution. These early adopters then stimulate increased demand and eventually the major companies realise there is a market large enough for them to serve.  An important aspect for companies is how they interact with and garner consumer ideas for products or services.  See Charles Leadbeater speak at a TED conference about the role of passionate and knowledgeable consumers in innovation on Ted (click below).

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When you are looking for new strategic opportunities..think Blue Oceans

Most organisations are looking for growth, innovation, a way to reduce their costs or expand their markets. Many are trapped by their history in relation to the markets and products/services they offer and need a process to think beyond their current approach.

The strategic schools that have developed over the years provide differing approaches to the consideration of strategy – strategy as position in the market, strategy as competencies to be leveraged, strategy as assets to be exploited – and each have something to offer.  The strategy work produced by W. Chan Kim and Renée Mauborgne – Blue Ocean Strategy – provides a number of useful tools by which we can examine potential for new strategies.

The summary (from the HBR article October 2004) is that the “business universe consists of two distinct kinds of space, which we think of as red and blue oceans. Red oceans represent all the industries in existence today—the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are well understood. Here, companies try to outperform their rivals in order to grab a greater share of existing demand. As the space gets more and more crowded, prospects for profits and growth are reduced. Products turn into commodities, and increasing competition turns the water bloody.

Blue oceans denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. There are two ways to create blue oceans. In a few cases, companies can give rise to completely new industries, as eBay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.

The example they use is Cirque du Soleil who were able to change elements from circus and theatre to create a new uncontested market space and away from a declining circus industry.

So how would we start to look at our organisation and what blue ocean opportunities may be available?

1. Strategy Maps – are a useful tool to understand the elements that clients consider when buying your product/service and where you sit in relation to these items versus your competitors.  The elements may include price, service, access, online capability, integration, ease of doing business, post sales support, speed of delivery and many more. You need to consider and understand the utility (usefulness) and importance of these to your target market and to map your performance versus key competitors. This will now give you a visual map of where you are positioned and how you are presenting your value proposition and whether it is superior versus your competitors.

When we look at these elements we need to consider them in four ways;

  • Which elements should we reduce what we do versus competitors
  • Which elements should we add as new
  • Which elements should we eliminate
  • Which elements should we increase versus competitors

2. Blue Ocean Strategy (BOS) is focussed in creating uncontested market space, making the competition irrelevant, creating and capturing new demand, breaking the value-cost trade-off and aligning the whole system of a firm’s activities in pursuit of differentiation and low-cost. If it sounds daunting then this discomfort provides the stimulus to think differently.

3. BOS challenges us to look across industries, and strategic groups and re-define the buyer.

4. The Six Stages of Buyer Experience Cycle

To find your blue ocean you need to look at the buyer experience and consider the utility or value of your product or service from their perspective and across the six stages of buyer experience. How is this occurring at the moment and how would it look differently under the new blue ocean strategy?

The six utility levers – the ways in which companies unlock the usefulness of their product or service for their customers – many of which are are obvious. The simplicity of use, the level of fun and the image associated and the environmental friendliness need little explanation. A product or service offers convenience simply by being easy to obtain and or use. The most commonly used lever is that of customer productivity.

An innovation can increase productivity by helping customers do things faster, better, or in different ways. e.g. by offering on-line analytics, comparisons that analyse and compare the raw information it delivers.

By locating a new product on one of the 36 spaces of the buyer utility map, managers can clearly see how the new idea creates a different utility proposition from existing products. In our experience, managers all too often focus on delivering more of the same stage of the buyer’s experience. That approach may be reasonable in emerging industries, where there’s plenty of room for improving a company’s utility proposition. But in many existing industries, this approach is unlikely to produce a market-shaping blue ocean strategy.

A range of other tools are offered to assist in doing your own blue ocean strategy and there is useful information on the http://www.blueoceanstrategy.com/ website.

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What I like about the Balanced Scorecard for business

When Kaplan and Norton developed the Balanced Scorecard they were seeking to develop a broader perspective of what needs to be measured and managed to achieve success in business and also how to communicate and integrate the measures and targets throughout an organisation.

As the editor of HBR stated in 2007

“In 1992, Robert S. Kaplan and David P. Norton’s concept of the balanced scorecard revolutionized conventional thinking about performance metrics. By going beyond traditional measures of financial performance, the concept has given a generation of managers a better understanding of how their companies are really doing. “

In this way it adds to Peter Senge’s work on the Fifth Discipline and having a systemic view of what a business requires. For example an absence of a systems or systemic view may be the cause of the dreaded cane toads in Queensland as the decision makers sought to eliminate the native cane beetle by introducing cane toads into Australia from Hawaii. The cane toads now number over 200 million and are a huge pest. Their short-sighted solution was to eliminate one pest without thinking that they were simply replacing it with another. Short-term decision making that fails to recognise the implications of changes to an environment, business or system can often lead to problems.

But back to Kaplan and Norton. Their scorecard ensured that leading indicators, such as staff capabilities and internal business processes, were as critical to understand and measure, as the lagging indicators such as revenue and profit.

As leaders we need to recognise that the financial results are the end result of our strategies and their execution. In order to achieve better outcomes we need to re-visit the entire system and assess our strategy from at least four perspectives;

1. How do our client see us and how do we wish to be seen (aka what is your Superior Value Proposition)? What are we trying to solve for the client and how do we plan to do this better than competitors?

2. How will our internal business processes be leveraged to deliver this superior value to the client? How can the way we do things, interact with clients, or utilise information create value we can use to support our client value proposition?

3. How will the capabilities of our strategic job families (roles) need to change or improve to underpin the value we are seeking to deliver?  e.g. Will our consultants advice capabilities allow us to deliver services in a way that complements our products and creates additional value for our clients?

4. How will our performance financially be seen by our shareholders? Are our shareholders seeking steady growth, better cash-flow, reduced volatility or rapid growth with patience regarding profitability?

These four elements were represented in a diagram to show the interrelationships of the elements -e.g. a competency developed with staff could create capacity for unique processes that then meets a key customer need and results in increased customer acquisition and revenue.

The most important aspect is the linkage between overall Vision/Strategy via clear measurements. Importantly it also facilitates the alignment of all business areas and individual staff with a related and supportive set of measures and targets.

I have experienced the benefits of a performance system that ensures alignment between overall corporate goals, divisional goals and personal goals. The system was structured to include the four elements and it is a powerful force towards achievement of a business vision.

The Balanced Scorecard is not sufficient to develop strategy in isolation but provides a direction for focus, in a holistic sense, on the overall business and the critical needs of customers and stakeholders. It also focusses attention on the information and process capabilities that can be leveraged as well as the people competencies that need to be developed and/or used in support of generating client value.

Like many systems it is a guide and the real benefits will only be obtained where creativity, innovation and a deep understanding of customers and business capability exists. The Balanced Scorecard is a great communication tool to explain the underlying components required to deliver a strategy and create the alignment critical to employee engagement.

If you get stuck trying to develop measures then you may want to try “How to Measure Anything: Finding the Value of Intangibles in Business” by Douglas W Hubbard.

So the challenge is multi-tiered;

1. Develop the right Vision and Strategy – the balanced scorecard can assist along with other strategic development tools (Porter’s Five Forces, Blue Ocean Strategy, Resource Based View etc)

2. Ensure the whole system is linked towards its achievement – this is a real strength of the Balanced Scorecard – ensuring everyone understands what the business is trying to achieve and how that will be measured.

3. Focus on the key measures ensuring they are causally linked (i.e. they will reflect the right outcome associated with the right inputs). A poor measure that is not reflective of what it is meant to measure will be counterproductive with staff and managers alike.

Do you use the Balanced Scorecard? How well does it serve your business?

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Change and what we can achieve in 30 days

Whilst the song may say that “Love is in the air..” my experience talking with CEO’s and business people is that “Change is in the air..” – not so catchy and certainly not as well embraced. The result of this is that we have spawned Change Managers, Change Programs and Organisational transformations.

So why is change so hard? Try writing with your non-preferred hand, brush your hair with your non-preferred hand, learn a new language or how to ski – how did it feel?  I still remember learning to ride a motorcycle in my late 30’s (an early mid-life crisis or because I am early adopter?) and finding the throttle control took a bit of getting used to as well as balancing 200kg of bike and rider at low speeds.

Change requires us to establish new patterns for behaviour and the process takes time, persistence and a desire to push through to master the skill so that it once again becomes a subconscious capability. It has been suggest there are four levels in the “Conscious Competence” model (see below or click the link).

The origins of this model are uncertain but potentially goes as far back as Confucius – so it’s not a recent problem!  The model examines both consciousness and competence. As you move from 1 to 4 your skill level improves to a point where, for example, you can drive a car, indicate, brake, depress the clutch, change gears and listen to the radio, think about the next holiday you want to go on and arrive home with a few “blank spots” where you can’t really recall driving (in detail).

Competence Incompetence
Conscious 3 – conscious competencethe person achieves ‘conscious competence’ in a skill when they can perform it reliably at will

the person will need to concentrate and think in order to perform the skill

the person will not reliably perform the skill unless thinking about it – the skill is not yet ‘second nature’ or ‘automatic’

the person should ideally continue to practise the new skill, and if appropriate commit to becoming ‘unconsciously competent’ at the new skill

practise is the single most effective way to move from stage 3 to 4

2 – conscious incompetencethe person becomes aware of the existence and relevance of the skill and is therefore also aware of their deficiency

ideally by attempting or trying to use the skill

the person realises that by improving their skill or ability in this area their effectiveness will improve

the person ideally makes a commitment to learn and practice the new skill, and to move to the ‘conscious competence’ stage

Unconscious 4 – unconscious competencethe skill becomes so practised that it enters the unconscious parts of the brain – it becomes ‘second nature’

common examples are driving, sports activities, typing, manual dexterity tasks, listening and communicating

it becomes possible for certain skills to be performed while doing something else, for example, knitting while reading a book

the person might now be able to teach others in the skill

the skill has become largely instinctual

1 – unconscious incompetencethe person is not aware of;

the existence or relevance of the skill area or

that they have a particular deficiency in the area

the person must become conscious of their incompetence before development of the new skill or learning can begin

If we understand change can be difficult for staff then we can approach the challenge differently.  If the culture has built trust between staff and management it will go a long way to working with people about the change. Getting involvement from staff about the change, educating and getting their feedback are all critical in understanding and helping people through change – think like a personal trainer – firm but supportive – motivating, praising any improvements and focus on efforts at the early stage.  People need time, training, support and encouragement to develop new skills.

Helping employees understand that these are the normal responses to change and that with persistence and help from their company they will develop new skills, grow and benefit and not to fear the change are the conversations companies need to have with staff.

In an interesting attack on a lack of change Matt Cutts, a Google employee, spoke about different 30-day challenges he has undertaken to generate change in his life.

Perhaps we could all improve our receptiveness to change and get more out of life by taking on more of these 30 day challenges!

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Part 2 – Growth Initiatives – traps and inhibitors

In my last post I talked about the elements that would be beneficial to growth initiatives and now I want to touch on those things that can hold back growth initiatives.

  1. A belief that the market you want to enter is easier and less competitive that the one you are in.  I have witnessed the ” build it and they will come” attitude a number of times. The starting point is a belief we can build a product/service and there is a market for it so we should be able to sell some.  This fails to understand the different competitor value propositions, how they will react to a new entrant and the switching costs for a client to move from one provider to another (time, effort, risk, costs, distraction etc).
  2.  Load the new business/service with a share of the overhead costs of the core business – including a hefty amount of support services costs – and add the bureaucracy of an established business.  This will be a sure-fire way to kill a number of new initiatives and make them uncompetitive with smaller players who are not part of a larger business.
  3. Believing the brand will make the sale. I have yet to experience a client who will buy a new product or service just because of the brand. Maybe Apple can do it but there is only one Apple company.  I think Microsoft have found it pretty hard to leverage their brand into mobile phones and Blackberry are under enormous challenge from Google/Android/HTC and have forecast falling revenues.  Brand may be good enough to get you in the consideration set but will rarely be sufficient to make the sale.
  4. A lack of competitor analysis to provide a clear mapping of how your value proposition will differ on key attributes customers use to decide on which product/service they purchase. This is needed to provide a clear sales track for your business development team to use. (Cost, benefits, features, access, servicing, channels, functionality, flexibility, quality etc).
  5. A lack of a pricing strategy. There are a whole range of issues to consider associated with your strategy for the product or service and the volumes and nature of your product or service. If you are hoping to leverage an existing client base what pricing incentives are there to recognise existing clients? Do you need to achieve scale quickly to reach break-even associated with fixed costs? Are you using cost-plus pricing, competitor based pricing or customer based pricing? Having the wrong pricing strategy will impact on your success and even your survival.
  6. No CRM system to allow a targeted and focussed sales and marketing process to build awareness, interest and desire to the key segments that you have identified. Without a good CRM (they don’t need to be expensive) you will not have the data and tracking ability to drive results for your business.
What other traps do you think reduce the ability for businesses to grow?
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