Growth initiatives – how do we grow?

We need to grow the business faster than “system” growth (i.e. faster than the overall industry growth rate). The Board is challenging the lack of top-line or profit growth and senior executives are scrambling to find the next big thing. The core business is under huge competitive pressures and we need to find another source of revenue, profit and growth and diversify our business.

All of the above are regular challenges faced by businesses and set off a range of activities to try to develop strategies, plans and projects to generate more growth.  My observation and experiences in these situations suggests a few things that may help with the process and those that may hurt.

Part 1. Things that help

Some business competencies and requirements that will facilitate the ability to act on the desire for growth include;

1. On overarching business strategy that is clear about your core capabilities, key markets, why you are in business and why clients should deal with you. In a Porter framework this may be whether you are a low-cost leader, product innovator or niche customer focussed.  It is little value for a niche focussed high service business to decide it wants to compete in a new market on a low-cost model. The lack of scale and underlying high service business model will react poorly to the conflict and cause a lot of wasted effort and eventually reduce margins, leading to a decline in the existing business and limited results from the new effort. Clearly knowledge and understanding of different strategic views and experience in assessing business opportunities through these differing viewpoints is important.

2. A business model for product and service development. As an example the Lanning & Phillips value proposition model starts with a focus on the client segment you are trying to serve/attract and the superior value proposition that you are offering to that segment of the market. You need a starting point and the best place to start is “who” is going to buy your offer – in a detailed micro-segmentation sense.  I still remember research on banking products and discovering in the focus group research the very different needs of small business owners from other demographics we had determined. Define your segments along multiple factors to test what the differences are in needs before aggregating common segments. Competencies in segmentation, market research and value proposition development are key to this analysis.

Understand the different levers for growth e.g.– acquisitions, vertical or horizontal integration, new markets, new services/products, new distribution channels, new media, bundling/packaging and new pricing models.

3. As you start this process you will immediately understand the need for coordination and integration of activities as well as driving for outcomes. A strong project management methodology with embedded project management skills will be important to achieve desired results.

4. Intrinsic to many of these elements is a need for creativity, insight and innovation. An ability to see unmet needs of clients that you have the capability of fulfilling and doing so profitably. What are you developing in your organization that supports innovation and creativity? Does your culture embrace new ideas or are they subjected to bureaucratic torture? Will someone with a great idea be forced to write paper after paper, asked to prove beyond doubt their idea will work and end of dejected and uninspired to try again? Look at Atlassian FedEx days to get some ideas about innovation and rapid development.

5. This feeds into the idea of risk-taking and clarity about the level of risk that an organization is wiling to take and Board acceptance of the risk-reward trade-off. No risk means low-level rewards in most cases. Being clear about how much risk is acceptable will help guide the nature of projects and the sort of expenditure that can be approved.  There are a number of articles on the benefits of smaller wins (see also Ram Charan’s: Profitable Growth is everyone’s business).

6. Collaboration from the business to input ideas, resources and engage with the program for growth. How will staff engage with the growth initiative? Will business heads see it as a political exercise and seek to protect their patch, budget and staffing? A highly engaged culture with high levels of trust and cooperation will dramatically assist the business in moving forward and supporting the growth project.  A fundamental component is a communications plan to keep all stakeholders informed.

These are just some of the key elements to a successful growth initiative and you probably get a sense of how wide-ranging and interrelated these different elements are and how difficult it may be to switch them on quickly.  All businesses need to be developing these capabilities if they want to achieve high levels of growth.  This list is not comprehensive – what would you like to add?

Next Blog – Traps to avoid when developing new growth initiatives.

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Measures, Business Performance and Staff Engagement

Early in my working life I heard the phrase “if you don’t measure it you don’t manage it” and I would have to say that it has held true over a long period of time. Measuring something achieves two things; firstly it elevates the outcome to a level of objective assessment and secondly it requires us to explore underlying assumptions regarding the causal effects. If you really want to generate debate about causation then link the measure to remuneration as people then become highly motivated to attribute poor results to other reasons/causes than those currently held which promotes good debate!

The link between a measure and its underlying causes is a critical element and one that can be easily overlooked or misinterpreted. Let’s look at an example of staff turnover (% of staff who over 12 months voluntarily leave an organisation as a % of total staff in that organisation) being used as a measure of effective leadership.

Why do people voluntarily leave a company? The causal factors may be many – lack of career progress, desire for travel, changing locations, going back to study, poor management, changing careers, poor pay etc.

Whilst poor leadership may be one of the causes of staff turnover it may not be the primary cause and to use it as the key measure would be both inaccurate and misleading.

The measures around leadership can be difficult and yet there has been good progress on this front with a variety of surveys that seek to examine the engagement that staff have with their workplace and how executives and managers can influence this level of engagement.

The BlessingWhite Employee Engagement Global Study 2010* is one such survey and highlights the benefits of an engaged workforce. The model examines an individuals contribution to the company’s success and their personal satisfaction in the role.

In Australia only 36% are Engaged and whilst this is not bad in global terms it is a sad indictment on leadership both here in Australia and overseas.

Towers Watson found that engaged organisations Earnings Per Share growth rate of 28% compared to an 11.2% decline for low engagement firms. JC Penney found that stores with top-quartile engagement scores generate about 10% more in sales per square foot than average. Hewitt claims that the highly engaged are 78% more productive than the low ones.

Building high levels of staff engagement would appear to be one of those measures that should be managed by all businesses who seek high levels of performance as it underpins achievement in other areas (customer service, sales, profit) by maximising the contribution from staff.

So think carefully about what you measure and the true causes of results and what drives increases and decreases in the measure otherwise you might believe the Mayor of a US city who observed the correlation between when they won the championship and the town celebrating and therefore suggested they start celebrating from the start of the season to ensure a win!

For more on non-financial measures you may want to read this article by Ernst & Young “Measures that Matter”

*For a copy of the full report (92 pages) go to www.polson.com.au .
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When decisions turn out wrong how do you react?

When decisions turn out wrong how do you react? Is it a case of moving on quickly and hoping people forget, undertaking a review and despondently wishing that it was something someone missed and thereby not your fault, or is it a robust post-mortem and review of process so that decision-making is improved and mistakes are used for learning?

I have mentioned before a book called Think Again and there is a YouTube presentation from one of the authors that provides a useful summary http://youtu.be/Ps9adOJjqes . Adding to that is a book from Michael J. Mauboussin about Think Twice -Harnessing the Power of Counter-intuition. Both books examine a number of decisions that are made and suggest an approach to improved decision making. As a business leader or manager this would appear a great insight and a real opportunity for managers and leaders to grasp improved approaches that would enhance their effectiveness and decision-making success – but there is a catch!

The models have some similarities and both highlight the importance of good governance for decisions, active consideration of alternatives and gathering data from external views and cases that could be considered similar. They also point out the need for honest examination of self-interest, any pre-judgements or biased views of the situations and how we need to mitigate these in our assessments.

All of these sound sensible but could struggle when the boss is not a self-aware and open leader. In many situations the “boss” may state a situation and their decision, not seek input or dissenting views and certainly not appreciate any governance oversight.

Misleading experiences, misleading prejudgments, inappropriate self-interest and inappropriate attachments are four root causes of errors in thinking that lead to bad decisions. The wisdom of crowds highlights that the use of a non-expert and truly diversified group to provide input on decisions adds to decision quality. This is covered by Mauboussin and builds on the excellent book by James Surowecki (Wisdom of Crowds).

So what else can you do? The use of a pre-mortem is a great way to get people thinking more broadly about the issues and aspects of a decision and asks participants to go to the future when they are all sitting in a room analysing what went wrong. In this way they can better reflect on where the risks are to decision success and where more information, review and analysis may be required.

Underpinning a lot of this is the need for a strong team environment where people can challenge decisions, test options and ensure robust debate occurs for key decisions. If there is not a high level of trust and commitment within the team there is unlikely to be the level of courage or care to challenge the decision – and yet that is exactly what is required.

So if decisions are not being well made in your business look first to building the trust and commitment of the team then examine the decision-making processes that you use to increase the probability of making the right decision.

In any analysis of results please look at the impacts of chance and randomness. It may have been the right decision (90% chance of success) but ran up against the randomness and dynamic nature of things (see my earlier article on randomness and luck at http://wp.me/pZqFA-3g ). A good decision process does not mean perfect results but a much more robust chance of securing the right decision.

For a further article on Mauboussin’s work see http://www.michaelmauboussin.com/pdfs/SmartPeople-DumbDecisions.pdf

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How much should we practice?

Ever wanted to learn a new language, play the piano or guitar or tennis? Writers such as Malcolm Gladwell have researched this topic and suggest that 10 years of practice or 10,000 hours are required to master a skill. Of course when you are 5 years old you have plenty of time to practice and be a master by 15!

For those of us keen to learn something new in later life the following article from Jonah Lehrer offers some hope that we can at least get some of that practice from passively listening (good for languages – probably not much help with tennis). It also highlights the power of our imagination where practice in the mind, coupled with actual practice leads to the same rate of improvement as if all practice was on an instrument.

How Much Should We Practice? By Jonah Lehrer   September 27, 2010  |  11:53 am

Somewhere, right now, a little kid is fighting with his parents about how much he needs to practice the piano. Or maybe it’s the clarinet. I fought with my parents about practicing everything. I didn’t want to practice my major chords, or my tennis swing, or my multiplication tables. I insisted that I already knew how to do it – I’d just done it – so why did I need to do it again?
Well, it turns out that 10 year-old Jonah had a point. There’s a brand new paper in the Journal of Neuroscience by a team of scientists at Northwestern (first author Beverly Wright) that investigates how much deliberate practice can be replaced with periods of “additional sensory stimulation,” or passive listening.
The experiment went like this: A large group of subjects was taught a difficult auditory discrimination task. Then, they practiced. And practiced. Every subject in the task performed 360 trials of the task per day for at least six days. But here’s where the interesting differences begin: In one follow-up regimen, listeners performed an unrelated task in silence. In another regimen, subjects performed that same task while listening to relevant stimuli in the background. In the final regimen, subjects didn’t get a break, but instead practiced the same auditory discrimination exercise over and over again. We’ll call this the nothing-but-practice group.
So which group improved the most? It turned out that you needed to be exposed to the relevant stimuli. This meant that the group which practiced the unrelated task in silence didn’t improve. However,  these experiments also demonstrated that listening to relevant background stimulation could be just as effective as slaving away at the task itself, at least when the subjects had practiced first. In fact, the scientists found that we don’t even have to be paying conscious attention to the stimuli – subjects still benefited from the stimulation even when distracted by an entirely unrelated task. I emailed with Andrew Sabin, one of the co-authors on the study, who summarized the results:
A great deal of previous work has shown that simply presenting the stimuli to the participant is usually not enough. They actually have to do the task. This is where our group comes in. Basically, what we say is, yes you do have to do the task, just not for the whole time. The main result is that if you practice for 20 minutes, and then you are passively exposed to stimuli for 20 minutes, you learn as if you have been practicing for 40 minutes. You can cut the effort in half, and still yield the same benefit. This finding could be important for clinical training programs, such as the ones that attempt to treat language-based learning disorders.
Obviously, these results have big implications. We spend a lot of time trying to improve our perceptions on very particular tasks, whether it’s a jet fighter pilot learning how to fly or a baseball player learning to hit a fastball or child with dyslexia learning how to read. Although we currently assume that the only way to improve is to constantly practice – in technical speak, the act of practicing provides a “permissive signal” that allows the accompanying stimulation to “drive learning” – this research demonstrates that we can also improve through mere exposure. Furthermore, our obsession with practice comes with serious drawbacks, since the tedium of practice can prove discouraging for beginners. And so we quit the piano and give up on our reading lessons, because we can’t stand the training regimen.
This doesn’t mean, of course, that we can just play Yo Yo Ma in the background and expect to master the cello, or put the textbook underneath the pillow and expect to ace the algebra test. We still need to practice. We just might not need to practice as much as we think. Here’s the kicker from the paper:
On a practical level, the present results suggest a means by which perceptual training regimens might be made markedly more efficient and less effortful. The current data indicates that it may be possible to reduce the effort required by participants by at least half, with no deleterious effect, simply by combining periods of task performance with periods of additional stimulus exposure. If this proves to be a general rule of non-declarative learning, it could help to explain how potent instances of learning can arise when sensory stimulation is not always coupled with attention.
Read More http://www.wired.com/wiredscience/2010/09/how-much-should-we-practice/#ixzz10nRPJPCL
By Jonah Lehrer Email Author
September 27, 2010  |
11:53 am  |
Categories: Frontal CortexScience Blogs

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Why leading people is not that difficult – a list to check!

When you think about it leading people should involve a fair amount of common sense. Treat people as you would like to be treated would be a good starting point (masochists aside). So what would be on your list of how you would like to be treated? I have listed some but encourage you to develop your own list and use it as a tool to cross-check how you are treating your own staff.

  1. Care about me as a person. If I am stressed, sad, excited – ask me why. It doesn’t need to involve hour-long sessions of psychotherapy – simply asking “you look a little ———-  is everything OK”. Finding out a relation/child/parent is very ill and being sympathetic will go a long way to building a connection and link to your leadership when you are asking for an extra effort (or better still they do it without you asking).
  2. Involve me in decisions and matters that affect my work, department, company. Now this doesn’t mean every decision becomes a poll and popular vote. Vroom and Yetton developed a model for optimising type of involvement and decision-making. In summary unless there is a conflict of interest (e.g. what should your pay increase be this year?) or a lack of time (need a decision in 2 mins – there is a fire and we need to take the exit!) you will gain a lot from involving people in planning, projects and decisions. You are likely to unearth some great ideas, build an understanding of why something is required and what options have been considered, develop your staff for the future when these issues arise and build commitment to the final decision.  Of course if you ignore everything they suggest without a reasonable basis or explanation then don’t even start.
  3. Give me some autonomy to apply the skills I have so I don’t feel that everything I do is being monitored. Autonomy generates a high level of intrinsic motivation as good people will rise to the responsibility to excel.
  4. Give me feedback – not once a year but regular simple pieces – good job on that report, nice analysis – next time would be great to also include competitor aspects, client’s loved your materials. It’s Ok to give praise – they won’t put their feet up and feel that they do not need to work anymore. Also as you build their confidence they will be more receptive to those time when you need to feedback that the work needs improvement. In a balanced approach they will be getting both types of feedback rather than to often managers only do one or the other.
  5. Create a sense of purpose for me and my area – we all like to feel that what we are doing is worthwhile to someone.
  6. Celebrate success along the journey – pizza’s in the office, an award/prize (staff vote and judge), a thank you note, dinner certificate etc. This is one area we managers (me too) have often fallen down on as we move from one step to the next without pause for recognition of progress.

Now that’s a good start – see how it goes and remember to add your items (or even post a comment below for others to see).

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Decisions, Outcomes and Luck

Have you ever experienced a time when a decision you made did not results in an ideal outcome? Often in business a decision is measured in terms of outcomes. What was the result that arose from the particular decision. In viewing decisions in hindsight we do not allow for the uncertainties that existed at the time. In a very good example of this experimenters gave experienced senior managers outcome scenario’s from a case study and asked them to predict the likely outcomes. Lets say the results were outcome A – 40%, B, 35%, C 25%.

A second group of senior managers were given the case study AND the outcome. They were asked to assess the probabilities for the different scenario’s irrespective of the fact that they knew the result. They needed to see the problem as it existed at the time and not be influenced by the subsequent result. Of course in hindsight their estimates were far different as it was “plain to see that option A would be the most likely result”.
Again lets say they awarded Option A – 65%, B 20% & C 15%. The only difference between the two groups was that one group had the luxury of knowing what happened and this affected them in a way that made things “self-evident” that were not as clear at the time.

The hindsight bias is often referred to as the “I-knew-it-all-along phenomenon.”

After the GFC many CEO’s were sacked for their firms poor performance. Whilst some of these may have been justified I wondered how many were the victims of hindsight bias or perhaps they were just scapegoats?

In many aspects of business we are like a captain of a ship – the oceans play a bigger role in determining speed, direction and progress than the skipper. The skill of surviving the difficult storms is still to be valued along with the capacity to find the winds that will support speed towards your destination. Just don’t get too caught up in how skilful a skipper you may be as a headwind and bad weather may be about to hit.

For more on this topic read http://hbr.org/2010/12/column-good-decisions-bad-outcomes/ar/pr an article by Dan Ariely where he makes a number of suggestions to assist in combating hindsight bias;

1. Document crucial assumptions. Analyse a manager’s assumptions at the time when the decision takes place. If they are valid but circumstances change, don’t punish her, but don’t reward her, either.

2. Create a standard for good decision making. Making sound assumptions and being explicit about them should be the basic condition for getting a reward. Good decisions are forward-looking, take available information into account, consider all available options, and do not create conflicts of interests.

3. Reward good decisions at the time they’re made.Reinforce smart habits by breaking the link between rewards and outcomes.

Our focus on outcomes is understandable. When a company loses money, people demand that heads roll, even if the changes are more about assuaging shareholders than sound management. Moreover, measuring outcomes is relatively easy to do; decision-making–based reward systems will be more complex. But as I’ve I said before, “It’s hard” is a terrible reason not to do something. Especially when that something can help reward and retain the people best able to help you grow your business.

Another article that may be of interest is an article by Paul Goodwin on hindsight bias as it effects forecasting.

http://www.forecasters.org/pdfs/foresight/free/Issue17_Goodwin.pdf

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The role of luck, chance or randomness

You may be familiar with an author – Nassim Taleb – he wrote a book called “The Black Swan” and also a book called “Fooled by Randomness“. In both books he looks at events from a viewpoint of predictability or more correctly unpredictability. In the first book the known fact many years ago from thousands of observations of the world concluded that swans were only ever white. This fact was destroyed when explorers reached Australia to find the existence of a Black Swan – thus destroying what was considered to be an irrefutable and evidence based fact.

His experience in the Wall St investment environment reflects on the many traders who thought they had developed a surefire system for smart investment decisions (think White Swan) that would always make money despite the risks. After a number of years of fantastic success they would “blow-up” and lose a lot of money and destroy the theory and their careers (the black swan).

Taleb shows how poor we are at recognising risks and continuing headlong into the next collapse of markets and the huge impact chance is going to play in short-term performance.  He uses the analogy of Russian Roulette with a prize of $10 million dollars – 5 out of 6 people are going to tell you what a great way it is to make money and one is going to blow their head off! If you are one of the people invited to play you are going to be so upset when (if) the first three people make $10m that you are convinced you should have a “shot”.

So when your friends, colleagues etc are telling you about a fantastic investment opportunity, a winning idea that lots of people have made money from you need to ask yourself (think Clint Eastwood) am I feeing lucky today?

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