Managing or leading

For some, the term leader and manager are synonymous. Within the context of new leadership paradigms, they are incredibly different. A great book on leadership that explains this difference is called “The Heart of Coaching”, written by Thomas Crane.

Old school management theory would purport that people are inherently irresponsible, lazy, need a boss and orders to follow, require structure and control. Their experience supports this view, largely because this kind of leadership creates an environment where people are reduced to that kind of behaviour. This undermines self-confidence and disempowers people. This robs not only the individual employees from an opportunity to experience more fulfilling work, but the organization of the full depth of creativity and discretionary effort each employee could have brought to the table.

Progressive management theory starts from a different assumption about people. It assumes that people:
• naturally function effectively within an appropriate environment, and that this is a source of fulfillment for them
• have great capacity, and having creative control over their work unleashes commitment and a sense of ownership
• are internally motivated, and they respond well to the opportunity to contribute to meaningful goals
• respond appropriately to being treated with trust andhonesty

Our assumptions about people lead us to create an environment where those theories prove themselves true. By changing your assumptions, you can start creating an environment and culture where people give you their best.

Building a pricing strategy

On the heels of the last post, how can a pricing strategy be connected to an overall corporate strategy?

First, let me start by saying that a pricing strategy needs to be the result of a combination of considerations. Building this in isolation can be a fatal error in your interaction with the market.

Build whatever process works for your culture, but take the following into account when you do:
• What is your value discipline – this is the primary context for this decision
• Understand your internal cost structure, and what can be changed
• Understand your competitive environment (porter’s 5 is a good start)
• Understand your target market pricing sensitivities
• What are your profitability goals?

And then:
• What pricing strategy is likely to result in the achievement of your desired market positioning based on these factors?

Pricing is a critical strategic decision, and requires your sharpest minds. When you truly know your market, you can narrow your field of customers and deliver a more finely tuned experience. For most industries, you can be marginally relevant to a larger group or significantly more relevant to a smaller group.

With a product excellence strategy, you should be selling for more than the average to either early adopters or a very paritcular crowd. Being able to buy higher priced products makes people that can afford you feel distinguished. An additional benefit is that in a market with low cues for quality, higher pricing can create incredible margin if your brand carries an appropriate appeal. Tried selling a t-shirt for $300? Lots of people are buying them!

With a customer intimacy model, you need to avoid pricing too low. You’re trying to appeal to those who recognize the added value that your model brings. Generally, pricing average to above average will work depending on your competitive environment.

With an operational excellence model, you deliver commodities through a uniquely efficient model. Your customers expect low low prices. That’s the only way.

Price is a consideration in every purchase, but it’s not seen the same way by every consumer. While it’s subconscious and unspoken, many consumers want to pay more than other people pay. But when they do, they want you to make it worth their while. Tying your pricing model based on your corporate strategy is nothing short of essential.

Making decisions in isolation

Across your organization, people are making decisions… every day. The extent to which those decision are made within the context of your overall strategy play a significant role in your success. Decisions without understanding what the appropriate context should be universally creates risk. And yet, you’ll rarely walk into an organization and not find a myriad of examples where this isn’t happening. Throughout my professional career, I have encountered this time and again, and you have too.

A key symptom I’ve come to identify is simply confusion. People can sense when there is a pileup of disconnects… and most people look the other way recognizing that it may not be worth the effort and career risk to “go there” if no one else is willing to go there with you.

One effective way is to begin to create an organizational competency of effective strategic decision making. If everyone consistently connects decisions to the context of the strategy the disconnect pileup will start to go away. This is where building a component into your strategy management methodology like what I refer to as core strategies.

Core strategies are identified as the handful of really critical functions within your organization where alignment becomes a make or break for the business overall. In all of these areas, require accountability for building a true strategy, and being accountable for results. Involve these functions in the critical decision making meetings, they are the people that determine your success.

Being number one

Being a niche player in a market often causes these smaller organizations to be timid about their market position. The assumption is that the powerful industry leader has deep enough pockets to crush you if they really wanted to. This may be true. However, not always.

For those looking to topple a significant competitor, there are the usual concerns… the cost of entering or scaling up within a market, brand equity, creating a real competitive advantage, cost of switching etc… however one truly significant factor that many organizations have used to their advantage is to pay attention to how hungry the #1 organization is.

The tendency when you’re #1, is to forget that there is still more to do. You get to #1 by being bold and setting a goal that is nothing short of cocky. Once you achieve that, many organizations forget to set another goal just as cocky. This kind of success breeds complacency. Certainly, many industry leaders are in that position because they aren’t complacent. They’re winning after all, but for how long?

If a Goliath organization has lulled themselves into merely maintaining shareholder value with their current market share, they are vulnerable. Vision only releases energy when you haven’t yet accomplished it. This dissonance literally causes those who are engaged to release incredible energy. When Ford first had the vision to democratize the automobile in 1907, to make the auto something every man could enjoy with his family and remove horses from the roads, their teams often worked until 10 or 11 at night… because they were believers. After they took the #1 position, they forgot to set another goal as big as the first. This opened up room for GM to re-take #1, and that’s exactly what happened. History is full of these examples.

Who will win tomorrow isn’t a product of incremental improvements in sales, it’s a matter of vision.

Outsourcing leadership

Strategy development is something that not everyone is great at. And while it’s something that most people can learn to do, quite often people fumble through because they’re embarrassed that they didn’t learn this skillset as they came up through the ranks. No one wants to put their hand up and admit they don’t have this skill. This leads to a very common management mistake: delegating development of the direction to a subordinate. The fact is that you can’t outsource leadership, and expect a positive outcome.

Now I’m a firm believer in the value of collective genius, and the idea that the manager isn’t necessarily the smartest person in the room. Having said that, a good manager recognizes their accountability to play a guiding role and take full ownership in the process.

Of all the roles that you will play as a manager, being a leader is the most important.

Setting the ceiling

As a planner, the concept of potential is a truly significant one. At the core, planning and strategy is about identifying and acknowledging potential, and then quantifying the change. Every board and executive planning session sets the ceiling for this potential, and the powerful effect this has on an organization should not be underestimated.

There are several key elements that are required for implementation to be successful. Doing this well requires plenty of complex thought, a variety of perspectives, and a hefty dose of leadership. Even though implementation is the greater challenge, top level planning sessions still set the height of the ceiling. Before this ceiling is established, it is worth challenging assumptions on which this view of the future has been established to ensure that they are correct as well as universally accepted.

And before you accept the future as you see it, know that your potential future is almost always greater than the one you are willing to acknowledge and pursue.

Who represents the strategy?

Another great way to determine how well your organization is positioned to successfully implement the strategy is to pay attention to who is representing and defending the interests of the competitive strategy in meetings. Where is it being driven from?

Now, before you move on to rattling off the company line, spend a couple weeks observing.

How much time gets dedicated to ACTIVELY guiding strategy and observing it from a macro level… all of the pieces? And by whom?
In meetings, what % of the senior 2-3 levels of leadership actively connect the conversation back to strategic objectives?
Who guides the direction of the strategy – does it come from the middle or the top?
When push comes to shove, does your financial budget reflect strategic priorities?
Do the people that guide the strategy have a direct link to the CEO?