What improvements drive your bottom line in the long run?

This is an important one. It’s a simple but loaded question. If you don’t have a well thought through strategy map, chances are that you don’t have consensus on what this is. Think about the implications of not knowing what this is. Generally speaking you need to start by theorizing, and then testing your assumptions through focused effort and follow-up measurement.

The important consideration is “long-run”. There are lots of moves you could make to boost numbers in the short-term but that would ultimately cripple your progress later on. Knowing what is transformational to your success and then aligning your resources to that is how you move forward.

Having everyone answer this question with the same response is a hint that you’re on the right track.

Anxiety and excitement

BIG compelling visionary ideas generate two emotional dynamics; anxiety and excitement. Both are important, you don’t want to eliminate either one of them, provided that they are being experienced for the right reasons.

People crave epic sagas, they want to be part of a winning team that is accomplishing something significant. In fact, the only way to circumvent natural resistance to change involves the acceptance of a more ideal future state, dissatisfaction with what currently is and an agreement on the first steps to get there. When organizations work to generate too much stability and satisfaction with the current state, they actually generate resistance to change because the perception is that there is no reason to budge.

So why is anxiety a good thing? The presence of a moderate degree of anxiety lets you know you are sensing that you are closer to the edge of your potential. Risk is being sensed. If you spend no time anywhere close to the edge of your potential, you are falling short of what you and your organization could accomplish. It stimulates change and adaptation because when success isn’t guaranteed, our openness to change increases. Too much anxiety is crippling, and anxiety without excitement is too. However much anxiety you have, you need to generate twice as much excitement to manage that level.

Think of excitement as “engaged excitement”; your people believing the visionary idea, agreeing on the strategy, trusting the leadership, being positioned to succeed. Perks can be part of the total picture, but they will never generate engaged excitement on their own.

It’s not always true that a great deal of dissatisfaction is a good thing, but when it exists BECAUSE you have shown them a brighter future and they’re on board… then you have done your job.

Customer experience and brand

A lot of people understand the concept of branding, but many don’t. On the entry side, there is the idea that it pertains to visual assets like logos. When a really powerful brand comes to mind, it’s easy to recall their logo. Harley Davison. Canadian Tire. There is an instant connection. In addition to that recollection, and more importantly, there is an emotional response. This gets to the point of why this is so critical. Your brand is quite simply your reputation. Framing it up that way, it’s easier to understand where it lives. It doesn’t exist on the servers at your office, rather that which exists in the hearts and minds of your customers and potential customers is what matters.

Advertising reinforces what people already know. Once someone has a belief about you, your advertising dollars can only confirm this or they will ignore what you are saying. First and second hand experiences drive this. Here’s where customer experience comes into play. Even more powerful than how you advertise is what friends and colleagues say about you to each other because there is a greater degree of trust in those relationships.

You impact your brand (reputation) by impacting both how customers think and feel about you, and by extension, what they say to each other. So how do you get control of that?

• Be more purposeful about how you manage your customer experience
• Align every aspect of your organization, from workforce to process
• Find out what your priority customer dis-satisfiers are, and deal with them (correlate against NPS and desired segments)
• Narrow your advertising field to those customers who resonate with your value discipline
• Celebrate and profile customers who carry deep loyalty
• Determine the dynamics of your promoters and detractors, what drives this?
• Find out what it takes to exceed the zone of tolerance and seed real loyalty
• Build a strategy map and try to find those few transformational measures that really drive the behaviours you need

Prioritizing

Your chances of getting ahead are much greater when everyone is working toward the same ends. So how do you ensure that all of your people are supporting the things that are most critical to your success? First you need to decide on what is important and then clearly disseminate it. Secondly, there has to be a process by which activities of lower significance to the strategy are removed. The fact is that there are many things people can spend their time focusing on, not all of which are critical to your success.

Show people how to connect with the critical improvements.
Take away things that no longer make sense.
Celebrate the behaviours you want to reinforce.
Lead by example.

Prioritization doesn’t happen on its own.

Initiatives: closing performance gaps

A critical concept within strategy management is being purposeful about what you focus on, and that includes your corporate level initiatives. Is it repository for everyone to show the board they’re busy? Is it a list of operationally driven projects? Is it used to mitigate strategic risk and capture opportunity?

There is more than one good reason to include a corporate level project in your business plan, obviously. In fact, if you don’t have more than one kind of reason for including initiatives, you may have an issue. For example: If all of your projects are focused on operational or compliance related issues, you may not be a very strategy focused organization. If all of your focus is on long-term positioning, but very little on the client, that can represent risk as well. If all of your projects are related to a client strategy, you may need to double check that another mechanism is handling your operational improvements, and so on.

Initiatives are a mechanism for closing performance gaps. The gap between your current performance and what your performance COULD be, both in the positive and negative sense. Positive: You could be doing better than you are, this is always true. By fixing what is holding you back, you close the performance gap between higher potential and current performance. Negative: Everything changes, and staying the same only results in eventual loss. By getting ahead of this risk, you close the performance gap between impending future risk and the performance you’re working to maintain or build.

The art is having a keen sense of the correct balance for your organization.

Broad strokes: Taking your strategy to the next level

If your organization is upping its commitment to strategy, and you’re wondering where to begin… congrats. This can be very exciting, because if you manage these moments well, it can change your future. Here are some good starting points to consider:

Corporate commitment: an essential first step

It’s worth having the conversation before you begin to describe what the impact on the individual CEO might be, and gain explicit commitment. Is the executive prepared to:
• Change their role if need be, to play a more active part in driving alignment?
• Get their hands dirty in building and leading the charge?
• Articulate a visionary future statement that you’re only 50% likely to achieve unless major change occurs (has some risk attached to it)?
• Hold the organization on course, making sure nothing distracts from the goal?
• Hold leaders accountable for progress, ask tougher questions?
• Take on more challenging metrics that are likely to show the holes in the operation?
• Push the board beyond incremental improvement and an operational focus?
• Educate leaders and the board on concepts they have never heard of before?

BHAG: a visionary idea, what are you really here for?

You can move past the BHAG into other levels of planning, and this is tempting, but it ultimately results in the organization acting without context in the form of compelling future direction. Many leaders don’t understand the value of a truly compelling BHAG. A BHAG should be both exciting and scary, anything less is below the potential of the organization. It generates engagement, and creates a real future for the organization. Leaders often don’t want to talk about this, because they feel like they should have the answer and they don’t. We need to make sure that we acknowledge this tendency up front, and choose to tackle it anyway. You can run all the best process in the world, but it ultimately has to fail if there is no substance behind it.

The BHAG is the crossover between what you’re passionate about, what you can be the best in the world at, and what drives your economics. People should think “hol-ey crap” when they hear it.
• “We will put a man on the moon and bring him home safely by the end of the decade” – John F. Kennedy
• “Democratize the automobile” – Henry Ford
• “Organize the world’s information” – Google
• “Turn the Starbucks brand into the most recognized and respected consumer brand in the world” – Starbucks

You know it when you hear it. It gets the juices flowing. We live in a world that has been formed by people with great vision, and the courage to state a visionary idea long before its time.

Value discipline: a competitive strategy

Every organization has to choose at the broadest level how they’re going to compete in their market. This isn’t a finely tuned marketing strategy, this is the broad strokes level. If you don’t make this choice, you’re going to spend time fighting each other on the highest level discussions like whether winning on price, cutting edge products or client intimacy is more important. Of course you need to be in the ballpark on 2 but you need to differentiate on one, or potential customers don’t know why they should choose you over someone else who does a better job of this. No one has the resources to dominate in all three. The point is that you shouldn’t be trying to appeal to the whole market, you should narrow your focus to offering deeper value to a narrower market. Doing 2 or 3 is a less efficient model, or will result in the organization failing or fooling itself with poor measures. BMW customers and Hyundai customers are quite frankly a different group of people.

Strategy map: figuring out what drives your economics

What are the top 5 or 10 things that drive your success? How are they interrelated? How many things drive your success? Is it 2 or 15? How can an organization be successful if they don’t know what drives their success? How can you choose corporate measures if you’re not sure what your value discipline is or what drives your economics? Having this picture is essential. Once you do, eliminating everything that doesn’t directly support where you’re trying to do is how you recapture the resources of your organization. Everyone complains about needing more resources, but the truth is that better alignment of existing resources would go a long way to solving these capacity gaps for many organizations.

Balanced scorecard: measuring the things that are most important

What gets measured gets done, especially when variable compensation is attached. Choosing measures should be an extension of the components above. You don’t choose measures based on how many things you want to measure, you choose them based on how many transformational drivers for corporate performance exist. If you have 3, great. If you have 10, so be it. Sometimes, when you get into it, you learn the transformational drivers… where a single measure results in most of the improvements you’re looking for.

Clearly defining a value gap: Being clear on what you’re changing

As it has been said, “you can’t do what you can’t describe.” The act of first acknowledging and then clearly defining what is holding the organization back from where it wants to be gives a great deal of clarity to what needs to be fixed and why it’s important. Once you have this, you know where to focus. It’s still a theory, but it’s something you can test by correlating perceived progress against the intended impact. It could be measured as the performance gap between client expectations and actual performance, it could be a key set of operational barriers that were identified as part of root cause analysis.

Solid processes and relentless alignment: the biggest challenge is actually doing it

All of the best intentions don’t go very far without a process to organize alignment. The process needs to create appropriate accountability, information flow, integration, and reward. All of this has to be done within direct context of the strategy. Effective strategy management isn’t a natural outcome of inaction, it’s a discipline.

Through these processes, alignment and integration is critical. Alignment of the complete resources of the organization to the corporate direction, and integration between the core functions and the strategy is essential. Examples:
• The HR strategy is focused on building a workforce that supports the specific needs of the value discipline
• The technology strategy enables the workforce in delivering the desired customer experience

Finally, while alignment is critical across the board, it is important for the organization to define and manage at the very least what it considers to be the teams that have the strongest link to strategy and maintain strong accountability measures in these areas. These core strategy areas should be close to the action in terms of demonstrating alignment, and hearing what is going on.

Environmental analysis:

When an organization determines what the most critical risks and opportunities are, it can act with more focus. Of course, an eye for outliers and routinely challenging assumptions is essential, you can’t spend all your time on that. Research efforts can be focused on the things that matter, and distractions can be avoided. Executive planning can follow suit. Paying attention to the things that matter and identifying the things that don’t is the only way to maintain a tight focus.

Fine tuning the competitive differentiators:

It will also be useful to plot the differentiating capabilities of the organizations against that of their competitors so we can start to explore touch-point and value discipline differentiation. This defines the desired market position, who you’re primarily competing against, where competitive rivalry is strongest (and lightest), and the extent to which your organization can afford to push out its footprint in any direction. Either as a scientific process, or more conceptually as required.

If you had one more

A good question to ponder is this: If you had one more resource, where would it make the most impact to your customers?

Answering this question is sometimes harder than it seems at first glance. Sometimes, the first response is to want to resolve an operational challenge. But that doesn’t always translate into impact with clients. This is worth spending a bit of time on. Once you have a view of what would make the biggest impact, you have a glimpse into where you should probably be paying more attention.

Then go to the ultimate no-BS perspective: Is that the change you’d make if you just bought the company?

Where you need to be brave

When you think you’re going to hear something that might challenge your paradigm

When taking on accountability for something challenging that needs to be done, but no one understands

When tackling things that have been broken for a long time

When leading from the middle

When doing the right thing creates personal risk, but your values demand it anyway

When a barrier that needs to be addressed is owned by a peer

When adopting measures that may not sing your praises, but tell the real story

Dealing with the hard truths today helps you avoid finding out harder truths tomorrow. Tough decisions put off only gain interest over time.

Strategic reinvestment and business efficiency

Managing a business by managing the financials is like thinking you make money by counting it. Mainstream management methodology started figuring this out about 20 years ago, and since then there has been a greater sense of balance in how most organizations are managed. This balance is usually achieved by maintaining a healthy tension of priorities to reinvention and efficiency, risk and reward.

Efficiency = minimize waste
Strategy = build capacity and strengthen relevance

When your business gets rocked, the first response is usually a protective, sometimes fear-based reaction of circling the wagons and cutting the fat. Sometimes this is the only thing that keeps you going. But… at some point if you don’t add back the ability to build capacity and strengthen relevance, you’re basically done. If you get rocked, don’t forget to re-initialize the strategy engine early, it’s the only button with a future attached to it.

You can have risk without reward, but you can’t have reward without risk… Strategic risk creates both waste and opportunity. Because of this, your ideal numbers will never be perfect on either the risk or reward side. How you optimize the balance is what is most important. To this end, be certain that the two opposing forces within your organization have roughly equal power.

Striking an appropriate balance is what is important.

Chasing symptoms

There are times when certain things have to be done. Compliance, some operational priorities etc… But consider this: what percentage of your customer improvement priorities are based on root cause analysis of customer dis-satisfiers? When defending the importance of priorities, listen for the reasons people give and consider at what level the reasoning is happening.

What you want to hear is:
“we’re doing this because it’s the root cause -> of our greatest performance gaps -> between client expectations -> and our performance -> in areas where there is a high degree of correlation to client loyalty”

OR

Something connected to alignment with your overall corporate positioning or value discipline / customer strategy. If the reasons you’re hearing are anything but, you need a stronger criteria for decision making.

So… to what extent do you focus on the root cause of things?