August 11, 2009
The Edge of Chaos
When Dee Hock, a small-time banker from Washington, took over Visa in the late 1970s, it suffered under restrictive management-which Hock hated. His vision for the company emphasized decentralization, not consolidation; freedom, not restriction. Ownership of individual Visa franchises now lies largely in the hands of individuals, and these individuals are constantly encouraged toward creative decisions-even (especially) decisions that pose competition for their fellow owners. Hock calls his system “chaordic”-a synthesis of chaos and order-and it seems to work: since 1970 Visa has grown by approximately 10,000% and still grows at an average of 20% per year, serving half a billion clients. The level of cooperation among the company’s elements lends Visa just enough conformity to remain unified; this is the “order” in “chaordic.” The chaos lies in Visa’s creative, no-boundaries decentralization.
Biologists call this fine line between structure and mayhem “the edge of chaos.” On this edge species experience their greatest fitness, fastest evolution, and most fluid adaptability. At the edge of chaos, interactions among individuals are high-energy. Necessity actually does breed invention. New ideas are both steadied by order and driven by pandemonium. The creative solutions found at this line are the emergent properties so crucial to the survival of any species; they’re jackpots of new information and industry-leading ideas.
Most companies’ business strategies never take the plunge into chaos. Their corporate strategies cause them to lie safely in their market niches, content with miniscule annual growth and an age-old customer base. Their employees use time-tested business strategies and refrain from launching anything new. But these rigid companies crack and shatter under the weight of an economic climate that changes massively at whim. Your market readily adapts to a constant influx and outflow of companies and innovations; in order to outperform the market, you must match or exceed its flexibility. Before rigor mortis sets in, limber up and dive toward the edge of chaos.
July 30, 2009
You Can’t Manage What You Can’t Measure
Management, by definition, requires intimate knowledge of what is being managed. And business knowledge depends on measurement. Good Strategic execution plans encourage and demand constant measurement of progress toward each initiative and objective. This measurement occurs via both internal and external feedback. Each consists of hard-and-fast performance measures (financial growth, percent customer retention) in key strategic areas, as well as qualitative responses to the changes taking place. The mechanism of measurement encourages adaptability: external feedback notifies managers of relevant (and sometimes urgent) changes in the environment, while internal feedback efficiently integrates employee innovation and input.
I’d like to hear from you on 2 measurements. 1. What are some of the metrics you use in your business? 2. How are we measuring up with the information we are providing here at BobJonas.com? Please let us know.
Tomorrow we will wrap up with Business Strategy Navgation as we take a look at “The Problem of Strategy.”
If you like what you’ve read so far, I encourage you to subscribe to BobJonas.com. Go to the top right side of this screen and fill in your name and email, and we’ll be sure to keep you up to date on new articels and news being posted here on this blog. Thanks.
July 29, 2009
The Ride, Part II: Implementation
Once the ship has hit the water, it’s time to move. The most intricate and brilliant execution plan is worthless hidden in a desk drawer beneath a stapler and dirty coffee mug. Strategy’s beauty lies in its careful implementation-and ubiquitous involvement. Any disturbance of the status quo is bound to make waves among employees and managers all-too-familiar with alleged strategic panaceas. Front-liners must be assured that the strategy is relevant and necessary. The American Productivity and Quality Center suggests company-wide education and involvement: “There must be a sense of urgency and a convincing argument that the proposed [strategy] will mitigate wasteful, whimsical changes.”
A well-designed strategy avoids such “wasteful, whimsical changes” by consistently involving representatives from all areas and levels in its creation and implementation. None of the new initiatives is irrelevant, because each builds on the input of those it affects. None is an annoying surprise, because each initiative addresses a widely understood goal. And nothing happens suddenly or irrationally: “a management system does not appear instantaneously,” write Kaplan and Norton. “Because of its scope, complexity, and impact, a new management system must be phased in over time.” A Strategy International execution plan facilitates strategic planning with the benefits of short-term proactive change. It does not expect-or, indeed, allow expectation of-sudden results, but promotes steady, directed, creative work toward a discernable future goal. It harnesses the creativity and proactivity of all of the organization’s members in its movement toward a final objective.
July 29, 2009
The Ride, Part I: The future trends and strategy
Magellan’s strategy was clear and simple: reach the Spice Islands via circumnavigation in order to secure spice trade for Spain and adventure for himself. His plan? Sail west, with prevailing winds. Seek (by trial and error) a channel through the enormous roadblock known as South America. Maintain knowledge of present position and plan for future direction.
It is safe to assume that during the two-year trip, Magellan and his crew constantly assessed this plan’s rationality and feasibility. It is also safe to assume that Magellan did not need a wide-ranging measurement rubric to track each strategic move. Here lies the difference between the Renaissance explorer and the Information Age manager.
To develop a business strategy, corporate leaders must identify and understand the future trends in their industry that will impact the demand for their products and services. The leaders need to create a database of activities. The Trends Analysis should result in a grouping of converging trends. These are the opportunities for future growth.
So how do the leaders drive the organization to succeed. They create a competition strategy. Michael Porter defined competitive strategy in 1996.
“Competitive strategy is about being different. It means… choosing to perform activities differently or to perform different activities than rivals.” “Strategy is making tradeoffs in competing. The essence of strategy is choosing what not to do.”
Further strategy is a unique way of creating and delivering value that pervades the entire organization. It is your enduring reason for being that makes your customers want you to flourish and thrive. It is what you do that creates value and makes you hard for others to imitate.
My definition of business strategy … an integrated and align set of strategic initiatives (tactics) all working together to create unique customer value and thereby unique customer perception.
Once armed with a well-framed strategy statement, a business must hit the road. Beat the pavement. Spend deserved time and resources creating a detailed, albeit flexible, roadmap that takes you from here (current reality) to there (objectives).
Again, commitment to adaptability is vital. Strategy, write Kaplan and Norton, “must reflect the structure of the organization for which [it] has been formulated.”
Both-the structure and the strategy-must be persistent but flexible enough to facilitate innovation and market adaptation. A strategy designed to propel a company toward an ambitious goal cannot be represented by a stodgy table or bar graph. The strategy map’s structured chaos perfectly captures the paradox of direction and flexibility that characterizes successful strategy. For this reason, Strategy International consultants help businesses create execution plans, aphoristic visual representations of the whole strategy process from confronted reality to trends, objective to initiative.
July 28, 2009
Having adequately assessed the present, embark on the adventure of the future. The most unpredictable and chaotic market environment is navigable with skill and control. A clear vision of your ideal future allows for well-defined, progressive movement.
The elements of a proactive future focus are simple:
Purpose. In general terms, the purpose of any business is to satisfy its stakeholders (this group includes shareholders, customers, executives/ partners, and the community).
Mission. Your business’ mission is its objective goal, the peak toward which you propel yourself. A mission may be purely financial (“we will achieve billion-dollar annual sales”), product-oriented (“we will develop the most fuel efficient compact car on the market”), or customer-focused (“we will attain 99% customer retention”). If purpose is your reason for existing in your eyes, mission is your reason for existing in consumers’ eyes.
Vision. A vision is exactly as it sounds: a mental picture of the way your business will look, feel, and appear once you have fulfilled your mission.
A caveat: Though definition of these terms is necessary, the key to successful navigation of an unpredictable environment is adaptability. Vision can easily change since, as part of the system, it is largely subject to the whims of the environment. According to the Columbia School of Business, strategy should actually serve to “build flexibility into your system…some way of keeping uncertainty alive and kicking.” This requires creativity: the vision must entail and encourage originality.