Half Full, Half Empty, or a New Perspective?

"One's first step in wisdom is to question everything -- and one's last is to come to terms with everything."
Georg Lichtenberg
German scientist and satirist

Is the glass half full or half empty? This metaphor is often used to talk about optimism or pessimism. However, what if we asked a different question about the glass? How might that change our perspective...and the actions we take next?

Everyone likes straightforward questions and answers, but business issues are rarely that simple (if they were, they probably would have been resolved long before now). At a minimum, strategy requires consideration of current and future market opportunities, competitive position, core competencies, key assets, and financial implications. Similarly, the messy reality of execution requires a deeper understanding of how an issue impacts a complex web of policies, processes, people, and systems. All of this requires perspective.

To gain this perspective, you typically need to assess an issue from multiple angles (e.g., various stakeholders, various levels of the organization, strategic vs. tactical). Building on the example of the glass of water, one might ask the following questions:

• Is the status of the glass critical for our business? How does it stack-up to our other priorities? When is an answer required? Can the question be delegated?
  
• The glass is actually full -- 50:50 air/water. Which do you want in the glass? Why? Is there a better alternative?
  
• Is the water volume in the glass trending up, or trending down? Is the trend accelerating or decelerating? Is the trend positive or negative? What is driving these changes? What can we do to positively influence the trend?
  
• Is the volume of water sufficient for our needs? Over what time period? What is the process for refilling the glass?
• Is the glass over-sized for its purpose? Under-sized for future needs? Is there a better use for the glass?
  
• Do we own the glass? Lease? Can we leverage a partner's glass?
  
• Do we need a glass at all? Can a different approach (e.g., water fountain) meet our needs more efficiently and/or effectively?
  

Please note: I never advocate "boiling the ocean" or making an issue more complicated than it needs to be. Balance additional analysis against an issue's importance, value differential of options, reversibility of a decision, available resources, and desired time line. When all else is equal, simple strategies, business models, and execution plans generate the most value over time (because they are most likely to have superior execution!).

That said...When faced with a significant business situation, it's almost always wise to take a moment to "peel the onion." The perspective you gain will help ensure you're working towards the most important goals, targeting the root causes with the most impact, and executing on plans with the best chance of success.

So, is the glass half full or half empty? With a different perspective, it could be almost anything.

Monday Morning Actions

• Look at your business from a different perspective. Consider the potential views of customers, partners, channels, employees (current and potential candidates), shareholders, debt holders, and potential investors. What concerns do each group have?
• Assess how a private equity buyer or turnaround specialist would view the value potential of your business
  
• Identify one business issue that may benefit from additional perspective; briefly explore the issue with cross-functional stakeholders to generate new ideas
  
• Identify one business issue that is being overcomplicated; make a call on the issue
• Mentor a subordinate on the value of perspective in problem solving
  

Organization Lessons from March Madness

"A player that makes a team great is more valuable than a great player."
John Wooden
Legendary UCLA basketball coach

The traditional approach to evaluating a basketball player focuses on key offensive and defensive statistics such as a player's points per game, field goal percentage, assists, rebounds, and blocked shots. These are undoubtedly important metrics, but they only tell part of the story.

Besides the typical statistics, players that make a team great provide many of the following intangibles:

• Leadership: inspiring, motivating, and driving the team to bring out their best
  
• Team orientation: willingness to sacrifice personal statistics and do what it takes (even the unglamorous dirty work) to maximize team performance
  
• Competitive drive: never-say-die attitude to overcome obstacles, perform when the chips are down, and achieve the team's goals
  
• Hustle: aggressive, high-energy pursuit of objectives
  
• Fungibility: flexible skill set and playing style that is adaptable to the competitive dynamics of the game
  

Talent and individual performances are necessary, but not sufficient, for a great team. Highly skilled teams without the intangibles are likely to resemble the 2004 US Men's Olympic basketball team (5-3 record, Bronze medal). Reducing the talent -- but adding the intangibles -- leads to the NBA champion 2007-08 Boston Celtics. Which team do you want your business to emulate?

Are you doing enough to hire, develop, evaluate, reward, and retain the employees that make your company great?

Monday Morning Actions

• Evaluate your project teams' intangible assets; add / subtract team members as required to fill gaps.
  
• Review hiring criteria and ensure candidates' intangible assets are explored during the recruiting process.
  
• Provide positive reinforcement to a subordinate or colleague that demonstrates intangible value; select mentoring candidates based on intangible assets.
  
• Incorporate softer intangibles into formal review processes. Ensure spikes / deficiencies are noted and impact final evaluations.
  
• Create a reward specifically for intangible assets (e.g., traveling "teamwork" award, spot bonuses).
  
• Incorporate intangibles into promotion and job assignment decisions (the more senior the role, the more important this becomes).
  

The Value of "In the Box" Strategy

"Common sense in an uncommon degree is what the world calls wisdom."
Samuel Taylor Coleridge
Author

People are frequently encouraged to "think outside the box" when faced with a challenging business problem. In theory, this enables novel solutions by relaxing assumptions, looking at problems from a different perspective, and thinking creatively. Such an approach can lead to breakthrough strategies and solutions. Unfortunately, when basic principles of business are violated, it can also lead to significant value destruction.

The trick of "thinking outside the box" is making sure you think outside of the correct box. Relax self-imposed assumptions and constraints to your hearts content, but beware of violating time-tested business fundamentals.

To help keep me grounded, I like to periodically skim the book Thinking Inside the Box: The 12 Timeless Rules for Managing a Successful Business by Kirk Cheyfitz. Is the book groundbreaking? No. However, it is a valuable reminder of the fundamental principles of good business.

Cheyfitz's book provides numerous mini-case studies categorized into 12 business planks:

1. Some things never change: know the difference between what will change and what won't, and pay attention to the former
2. Profits: the first business of business is making money
3. Cash is everything: if you don't manage your cash, you won't be managing anything for long
4. Know what can be controlled and what can't: it is far better to manage expenses than pray for sales
5. Customers are the boss: give customers what they want, not what you want to give them
6. Unify the whole business: you should be selling all the time
7. If you can buy it, don't start it up: follow the example of virtually every big company in history and buy your way to bigness (at a reasonable cost)
8. Hire smart or manage hard: when it comes to people, you can either hire smart and get out of the way, or you can run yourself ragged micromanaging
9. Secure the real assets: find your business's real assets (the ones that generate your profits) and leverage them for all they're worth
10. Results are more important than the process: the end result is what really matters, so don't get bogged down in methodologies
    
11. Nothing lasts forever: always be ready to renew your business
12. Always have an exit strategy: make a plan to get your money out, and keep the plan updated and handy

The book is a quick read and provides a wealth of sound business fundamentals. Each chapter ends with an excellent summary that can make the book a ten minute read if required.

Monday Morning Actions

• Encourage unrestricted thinking / ideas when brainstorming "out of the box." You never know where creativity will lead you!
  
• In directed brainstorming, focus on relaxing self-imposed assumptions and constraints
• When evaluating ideas, apply fundamental business principles to help screen viable paths
• Before executing a plan, document and reassess core assumptions. If the plan stretches basic business principles, an objective 3rd-party assessment may be valuable
  

Critical Catalysts for Effective Organization Change

In these challenging times, executive teams must frequently drive quantum-leap changes in business performance. Unfortunately, these change efforts frequently fall short of their objectives.

To maximize the chance of success, executives must ensure six critical change catalysts are in place:

1. Vision: Where are you trying to go with the organization? A vision provides a rallying cry for the organization and provides necessary context for the strategy.
   
2. Strategy: What is the strategy for getting there? A pragmatic strategy provides focus, a basic business model construct, and critical boundaries for the desired changes.
   
3. Action plan: What specific steps are required? To create value, strategies must be broken down into discrete steps required to accomplish the goal. Ideally, these steps should be aligned with other change initiatives across the organization.
   
4. Skills: What skill set (e.g., functional, analytical, political, IT, collaboration) is required to successfully execute the action plan? For significant change efforts, holistic skills are just as important as more tactical skills.
   
5. Resources: Are the right resources (e.g., personnel, capital, leadership bandwidth) at the right magnitude allocated to the effort? Are they actually being applied? To enable change, an appropriate level of resources must be budgeted and applied to the change effort. While all companies are resource constrained (particularly those involved in a turn-around), starving a change effort for resources is usually a quick path to failure.
   
6. Incentives: Are incentives in place to properly motivate the organization? The full spectrum of incentives should be considered (e.g., monetary, promotion, recognition). For intensive change efforts, significant incentives for key personnel may be warranted.
   

For incremental change efforts, most companies rely upon their existing policies, processes, and organizations to drive change. However, major change efforts (e.g., restructuring, turn-around) typically require substantial deviations from a company's norm.

Without a tailored approach, major change efforts frequently fall short due to a handful of missing catalysts:

• Strategies and operating plans incorporate over-optimistic assumptions.
  
• The team's skill set lacks holistic perspectives leading to (i) missed critical interdependencies in the action plan, (ii) mis-aligned policies, processes, or goals (e.g., sales comp plan vs. margin target, cost reduction vs. retention of key talent), and (iii) wide-spread sub-optimization in project execution.
• Budgeted resources (i) are not applied in a timely matter due to over-commitment or excessively long transition-times, (ii) do not match the required skill sets (e.g., stretched "development opportunity"), or (iii) lack sufficient leadership bandwidth to provide appropriate guidance and "air cover."

While change introduces many unknowns, the six catalysts underpin all successful change efforts. Fortunately, these catalysts are largely within the control of the executive team.

Monday Morning Actions

• Select a key change effort that is currently underway and identify deficiencies in the effort's critical change catalysts.
• Pursue external assistance where critical skills or resources are not available within the organization.
• Incorporate a catalyst assessment into the project approval/funding process.
  

I Can't Beat Tiger Woods

"However beautiful the strategy, you should occasionally look at the results."
Winston Churchill
Former British Prime Minister

When I go golfing, I visualize how every hole should be played. Power draw off the tee to the right side of the fairway...lofted 7-iron just below and to the left of the hole...firm putt at the left edge of the hole...BIRDIE!

The strategy is flawless, yet it rarely happens. Why? Success in golf isn't driven by strategy, it's about execution. The golf player who executes at the highest level on the most consistent basis will win. Despite the strategic perfection in my mind, I will never beat Tiger Woods.

Like golf, superior business performance requires superior execution. Given a choice between superior strategy and superior execution, I'll take the execution every time. In fact, I'd go so far as to claim strategy enables value, but only execution creates value. That's borderline heresy from a former McKinsey consultant.

Winston Churchill was right -- results matter. Results require execution.

Monday Morning Actions

• When analyzing strategic options, heavily weigh execution ramifications in your final decision.
• Re-assess the value of the marginal effort you are putting into your strategy activities. Your organization may be better off focusing those resources on executing the strategy.
• Examine your company's job mobility and rewards policies. Are employees in roles long enough to truly evaluate their ability to execute? Are employees with superior execution skills rewarded appropriately?
  

P.S. I'll never win a Masters Championship, but feel free to ask about my eagle or my 430 yard drive. :-)

Welcome to the Breakaway Business Blog

At the most basic level, the long-term value of a company is largely determined by the strategy it pursues and it's ability to execute the strategy.

In my 20+ years in consulting and line management, I have seen enormous value enabled by sound strategy -- and destroyed by faulty strategy. A sound strategy never guarantees value creation, but it can certainly maximize the potential of an organization. However, while strategy frequently gets the headlines, superior execution typically has more influence on long-term value.

The combination of superior strategy and superior execution creates a "breakaway business" -- a business that breaks away from its competitors in terms of growth, profitability, cash flow, and customer/employee satisfaction. As business leaders, this needs to be our target.

By creating this blog, I hope to share my perspectives on both the theory and real-world lessons of both business strategy and execution . Topics will typically be based on my personal observations, current business events, and leading books/journals. In addition, I will always try to make the posts suitable for "Monday morning value."

I look forward to your feedback!