Is there a way for advisory service companies, which provide accountants, lawyers, consultants and marketing experts to other businesses, to adapt to changing demands?
Some pundits, such as the Harvard scholar Clayton Christensen, have questioned whether traditional consulting firms will get less work as more innovative business models emerge.
I think challenges bring opportunities and that firms which change with the times will remain relevant and flourish.
Like many other sectors, the advisory service industry has had its ups and downs. Its current slowdown may herald the start of a darker period thanks to three significant trends:
1. Democratization of information
Prior to the Internet, advisory service firms offered clients knowledge and insight, which they couldn’t find elsewhere. Now, a lot of information is available for free, or at low cost on the web, and that includes expertise through freelancer portals like guru.com. To find critical facts and figures on market trends, customer research, or industry costs, organizations no longer need to hire a traditional advisory firm.
2. Fewer intermediaries
It used to be that if you needed top talent to address a business issue, you paid the price and dealt with a blue chip firm or hired a leader in the field. Today, a manager has many more options, often with lower costs and faster turnarounds. The rise of the freelance and sharing economy allows companies to find talent and knowledge as needed on a global basis.
3. The rise of machine learning
Machine learning, also known as artificial intelligence, has the potential to disrupt many facets of the professional services industry. Using machines for rote and even complex tasks can reduce the need to hire firms to do mundane tasks, or for an expert’s analysis, judgment and time. For example, judges and lawyers are increasingly resolving small claims through “e-adjudication” as opposed to using the expensive and time-consuming legal system.
Power of disruption
Despite these disruptive forces, traditional firms aren’t going away any time soon: the fact that they have a wide-range of services and expertise to offer, the changing regulatory and technological environment and fickle customer needs will ensure it. However, they need to evolve if they want to stay relevant to their clients, outflank competitors and maintain juicy margins.
Terry Donnelly, chief marketing officer for Canada of New York-based MDC Partners Inc., an advertising and marketing company, agreed.
“The traditional ad agency model is dying,” Toronto-based Donnelly said. “Marketers want leading edge, unique and practical solutions that drive measurable results and provide a durable and sustaining competitive advantage. MDC Partners recognized the ‘new normal’ early on and built a unique portfolio of agencies that retains the visionary founders as partners, motivated to do great creative work, versus the staid multinational agencies that regularly lose their best people.”
Advisory service leaders who want to better assist their clients and avoid disruption might want to consider these strategies:
1. Become a virtual provider
Companies can leverage their strengths such as client relationships and a trusted brand to create their own, on-demand virtual offerings as a complement to their traditional business. This model could mean acting as an online skills, data or problem-solving hub, and delivering of the best services to suit a client’s needs.
2. Get more involved in execution
While people and expertise may be plentiful, that’s not the case for excellent execution. Advisory service firms can offer follow-through and even take on line responsibilities through a shared service model. This could go beyond being an outsourcer to actually embed adaptable and skilled individuals and tools directly into the client’s workflow process.
3. Focus on capability building, not projects
Advisory services should focus their work on addressing long-term projects and needs instead of short-term contracts that deal with a specific issue. They could help clients build strategic capabilities to ensure competitiveness. One way to do this is to train people to do the work themselves.
As an example, a lawyer would not just draw up a contract based on the client’s needs and then walk away, rather they could give the client tools to become somewhat proficient in their own right.
In addition, companies could provide regular advisory support to make sure long-term goals are met.
Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP.
Canadian companies need to look to global markets to drive growth, or even survive, in today’s economic climate.
The impetus for companies to go global is driven by a number of trends. The country’s market is relatively small, fragmented and grows slowly. Many firms face threats from emerging markets and rebounding American competitors, all spurred on by globalization and falling trade barriers and tariffs. At the same time, it’s never been a better time to export thanks to a weaker dollar, extensive ties between new Canadians and their home countries and the world-shrinking impact of technology.
How can companies prudently go global without incurring undue risk and blowing the budget? Consider this 5C strategy framework:
1. Country acumen
Companies need to deepen their analysis of target markets beyond counting the number of potential customers or identifying competitors. Businesses need a granular understanding of customer habits, distribution channels, pricing and regulations.
Business will never take off if it’s not able to design and deliver a competitively priced product tailored to local needs. Expect to go through multiple executions to find the winning product and an approach to marketing it.
In many markets success hinges on finding and working with politically connected, reliable and experienced business partners. They’re vital to establishing initial credibility, overcoming hurdles and helping secure early customer acceptance.
Companies need not break the bank when exporting, especially when they’ve done their homework and have the right partners. However, managers shouldn’t be too frugal either. Business risks can increase when you under-spend in critical areas like customer care, logistics and local professional services.
As with other major investments, having unrealistic short-term goals can lead to disappointment. Patience and fortitude are needed, particularly in the less developed markets where things that could go wrong often do.
Learn from others
Plenty of Canadian companies have successfully gone global and offer what they learned to those considering the exporting plunge. CSR Cosmetic Solutions, a medium-size firm based in Barrie, Ontario, is one such example.
CSR is a contract manufacturer competing in the global cosmetics and personal care product industry. It was established in 1943. Almost 80 per cent of the business is exported to Costa Rica, France, Germany and the U.S. among other countries. Here are a couple of top tips that helped them.
1. Raise your game
CSR believes companies have to be competitive on a global basis over the long term, regardless of fleeting advantages like favorable exchange rates. Businesses should also deliver superior products to compete against incumbents in their home markets.
CSR also raised its game by doing the right things, right. For example, they regularly aim to improve competitiveness by stripping out unnecessary costs, training employees and prudently leveraging new, productivity-enhancing technology and equipment.
2. Pick the spots that play to your strengths
CSR is very strategic in terms of which markets they target and how they penetrate them. They only choose markets where their corporate strengths – product innovation, organizational agility and delivering tailored solutions – can deliver a winning value proposition.
Furthermore, CSR minimizes risk by deeply understanding their target market including cultural norms, regulations and customer buying behavior. Finally, CSR strives to eliminate the client’s impression they are dealing with a foreign supplier. For example, in the U.S. the company uses American consultants for business development and account management. Marketing is tailored to reflect regional needs. And CSR’s logistics strategy is designed to virtually eliminate any border issues.
Steve Blanchet, CSR’s president and chief executive officer, says he tries to make its global trade seamless for the company and its customers.
“We continually review and understand the changing market conditions and regulations in our export markets,” Blanchet says.
There is no silver bullet strategy to winning in foreign markets. Instead, success is about keeping an eye on the fundamentals: being bold, doing your homework, demonstrating agility and focusing on continuous improvement from a cost and product perspective.
Mitchell Osak is the Managing Director, Strategic Advisory Services at Grant Thornton LLP, a leading Canadian advisory, tax and assurance firm. He can be reached at Mitchell.firstname.lastname@example.org and on Twitter @MitchellOsak
“Adapt or die” may be one of the most over-hyped business phrases of the last decade. The reality is that most firms don’t face disruptive threats. And seasoned leaders understand the serious business risks of poorly designed transformations.
Fortunately, there is another way to ensure competitiveness and growth. Companies that stay true to a winning corporate strategy over the long run can be very successful. How do you do this, especially when unforeseen internal and external events test your convictions?
In an ideal world, leaders craft and follow a clear, compelling and multi-year strategic plan. Realistically, this approach often doesn’t survive more than a few quarters. Headwinds such as slowing customer demand, rising costs, or competitive moves often spur managers on to increase spending, or to make deep cuts. In essence, leaders overreact to short-term noise instead of focusing on the long-term market.
Furthermore, organizational dynamics can lead to management prematurely hitting the panic button. These include:
- Some leadership practices have a built-in bias towards quick reactions at the expense of deliberation and patience;
- The need to hit short-term metrics to meet goals creates incentives to do things at any cost;
- Without the anchor of an existing strategy or priorities, it’s easy for companies to zigzag with no clear direction.
All of this can lead to operational distraction, wasted investment, high employee turnover and a compromised brand image.
Staying the course
Consistency pays off over time. And companies that stick with a good plan will become more efficient and develop better relationships with customers and partners. Importantly, there is no trade-off between speed and deliberation in a strategically consistent business. Staying the course also enables quicker decision-making and follow-through.
Canadian telecom provider Telus Corp. has successfully used strategic consistency. Telus’s focus on service, brand and culture helped it outperform its rivals during the last 15 years, according to a strategy+business article published on Aug. 31. During this time, the Vancouver-based company’s revenue more than doubled to $12 billion and it returned 351 percent to shareholders, making it a global leader in the sector, the article stated.
Staying the course is particularly important in business services, where clients measure performance over years, or decades. For example, the investment-servicing company CIBC Mellon built profitable market share by remaining true to its goals of focusing on clients and reliability.
“Consistency over the long term has been critical to earning the trust of our clients,” said Claire Johnson, senior vice president, strategic initiatives. “Choosing the right strategy and supporting it through ever improving products and services is the key to long-term market success and customer satisfaction.”
Becoming strategically consistent
Any organization can maintain strategic coherency. Here’s how Telus and others have made it work:
1. Define values
Leaders need to define the winning strategic values (i.e. how the company competes and with what capabilities) that work for their firm and use these to guide important decisions and actions over the long term.
2. Take a long-term view
Compensation programs and reporting tools should prioritize long-term shareholder value creation and reflect the performance of key strategic values.
3. Encourage clear leadership
Every employee, supplier and shareholder takes his or her cue from what leaders say, and more importantly, do. When short-term emergencies arise, managers need to have the patience, support and fortitude to focus on what is truly vital.
4. Understand the relationship between time and change
New events, competitive moves, or technologies often encourage a short-term overreaction at the expense of more deliberate thinking and prudence. Remember what Bill Gates said: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”
Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP
Apple and Google recently created a buzz as they launched their latest phones with all sorts of new features.
Improved cameras, fingerprint sensors and gizmos to save battery life were among the offerings to win over the public.
Slick designs and major international product launches may make innovation seem like a sophisticated practice that’s easy for companies with big budgets and plenty of time, but what if you don’t have that luxury.
The reality is that some of the most successful innovators get significant results without outspending their rivals. For example, Procter & Gamble minimizes research and development (R&D) investment and time by getting product teams to tap into the creativity and problem-solving efforts of outside entrepreneurs, universities and start-ups.
Apple has launched some of the world’s most successful products despite spending less on R&D (as a percentage of revenues) than many of its competitors. And companies such as Amazon and Google have used quick, low-cost experiments to quickly gain consumer knowledge and to identify and scale winning ideas, while also to pulling the plug on white elephant projects.
Most companies need a practical approach to innovation that can be used regularly to get good results.
More than 15 years of client work and research has taught me there’s a middle way between ad hoc initiatives and building expensive innovation factories. We developed a system I call the Thrifty Innovation Engine (TIE), which offers companies an alternative approach.
It’s based on the view that innovation is simply fresh thinking that comes from inside or outside of the organization, combined with actions to create market results through higher revenue, or lower cost.
Here’s how the process worked for a software client. This firm’s approach to innovation veered from rushing emergency product upgrades for single clients to funding ‘new venture’ business units that looked well beyond a two-year planning horizon. Neither approach delivered the expected business results, but they did generate plenty of politics and expenses to boot. We helped the client implement a TIE – a 120 day innovation germination and commercialization process.
Phase 1 – 10 days
Assessment, priority-setting and getting a team together
This was vital, as management didn’t have a clear picture of spending, or accountability. A small team of product managers, programmers, financial analysts and marketers looked at ideas and bucketed them according to potential customer appeal, capabilities, financial returns and ease of commercialization. The team then chose five ideas for customer feedback.
Phase 2 – 20 days
We introduced the five ideas to 16 strategic and prospective clients and four industry leaders through a series of sessions. Our goal was to find out how each idea met customer needs, what features were important and how emerging technological trends could be used. Two of the ideas generated significant customer interest and were placed in the commercialization pipeline.
Phase 3 – 75 days
A small and highly motivated group of programmers were dedicated to each idea, along with a budget and internal mandate. This wasn’t a sideline project starved for internal support. The core project group continued to be accountable and provide input but were told to use a minimalist touch. Low cost, speed and client consultation were guiding principles. For example, the team was encouraged to use lean methods such as open source tools. Each team also collaborated with the clients to minimize risk and assure market acceptance.
Phase 4 – 15 days
The team reviewed the process and what they learned to fine tune the framework, which included committed resources, defined practices, metrics and knowledge management policies. A system was also set up to track the business results and customer feedback and to cycle these findings back into the TIE knowledge bank.
Developing an innovation engine like this won’t guarantee your firm becomes the next Apple or Google, however it can help your efforts become more productive and ensure your great ideas are market driven and not long shots.
If I could rank all of Steve Jobs’s business lessons, the importance of design in supporting business success would top my list.
Don’t take my word for it, though. Many global market leaders, and not just in fashion, electronics or luxury brands, drive growth by continuously enhancing product design. However, companies without a design heritage or capability can also use this strategy to improve revenue and brand image.
In a simplified process, designers working in collaboration with product managers and engineers take creative ideas and marry them with a customer’s requirements and the company’s goals. The integration of this effort hopefully leads to the creation of an aesthetically pleasing, functional and profitable product. Design is the sum total of the properties of a product or service made up of the form (i.e., the aesthetics around look, feel, sounds etc.) and the function (i.e., the practical benefits delivered). Good design can help a company create or dominate a category (think iPhone); poor design can kill a brand (remember the Edsel).
Design isn’t just the purview of high-end, iconic consumer brands such as Apple, Louis Vuitton, Nike, and Bang & Olufsen. Some B2B manufacturers such as IBM (laptops), Herman Miller (office chairs) and Olivetti (calculators) have used product design leaders to dominate their categories.
Then there’s successful and well-designed brands including IKEA, Samsung and Canada’s Umbria, which have proven neither price nor a Paris, New York or Milan address are required for using design competencies as a key differentiator.
Nor do you need a large investment or a creative studio to compete on design. Take, for example, the experience of one of my clients — a manufacturer of high performance automation systems. The company, challenged to build market share without resorting to price discounting, tweaked its product designs and saw an immediate boost to revenue and brand image. Research showed buyers perceived little difference between products (not unexpected since the systems looked remarkably similar) despite the fact that system performance and warranties varied significantly. Not surprisingly, pricing was their key purchase driver. To stand out, the company had to leverage other attributes.
Management agreed to run an experiment: redesign its product demo to make it visually appealing and high end, then gauge its success through prospect and client feedback. This involved some simple design changes — repainting certain components, enclosing messy cable assemblies and enhancing the documentation and packaging. The response from the sales team and prospects was overwhelming. Sales closing rates and perceived product value jumped. Based on these results, the CEO decided to redesign the entire lineup.
Leveraging design is not for the impatient, undisciplined or risk adverse. World-class firms build internal competencies and ensure they become part of their cultural DNA.
Three best practices to achieve this are:
Learn Acquire a deep and multifaceted understanding of your customers’ needs (including sub-conscious drivers of their behaviour), as well as an understanding of emerging trends, such as mobile computing. Be mindful of Sony founder Akio Morita’s observation that consumers often fail to see the appeal of a breakthrough product on first hearing about it (the Walkman in this case). Keep the creative juices flowing by being plugged in to what is happening in complementary industries and related fields such as technology, nature, entertainment and fashion.
Build Assemble the right ingredients — talent, tools and processes — then give them the freedom to follow a vision consistent with the company’s goals. Collaboration is essential; designers should spend much of their time working directly with the product development and operational groups as well as external partners. Employing the right knowledge management systems and metrics will help ensure design excellence is institutionalized, cultivated and effectively managed long term.
Persevere Making these changes stick requires strong leadership, the pull of motivational values and goals and perseverance, not to mention a re-balancing of priorities. Internal alignment won’t always be easy especially when you are asking engineers and production managers to collaborate with designers. Finally, you need to be realistic. Not every new design, no matter how elegant, will be a hit with customers.
Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP. He can be reached at Mitchell.Osak@ca.gt.com Follow him at Twitter.com/MitchellOsak
It’s never been tougher to be a wealth manager. A significant growth in assets under management over the past seven years (last week’s correction notwithstanding) has not translated into suitable top and bottom line growth. Many industry observers blame this on structural challenges that belie an easy fix and are not going away in the short term. To reboot profitability and position their firms for growth, wealth managers should go back to the fundamentals and re-examine where and how they compete.
Every company is experiencing strong headwinds including market uncertainty, insufficient scale, poor brand differentiation, fee compression, and rising costs (for regulatory compliance, information technology, etc.). On the horizon is another threat, technology-based “robo-advisers,” such as Toronto-based startup Wealthsimple, which use an automated platform to target specific, tech-savvy segments with a focused value proposition and lower fees.
It is the three “M” wealth management firms — mid-sized, me-too and middling — that face the greatest business risk. They can no longer be all things to all clients or get by merely on the strength of personal relationships. Their best approach would be to go back the fundamentals: re-examine the segments they pursue, choose the best value proposition for the target client and build the capabilities needed to deliver it. While each firm will define their own approach, they may want to consider two strategic opportunities:
The gender gap Most wealth management firms lack the practices, understanding and tools to satisfy and address one large but relatively untapped segment, women. Women create, control and influence a huge amount of wealth — upward of 39 per cent of U.S investible assets, according to research from the Center for Talent Innovation.
The research found that 47 per cent of U.S. female wealth creators (53 per cent globally) and a shocking 75 per cent of women under age 40 do not have a financial adviser. Among the U.S. women that do have an adviser, 44 per cent report they are not understood by their adviser. There is no reason to believe that Canadian female clients are managed or treated any better than their U.S. or global counterparts.
Wealth managers need to gain a deeper understanding of women investors’ needs, requirements and fears using quantitative and qualitative research (advanced tools like ethnography can help here). Insights and lessons can be gleaned from industries such as automobile and consumer electronics that have pioneered female-friendly marketing and product design. Tactics could include: crafting more gender-neutral messages and imagery, employing principles of behavioural finance to remove hidden bias, training advisers in gender-smarts and creating a more collaborative and inclusive client experience.
To best capitalize on this opportunity, consider customizing products and services to suit women, including creating a risk profile that is markedly different (according to a study from consultants BCG) from one created for a man.
“We discovered early on our female clients have unique needs. They look for more collaborative, education-focused advisers with a holistic, long-term approach to financial planning,” said Jennifer Boynton, an investment counsel at Toronto-based RealGrowth, which is growing by focusing on addressing the needs of female clients. “Addressing these needs, while still meeting their investment targets, has enabled us to consistently exceed acquisition, retention, and most importantly, client satisfaction goals,” she said.
Build digital capability Given the wide range of consumer activities that can be done on a smartphone or desktop, it’s surprising that digitization has advanced so slowly in this space. While incorporating new technologies can be difficult, it no longer can be put off. Doing so will help you remain relevant and attract key segments such as high income digital natives or millennials who are very comfortable performing day-to-day activities online.
Furthermore, going digital is vital for streamlining back-office operations, enhancing reporting and improving data and analytics capabilities.
Digital tools can provide clients with mobile, real-time and user-friendly views of their portfolio (including value, costs, transactions) along with self-serve options for research, recommendations, buy/sell and support. Advanced data analytics can be leveraged to proactively tailor your investment advice and content based on each client’s profile, or support internal investment decisions. Finally, many wealth managers can make better use of social media networks to disseminate information, build moderated communities of interest (say around tax planning) and gauge investor sentiment and needs.
When it comes to realizing the digital dividend, the secret is to understand your client’s needs, and build back from there. That requires companies to create a 360 degree review of each client’s assets, requirements and behaviour patterns, an understanding of existing processes and a willingness to re-engineer the client-experience model (including practices, culture and policies), before exploring technology solutions.
Every business leader knows businesses must adapt to their environment or become discredited and irrelevant over time. But how do you do this as quickly and painlessly as possible?
While there are many leadership styles, the odds of a successful transformation improve when a leader’s values and behaviours are congruent with the mandate of the company, and are seen as aspirational.
Maurizio Bevilacqua, the mayor of Vaughan, Ont., is spearheading significant cultural change, transforming operational productivity, enhancing service levels and improving employee engagement while bringing newfound respect to city politics. His values-driven approach to leadership offers many lessons for people tasked with leading major transformation in any organization.
The mayor is no stranger to the public sector. He has served in government for many years, including as a Member of Parliament for Vaughan for 22 years. In 2010, he left federal politics and was elected mayor of the city. From the get go, Bevilacqua adopted a different leadership style from a typical politician. His approach relies less on command and control management and more on setting the right example and instilling in the culture aspirational, humanistic values.
Values-driven leadership is not new in the private sector. Many of the world’s most successful business leaders — Steve Jobs (Apple), Herb Kelleher (Southwest Airlines) and Jerry Greenfield and Ben Cohen (Ben & Jerry’s) — have imprinted similar values in their companies with great results.
Bevilacqua’s values-driven leadership is demonstrated through a variety of practices and programs. For example, positivity, servitude and goodness are regularly invoked as guiding principles from strategy development on down to personal actions at Vaughan City Hall.
The mayor believes in improving employee engagement through small but personal gestures such as praising the dedicated efforts of employees both privately and publicly, placing a personal phone call for special occasions or simply saying thank you. The commitment isn’t just lip service. He and the members of council provided written commitment to the Vaughan Accord — a 12-point document that defines the principles of public service — a promise of responsible, co-operative, transparent and effective governance.
So far, the mayor’s approach has paid off in spades. Vaughan is now among the top municipal performers in Canada in voter satisfaction, economic development and staff excellence. To wit, a recent Citizen Survey revealed that 90 per cent of Vaughan residents are “very” or “somewhat satisfied” with city services overall, while 95 per cent rated quality of life “good” or “very good.” These numbers have all increased during the Bevilacqua’s tenure.
Furthermore, a fresh, business-friendly environment has led to a 18.3 per cent increase in new business creation since he assumed office. Similarly, his values-driven change has had a positive effect on staff excellence; employee engagement and demonstrated leadership competencies are up 13 and 17 per cent, respectively, compared with 2009.
Mayor Bevilacqua’s leadership style and methods are congruent with other best practice change practices:
- Develop an inspiring narrative and values Leaders need to appeal to their staff’s spirit as well as logical brain using a simple message communicated regularly;
- Engage all stakeholders Ignoring some groups, especially skeptics, may short change the effort and create unwanted opponents;
- Model desirable behaviours Credibility is everything. If leaders talk the talk, they need to walk the walk;
- Support your staff Nothing slows momentum faster than a leader who does not help their team overcome roadblocks; and
- Be patient Real change takes time, courage and perseverance
Without a doubt, Mayor Bevilacqua is on the right track to transforming Vaughan. Yet, he should be mindful of the sage words of Pericles, Athen’s leader during the Peloponnesian War. “What I fear more than the strategies of our enemies,” lamented Pericles, “is our own mistakes,” a warning all leaders should heed.
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Nearly every executive pays lip service to “shareholder value.” But many of them readily, if unwittingly, make business decisions that run counter to that objective.
Over the long run, no variable correlates more strongly with shareholder value than profit maximization — something that many companies do not prioritize in spirit, let alone in practice.
Instead, they often focus on flavor-of-the-month strategies such as market share growth or product innovation. Believe it or not, these are not always compatible with maximizing profit over the long run.
The problem with focusing on market share is that growth is often achieved at the expense of competitors. “Switchers” are the most difficult customers to attract, frequently requiring discounted pricing or free trials, and are also the most difficult to retain. The result is generally a temporary increase in market share that does not translate into higher revenue or lower operating costs.
While focusing on product innovation is always a good place to start, it too can come up short when it comes to maximizing profit. One major reason is a failure to properly price the products. An introductory price that is too low for too long — usually in hopes of stealing market share — may never produce the return a company is hoping for.
The result is that companies often spin their wheels, leaving profit on the table because they don’t understand the true value of their enhanced product — or feel that their brand does not command the heft required to demand premium pricing for premium quality.
Why does pricing go off the rails?
Our consulting firm recently worked with a company whose stock was under-performing relative to its peers. The company’s solution had been to increase market share through product upgrades. Despite considerable money and effort, however, the strategy failed to build top-line revenue and, as a result, investors were unmoved.
When we performed the postmortem we determined that management put a great deal of care into identifying what customers wanted and how to market the products but put little thought into what to charge. Not only were the prices too low to feasibly provide a return on the organization’s R&D investment, customers failed in lieu of premium pricing to grasp the products’ premium quality.
Setting the right price
It can be a challenge to devise and stick to a pricing strategy that reflects the true value of a product or service without compromising competitiveness. Here are a few tips that can make the task a little easier:
- Ensure that every stakeholder both understands the primacy of long-term profitability and is aligned around that goal;
- Recognize that there may be special instances when premium pricing should temporarily take the backseat to marketplace competition;
- Understand your existing and potential customers’ needs and budget and seek to meet both;
- Enumerate the ways in which your product or service addresses those needs, using tools such as a customer-value model;
- Consider if or how you need to differentiate and build your brand to support premium pricing.
For more information on our services and work, please visit the Quanta Consulting Inc., web site.
Why do seemingly intelligent and well-meaning executives make bad business decisions?
As consultants, it’s a question that organizations task us with answering, often through postmortem reviews of failed strategic initiatives. The idea is to develop a better understanding of how and why pivotal (and ultimately poor) choices were made in hopes of not repeating the mistakes.
We look at the analysis undertaken, the managerial deliberation and how the final decisions were made. In each case, we discovered that the root cause of the bad choice(s) was not the decision-makers themselves — i.e. stupidity on the part of management — but rather a dysfunctional process for making decisions.
Optimizing the decision-making process can go a long way to improving the level of analysis, managerial buy-in and the quality of the decision. And — perhaps most importantly — it could spare your organization from being responsible for the next Edsel or New Coke.
Whether purposefully, a product of geography or a matter of culture, employees in many organizations are “siloed” in discrete units or departments. Rigid silos restrict the flow of ideas, hampering the collaborative process required for developing sound analysis and making informed decisions.
Executives who possess a siloed worldview — i.e. “empire builders” — can be particularly toxic. Unlike lower-level managers, these individuals have the power to inhibit the allocation of necessary resources and the development and implementation of strategy that serves the interests of the larger organization.
Politicking is inevitable when any group is gathered to make an important decision. The trouble occurs when politicking gets out of control and supersedes sound logic. This sort of dysfunction breeds and emboldens bias and ago, which can hijack the process and lead to lousy decision-making.
Common examples of excessive politicking include: prioritizing departmental or career goals at the expense of corporate ones; keeping key stakeholders in the dark through the widespread use of back-channel communications; and overemphasizing consensus building or “what will fly” over what makes the most sense.
Most large organizations assert the importance of strategic problem solving and retain scores of managers who possess this skill. However, many of these firms fail to create and follow the right practices for guiding and empowering these individuals to reach their full potential.
The process — if it even exists — often follows inadequate preparatory work and is too brief, under-resourced and devoid of key stakeholders. Worse, the individuals who are in the room often possess a shared analytical framework thus and lack the skills, expertise and vision required for distinguishing between a good idea and a bad one.
There is no silver bullet for creating and sustaining an effective decision-making process. Every company and situation is unique. However, getting the organizational fundamentals right can go a long way toward mitigating and eliminating many of the aforementioned issues. Generally speaking, best practices include:
- Developing and implementing a systematic decision-making methodology and process
- Encouraging open and frank discussions about all options, assumptions and scenarios
- Providing access to high-quality and actionable data
- Using practical and coherent criteria for evaluating decisions
- Having engaged and impartial leaders overseeing the process