Archive for November, 2013|Monthly archive page

Don’t plan, tack

Companies that fail to plan, plan to fail. Or do they?  It is very common for organizations to spend significant time and effort each year developing strategic plans that are used to analyze the market, set goals and priorities and allocate resources.  However, there is often no correlation between plan quality and market results.  Relying on a formal, long-term strategic plan is not for everyone and can, in fact, be dangerous for many companies.  Here’s why.

Strategic planning is predicated on a number of shaky assumptions, three of which are:

  1. Managers can predict the future. It is virtually impossible to dependably predict the future given the unknowns — competitive reaction, technological change and likelihood of Black Swan events.  No matter how thorough a plan is, it cannot account for every contingency. For example, few firms anticipated the 2008 Financial Crisis and the speed at which it unfolded.  When unforeseen change happens, an inflexible plan can turn into a strategic blindfold.
  2. Target goals are attainable. Many plans feature BHAGs (Big Hairy Audacious Goals) that are used to motivate employees and spur breakthrough thinking and effort. The problem with having these stretch goals is that often they are  divorced from market and financial realities, and are set for other reasons like management incentives, ego or head office needs.
  3. Everyone aligns to the plan. Though strategic planning is typically a cross-functional exercise, its implementation is often uneven or compromised. Poor implementation arises when metrics or objectives that are at odds with the plan’s targets and measures are used as incentives for departments. Promoting unrealistic goals can demotivate employees or lead to unethical behaviour.

Strategic planning has other drawbacks. The exercise can consume an inordinate amount of time, effort and resources.  The value of the plan is highly dependent on having customer, channel and cost data, which is often unavailable or of poor quality.  Finally, the planning process can often lead to win-lose outcomes, triggering infighting and limiting collaboration.

There is another approach to coping with competition and uncertain future.  We call this method, “strategic tacking” — a sailing term used to describe how a boat sails towards the finish line in an indirect way making allowances for changing weather and water conditions plus race position. Through strategic tacking, companies pay less attention to creating a plan and focus instead on producing the essential knowledge and operational adaptability to compete well in a dynamic environment. Strategic tacking does not mean an enterprise is not systematic or rigorous in its thinking. Rather, management prioritizes process over a finite outcome or plan.  Strategic tacking includes the following elements:

Core assets

Whether they know it or not, every firm competes best across one to two dimensions such as customer satisfaction, product performance or low cost. Understanding this differentiation and the capabilities that support it (taken together are core assets) is the first step to achieving clarity of purpose and action. These assets would act as a strategic lens to help leaders decide what to prioritize with what resources, given the potential benefits and risks.

Analytical competencies

Companies need a regular and objective view of their competitors, customers and costs.  To get this, managers need to undertake a thorough analytical process that includes as many internal and external people as possible. This activity will help management quickly identify and meet competitive challenge and exploit new opportunities without over-stretching capabilities and partners.  Where possible, simulation-based analytical tools like war gaming should be used to explore real-life, risk scenarios and drive internal buy-in.  As well, the firm should have market intelligence mechanisms that capture information, turn it into knowledge and share it quickly.

Organizational Agility

The right structure and processes need to be in place to make quick, fact-based decisions that lead to rapid enterprise mobilization.  We have seen firms maintain a SWOT-like, decision making group, made up of senior managers and experts from across the company.  Instead of earmarking 12 months of investment in a budget, firms can hold back discretionary funds to capitalize on opportunities.  Once decisions are made, there also needs to be mechanisms for deploying people, capital and expertise.  We have created market-specific, rapid-deployment teams made up of project managers, marketers and product managers who are ready to execute high-priority initiatives.

Many companies strategically tack whether they recognize it or not.  This approach may be one reason why leaders like Apple, Google, Amazon, Open Text and Nike can consistently outflank and preempt competition. Unsurprisingly, strategic tacking is not a realistic option for every company based on shareholder expectations and organizational issues.  Furthermore, well-crafted plans are still best suited for slow-moving sectors such as consumer & industrial goods, not-for-profits and services.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

5 Steps to Digital Transformation

Most companies want to better leverage digital technologies — social, mobile and cloud services — to deliver an enhanced customer experience, enable new business models and drive greater operating efficiencies.  They also dread falling behind their bolder, more agile competitors. Yet, most leaders are unclear as how better to use the technology they have or decide which new tools to adopt. How can these laggards prudently catch up?

It is well documented how transformational leaders like Starbucks, Nike, Cisco and Apple have employed digital enablement — organizationally and technologically — to generate new revenues, extend market leadership, and reduce cost by streamlining processes and practices.  Unfortunately, these firms are the exception not the rule.

MIT Sloan Management Review and Capgemini Consulting conducted a survey in 2013 of 1,559 executives and managers spread across a wide range of industries. The survey looked at the state of digital transformation, and the barriers and enablers that are impacting this journey.  To be clear, we are talking about embracing breakthroughWeb 3.0 technologies such as cloud computingcrowdsourcing3D printing andlocation-based analytics, not more common applications like e-commerce or server virtualization.

The study’s key conclusion is sobering but hopeful. Despite the promise (or hype) of a digitally enabled business, most companies have been tentative in fully adopting new technologies and supporting them with organizational changes.  Fortunately, the study also highlights some best practices that point a way forward to fully exploiting potential of digital technology. Some of the study’s key finding are:

  • There is a digital imperative. A convincing 78% of respondents said achieving digital transformation will become critical to their organizations within the next two years.
  • However, words do not match with reality.  Only 38% of respondents said digital transformation was a high priority on their CEOs’ agendas.
  • Awareness of the intent-action gap is a good first step. A strong 63% of the executives acknowledge the pace of technology change in their organization is too slow.
  • Firms that were considered digitally savvy typically outperformed companies that lagged in technological implementation.

There are worrisome but often benign causes for this lethargy.  The study and our research point to many factors, including:

Lack of urgency: Firms with no ‘burning platform,’ competing management priorities or who focus inordinately on short-term results will be less willing to put sufficient focus and resources behind digital initiatives.

Pessimistic culture: Many organizations are naturally risk averse, have management systems that don’t handle technology issues well or display a ‘not invented here’ mindset to technological adoption.

Low digital awareness among leaders: A digital divide exists in many companies between junior or middle managers who understand the potential of digital technology and those leaders who make strategic and financial decisions.

These barriers must be overcome. Entire industries (e.g., travel, music, retailing) have been disrupted by digital pure-plays and/or seen their margins shrink significantly.  Acknowledging the issue is no longer enough; organizations must get in the game.  Here are five best-practice recommendations we have made to a variety of clients:

Raise digital literacy. To begin with, all cross-functional leaders need to understand key digital trends, what their competition (current and emerging) is doing and what are some best practices from outside their industry.  Nike looked beyond the apparel industry to the wireless, controls and sensor industries when launching its Nike+ offering.

Focus the impact. Technology should not be adopted because it is cool and flashy. It must support the core mission and priorities of the firm — not create new ones.  When Starbucks made its digital transition, it added services that would enhance the customer experience (free wi-fi) and streamline operations (add digital payments to speed up the order/payment process).

Organize for success. Companies can take many steps to support transformation, including mandating digital representation on cross-functional teams, forming digital ‘centres of excellence’ and giving enterprise-level authority for digital investments. When media firm Gannett and Columbia University wanted to accelerate its adoption of digital technologies, it created a new chief digital officer position with a mandate to spur technological adoption and relentlessly evangelize the vision.

Re-tune practices. Make digital literacy part of key practices like recruiting, research and training.  Create and connect digital transformation metrics to reporting, incentives and the performance management system.  One of our clients in the IT sector requires their planning activities and templates to include a digital lens.

Walk, don’t run. Big bang technology adoption rarely works.  Pick an operational, service or marketing pain point and investigate how digital technology can help solve the problem or improve performance.  Pilot something.  If it works well, scale quickly.  If it doesn’t meet expectations, kill quickly, inculcate the lessons and move on to something else.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Guaranteeing integrated marketing

Many marketing departments resemble the Tower of Babel:  disparate teams, speaking different languages, working at cross paths and often not getting along.  In business parlance, this is called an integration problem.  Like the challenges facing the denizens of Babel, poor integration can wreak havoc on a company’s marketing effectiveness and brand image. Luckily, CMOs can overcome these problems by tweaking their structures, processes and practices and driving tighter strategic alignment.

Loose integration occurs when different customer-facing groups (e.g., marketing, sales, customer service) pursue different institutional (or personal) agendas. We have seen the implications of weak integration in dozens of our clients and the firms we benchmark.  Symptoms include: schizophrenic brand messages; tactics that run counter to the marketing strategy; duplication of effort and; in-fighting around who controls the priorities and budget.

The root causes of loose integration often arise unintentionally.  For example, programs are implemented unevenly; customer and channel fragmentation leads to a plethora of conflicting messages and tactics and; the growth of marketing outsourcing increases the odds of misalignment.  Not to be minimized is the personal dimension where department heads or employees purposely pursue agendas that are not aligned with the marketing strategy.

An almost fully integrated company  (complete integration is probably unrealistic) stands a good chance of delivering superior marketing performance as defined by lower cost and higher levels of customer acquisition and retention, higher levels of innovation and a stronger brand image. Examples of highly ‘integrated’ firms include: Apple, Four Seasons, Nike, Coca-Cola, McDonald’s and Victoria’s Secret.

Leaders can preempt and overcome the harmful effects of low integration by considering three, interrelated, approaches:

1.  Drive strategic congruence across the company

Brand internally

Your employees are market ambassadors as well as influencers within their organizations. Getting them to read and execute off the same marketing script will minimize integration issues.  Some management action items include evangelizing the marketing mission and strategy across the company, regularly communicating the firm’s value proposition and point of difference, and quickly updating stakeholders with any important changes to the program, partners, etc.

Make planning visible

A transparent and inclusive planning process increases integration and alignment by ensuring all views are aired, promoting fact-driven decision making, exposing management bias and reducing organizational uncertainty.

In-source more activities

The more marketing agencies and contractors are used, the greater the chance of integration problems, tracing to complexity-induced errors and strategy-execution gaps. Bringing more work and functions in house (and ensuring they are properly managed) will improve integration.

2.  Break down silos

Revamp the structure

A business maxim says that structure should follow strategy.  Often the structure gets out of sync and needs to be corrected.  Some ways to do this include organizing around capabilities or strategic goals like customer acquisition and retention, and introducing a shared service-delivery model that centralizes program execution.

Rogers Communications uses a couple of different structures to drive integration. “We bring people from across the organization and regardless of reporting relationships on teams to focus around common goals such as retention or acquisition,” says John Boynton, chief marketing officer. “Another approach is around execution. For example, with social media executions we have a hub-and-spoke model with experts in the hub giving advice and assistance to those in the spoke trying to use social media for varying different objectives.”

Clarify roles and responsibilities

Unclear accountability and decision rights naturally lead to conflicting programs and duplication of effort, not to mention internal strife. One way to address this problem is to clarify and formalize roles and responsibilities with charters and circulate them to key stakeholders.

3.  Use one playbook

Fine-tune the management systems & culture

Employees often work at cross-purposes when their goals, metrics and incentives are not aligned.  Leaders need to ensure there is a shared marketing mission, lexicon and performance measurement systems that is congruent with corporate priorities and integrates every activity up and across the organization.

When formal systems are lacking, companies need to be pragmatic. “Our goal is to define and create a marketing culture where it is okay to have discussions at the outset to establish decision makers and inputers,” says Boynton. “This can save a lot of time and avoid disparate executions and decisions.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.