Archive for October, 2015|Monthly archive page

The virtue of strategic consistency

“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:

  1. Some leadership practices have a built-in bias towards quick reactions at the expense of deliberation and patience;
  1. The need to hit short-term metrics to meet goals creates incentives to do things at any cost;
  1. 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

Being a frugal innovator

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

Market validation

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

Commercialization

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

Final steps

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.