Cutting Through The Grey

Sentiment

In difficult trading times we are advised to track both the tangible and intangible aspects of our businesses. In tangible terms, a real understanding of money flows is essential. In intangible terms, we follow sentiment. What is the quality of our relationships along our value chains? Are we delivering value to all our stakeholders? Do they want to travel further with us?

Sentiment is viral. It spreads quickly across boundaries. Sentiment impacts our reputation and bottom line. Sentiment is often driven by interest not logic. Sentiment is not static.

How much time is your business devoting to tracking and analysing the impact of stakeholder sentiment on the formulation and delivery of your strategy?

Who is bringing insights on stakeholder sentiment for debate in the boardroom?

Are the messages being filtered or distorted?

Which image do you see?

 

Strategic Decision Making

Beyond the purely academic study of strategic decision making, there is a pragmatic realisation in many Boardrooms, that processes must change.

Impacted by an increasingly turbulent business environment, decision longevity has shortened. Decison making bodies generally meet more frequently as they seek to develop a collective understanding of what Dr Laurence Lyons and I term 'The Rich Picture' of the context in which their organisations must perform. At London Business School, Prof. Don Sull characterises 'The New Normal' as like peering into fog and suggests that strategic timeframes need to recognise this uncertainty. Prof. Zeger Degraeve highlights the need to focus on the quality and process of decision making rather than just the results achieved.

Many business leaders, including Jack Welch, ex CEO of GE, highight geo-political, socio-economic and competitive dynamics as key trends to track in creating a better understanding of the context in which strategic decisions must be made and executed. They point to the emergence of new markets and the convergence of technologies as providing ethical challenges, which regulation and legislation regimes are seeking to address.

As Boards review their structures, processes and dynamics, three key questions arise:

Who can make strategic decisions? or How far along the control - empowerment continuum are we prepared to travel?

How can we ensure that alternatives and their consequences are explored? or How do we determine and revisit our risk appetite?

What criteria will be use to choose between alternatives? or How can we best use our capability to produce value?

The disciplines of strategic decision making are clearly under review.

Sharing insights from Gen Y

24/7/365 available and global connectivity, have increased the ‘noise’ which business leaders have to filter. The time available to think strategically is also under threat by what Rod Eddington characterised as 'the tyranny of the urgent.'  The challenge is to develop a clear and continuously emerging line of sight through the boardroom to the organisation, the market place and beyond to the wider world.

The search is for aggregated information expressed in simple language and the trend is for board members to access interactive, multimedia rather than print. Forums such as TED allow politicians, academics and business leaders to rub shoulders. You Tube provides authors with a dynamic way to share their insights. 

Brave business leaders are inviting the new ‘Generation Y’ into the boardroom. Raised in the digital era, ‘Gen. Y’ help them to navigate and interrogate this rich and living library. The insights shared, provide value to all parties. Boards are challenged to think in different ways and their young talent is provided with real insights into the way in which strategic decision making and implementation happen. Whether these opportunties are called 'internships', 'reverse mentoring' or 'shadow boards' the benefits are significant.

Values alignment

The accepted wisdom is that supply chains with values alignment are more productive. Clearly achieving that alignment calls for transparency in both processes and behaviour.

The values articulated and evidenced so compellingly by Body Shop founder, Anita Roddick, are now being emulated by organisations across a variety of sectors. When Body Shop was taken over by L'Oreal, many waited for the values to be watered down by commerical imperatives and stories exist to support and counter this expectation.

More recently, the sale of 200 year old British firm Cadbury to US Multinational Kraft for £11bn has excited much discussion about compromised values. Cadbury's ex CEO, American Todd Stitzer, was a firm advocate of leading through shared values, coining the phrase 'Performance Driven, Values Led.' The deal with Kraft was welcomed by hedge fund shareholders and has been followed by pre deal promises broken, the relocation of the head office from UK to Switzerland, a fine on Kraft levied by the City Takeover Panel for their conduct, a knighthood for former Cadbury Chairman, Sir Roger Carr for brokering the deal and on Friday the report that the Dairy Milk bar is going to be reduced in size so that customers do not have to pay more.

Perhaps it is not surprising that the operating environment is becoming increasingly uncomfortable for the entrepreneurial team who lead organic chocolate maker Green and Black's. Having been part of the Cadbury family for six years and experienced one style of parent, media stories point to their spirit being crushed by their new parents at Kraft. Since late in 2010, there has been talk of Green and Black's leadership team lobbying Kraft to entertain an MBO. It must seem a far cry from the ethical and organic origins of the business founded in 1991 by husband and wife team Craig Sams and Josephine Fairley of Whole Earth Foods.

Once again we are reminded that one of the main reasons for failing to realise value post acquisition is values misalignment.

Corporate Governance Comes To Government?

^{Can the very principles which describe good corporate governance for businesses, be applied to the new political regime in UK?}

^{The UK operates in a  regulatory environment which encourages the use of judgement, unlike the more rules based approach adopted by the US. Key principles describe how Boards should operate or explain their reasons for adoping alternative approaches:}

^{The structure of a Board should avoid the concentration of power in too few hands. The roles of Chairman and Chief Executive should be separate and non executive directors are expected to provide independent challenge. The Board may establish committees to deal with particular aspects and these report recommendations to the whole Board for discussion and ratification. High performance Boards learn continuously. They regularly review their effectiveness, considering their structures, processes and behavioural dynamics.}

^{High performance Boards combine people who provide diverse insights and are prepared to listen to alternative views, challenge them constructively and take the appropriate time to debate in order to arrive at consensus on strategic decisions. Once these decisions have been made, everyone is overt in their support for the decisions in order to ensure that a clear and consistent message is received by all stakeholders. The Board delegates the implementation of their strategic decisions to the executive. They do not interfere in tactics, but do provide active, visible sponsorship and leadership of strategic change.}

^{High performance Boards espouse a common vision of what they are trying to achieve and a common set of values, which describe acceptable and unacceptable behaviour. Board members build the ability to collaborate and partner in order to create value. They create environments for their meetings which promote this behaviour. They engage in dialogue with all stakeholder groups in order to develop insights into their perceptions and expectations and bring these insights to the whole Board in order that they may inform strategic decision making.}

^{So which of these principles can be transferred to the Corporate Governance of our Country, at a time of great economic, social and technological change?}

^{The Structure: We are promised a coalition. Synonyms for that term include alliance - amalgam - affiliation- fusion - integration - league - merger - union - confederation. Business clearly differentiates between these terms, so what exactly is meant by coalition and how will we judge whether it has been achieved?}

^{The Agenda: The new leadership is clearly articulating the areas of agreement in their policies. Media attention is currently focused on differences between the partners in this coalition. The voting public are voicing a wide range of views, using every communication device available. Building consensus and commitment to a common agenda will take time and effort.}

^{The Forum: The two party system promoted a confrontational style of politics, deployed during most of the time that the Boomer generation has been in positions of power. The House sits in confrontation with The Speaker as Chair. The new coalition leadership comes from a different generation, bought up on the idea of transparency and collaboration enabled by instant and global connection. Generation X and Y think differently from their parents and grandparents. Perhaps we will see the Palace of Westminster remodelled to provide a different environment for constuctive debate.}

^{The Decision Process: This election has been characterised by high levels of visibility, dialogue and engagement with the public and the use of new media channels to canvass opinions from all stakeholder groups. We have been promised a new approach to decision making which is more closely aligned to that promoted as Good Corporate Governance for business. Time will tell.
 
The Behaviour: The coalition promotes collaboration and has spend the last few days establishing whether they are able to collaborate. Collaboration takes time, but builds a high level of commitment. It is driven by a desire to co-operate, while asserting one's own position in a constructive and challenging fashion. Where time is short and differences emerge, there are two default positions. The first is to seek a compromise, a mutually acceptable but sub-optimal solution which is expedient and achieves temporary settlement of complex issues. The second default is to compete for power, using whatever approaches are needed to get your desired result. While this may be appropriate in an emergency, where critical welfare issues are concerned or to drive through unpopular  actions, it eats away at the foundations of a coalition if it is deployed inappropriately or frequently.}

^{The spotlight will shine brightly and continuously on the coalition leadership as they steer a path through troubled waters. We will listen carefully to the beautifully crafted soundbites and seek authentic and altruistic solutions to the problems we face.}

Strategic Change Insight - Risk isn't always bad

Without risk there is no innovation. Individuals and organisations have different risk appetites which Boards must determine. The Institute of Risk Management (IRM) identifies risk as ‘a positive force for growth and success.’ Events have causes and consequences. The latter could be upside risks - to be exploited or downside risks – to be mitigated.

 

Warren Buffett, perceived as the world’s most successful investor, says “Risk comes from not knowing what you’re doing.” Buffet has a robust approach to taking calculated risks. He advocates investing, not speculating and suggests that diversification is not essential. Since capital is a limited resource, investment targets should provide durable competitive advantage, be run by able management whom you can trust, have a sensible price tag and be understandable businesses (complexity hides potential risk). As an independent thinker, he advises flexibility in applying his approach, debt avoidance and a philanthropic attitude to the profits you make.

Strategic Change Principle

Engage with all your stakeholders and understand what they expect from you.

 

Instantaneous global connectivity makes the task of engaging in dialogue with discrete audiences increasingly complicated. A message to one audience can be swiftly transmitted to all via a range of networking tools.

 

The best seller list includes multiple titles dealing with the impact of virtual ‘social’ networking on organisational strategy and the advent of cloud computing.

 

Technological possibilities can enable changes to the shape and nature of organisations and value chains but appetite for these changes differs. What stakeholders remember also differs. Corporate memory often resides in the minds of decision makers and their time in post is decreasing. Conversely, business ‘transgressions’ remain in the social memory far longer.

Strategy Formulation According to Charles Darwin

On 12th February 2009, we celebrated the 200th anniversary of the birth of Charles Darwin.150 years ago, he published his DANGEROUS IDEA.' Having placed his manuscript in a cupboard for 16 years because it challenged the very core of the prevalent belief system, Darwin chose to share his thinking 'ON THE ORIGIN OF THE SPECIES.' The central premise is that 'NATURAL SELECTION favours those with an ability to adapt to their environment, generally by discovering a niche which they can occupy and flourish.

As most organisations seek to identify their Distinctive Competitive Advantage in turbulent environments, they are advised to identify a range of alternative scenarios and track external change triggers closely. Business leaders seek to develop foresight in order to recognise the pattern of factors likely to impact their industries, markets and organisations. Successful species took millions of years to evolve and we don't have that luxury.  Investing in the development of strategic thinking and spotting the niches where you can deliver value most successfully, will differentiate the successful.

In the words of Louis Pasteur 'CHANCE FAVOURS THE PREPARED MIND.'

Stormy Weather Ahead

 

Stormy times are forecast for 2009. From 2004 the availability of easy credit was overheating some economies; by 2008 unprecedented complexity was confusing the financial services industry as esoteric derivatives became incomprehensible. In UK, personal debt exceeded GDP. 

 

Strategic change has been triggered by a range of factors including the global economy. Prescient business leaders identified the pattern of factors which impacted their ability to deliver value to their markets, shortened their planning horizons, and focused on what could be done today to deliver a better future.

 

Entrepreneurs are inherently optimistic and create their own context rather than accepting the status quo. Their change appetite is significant. Analysts indicate that the entrepreneurs who will radically change our lives in the 21st century are those concerned with the convergence of disparate technologies. Conflict will exist between that which is technologically possible and that which is perceived to be ethically and morally sound.

 

The challenge for many organisations will be to retain talent and choose appropriate technologies to enable optimal performance. 

How To Plan Strategic Change

The turbulent business environment which most organizations inhabit, has impacted the degree to which it is possible to plan strategic change. The pattern of external factors impacting organisations, has become more complex. A more responsive and adaptive approach is required in order to identify these factors and take early advantage of the opportunites to innovate or mitigate threats.

Planning strategic change is most effective when it recognizes and builds on the operational pulse of the organization.

Creating strategic change is about getting fit for an uncertain future, while also ensuring operational stability. Most analysts agree that strategic change derails as a result of inappropriate timing and lack of engagement.

While there is no blueprint for success, there are some tried and tested guidelines for increasing the likelihood of achieving the desired results.

Deciding when to launch new initiatives relies on the ability of business leaders to think strategically:

Scanning the wider world, their market places and their operating environment

Identifying the pattern of external and internal factors driving their strategic change

Assessing their stakeholders’ attitudes and expectations

High performing organizations are adopting a participative approach to strategic planning, which surfaces all existing and proposed change initiatives and allows them to be evaluated in the light of strategic imperatives.

Change overload and fatigue are common complaints from Directors. At the same time, new initiatives are championed and obsolete ones are seldom ‘killed.’

Mapping all change initiatives against the business planning cycle, highlights conflicts and interdependencies, while providing an holistic view of the agenda the organization is being asked to embrace. Pinch points become apparent and Director time can be focused on steering multiple initiatives concurrently.

A participative approach to planning, ensures that constructive challenge becomes part of an effective process to determine which initiatives are Mission critical and when they should be launched. A common agenda is created and Directors can begin the process of engaging their stakeholders in the journey.