But why are they stupid. An article in the McKinsey Quarterly on Strategy (sorry lost the link) puts it well:

Spurious frameworks and torrents of data often obscure the basic principles of good strategy. To beat the market, companies must exploit imperfections that stop (or at least slow) its workings. Such competitive advantages are scarce and fleeting because markets drive a reversion to mean performance as middling companies emulate the best and the worst exit or undergo significant reform.
Good strategies therefore emphasize difference—versus direct competitors, potential substitutes, and potential entrants—not industry-wide best practices.

Instead ask yourself, what could be the ‘killer-app’ that could be developed and take over our market? Then get on developing exactly that.

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Related posts:

• Planning fallacy: why people can’t plan and what to do about it.
• Innovation station: McDonalds hamming up innovation and succeeding

In this post, I look at the tools, processes and thinking that Avery Dennison Materials used to improve the agility of their organisation.

David Martin, the Vice President and General Manager Avery Dennison Materials, talked to CEO Forum about how they improved the agility of their organisation. CEO Forum defined corporate agility as “being able to respond quickly to shifts in market and customer demands – has become a highly prized strategic asset.” 

Martin described the result of the organisation having improved agility as “getting the organisation aligned and more able to ‘think on its feet’, and having urgency about execution.” And that, “Increasing agility is largely about empowering people to act.”

In order to allow people to make decisions, it is important to communicate, “after all, if they clearly understand what the business objectives are. Every month, for instance, I will address all our employees face-to-face about what we are aiming for as a company, and how they can help achieve those goals.”

Martin says the main reason for needing to become agile was because they had become dysfunctional and “inwardly focused as an organisation.” This manifested in optimising internal processes without any awareness of what the client needs were.

Approach

There are many ways to improve an organisation, Avery Dennison used Lean as the tool to enable the organisation to become more agile and that “the Lean approach [was] pivotal.”

Lean equipped them with them with “a common way of approaching problems and coming up with solutions.” This was supported with a cross-functional approach, by implementing project teams to address the issues they saw as strategic priorities for the business as whole.

“Having the same teams responsible from design to implementation really helped people buy into the projects and own the results.”

Leadership

Lean does not perform miracles all by itself. “Lean was our main tool, but we also supported that with Leadership Skills training and other general skills development” Martin says.

“But I think the role of Lean was critical, as it really gave us a good place to start and a common approach across a wide range of projects.”

“The Lean approach was also particularly useful for us, as a lot of our challenges were to do with cross-functional business processes, and that is something that Lean addresses well.”

Avery Dennison realised that while the Lean approach was essential, leadership at various positions in the organisation is required to achieve meaningful results.

Implementation

Avery set up project leaders for the value streams “one for back office/support processes, and one for manufacturing and/or customer related processes.” Returning the leaders to business-as-usual once the project were completed.

Another key change of mindset Avery Dennison took was enlarging the thinking of the business to include the entire supply chain.

People focus

Lean is about the people, how they interact with clients, processes; the system as a whole. But sometime this can mean a change in people to kick start a culture change.

Avery turned over leadership where it made sense, but acknowledges that bringing in new people isn’t necessarily always the answer. “I think bringing a lot of new people has both advantages and disadvantages.  The disadvantage is that you lose some corporate memory, and that can be a challenge when you are undergoing a lot of change.”

The corollary is,”you often get a lot of enthusiasm, and that can certainly help drive the change.  We’ve kept the skills critical to making sure our learning’s are not lost.”

Results

“Profitability, growth and employee engagement…We have more opportunities than we have had for a decade, and I know that has only come about by focusing outside the organisation and being as aggressive as we have been in developing new opportunities to grow.”

Owens reflects on the processes used in devising the Caterpillar strategy: “In terms of the economic side of it all, here at Caterpillar, we think about scenarios. And so, we kind of set those trend levels, if you will, and then the high-lows that we will have to deal with.”

He comments on the cognitive biases that plague human decision making, and how emphasising the process to combat these is vitally important. “[I]n our strategic planning process at Caterpillar over the years, we’ve really worked on that high-low mentality with a lot of emphasis, because everybody is inclined to be optimistic.”

Caterpillars’ investment and strategic horizon is very long-term, and 2004-2005 they were thinking about a vision through until 2020. The scenarios they considered in the decision making included “need to be prepared for extreme fluctuations and a trough scenario of a deep global recession.”

Owens and his team didn’t know a global recession would occur, and certainly not to the magnitude experienced. But they did force their business units to, “think about how we would deal with that if it occurred simultaneously globally.”

The reversion to the mean is a well known statistical concept, and now Caterpillar are considering the scenario of a sharp increase in demand as, “But we’re also likely to see a correction back to that trend level that’ll be rather abrupt when it does occur.” It would be criminal to not be prepared for it and think the prevailing conditions are the ‘new normal.’

Flexibility is a key attribute of maintaining Strategic Agility. Owens, reflecting on Caterpillars’ earlier financial problems in the 1980’s says, “I came out of that with a great resolve that we would build in flexibility that would allow the company to sustain profitability and, ideally, cover the cost of capital in the worst-case scenario.”

The concepts for maintaining strategic agility are clear:

1. Develop a process for develop business strategy that incorporates a range of alternative scenarios.
2. Beware of cognitive bias in the strategic thinking and board decision processes. As Owens stated, leaders are very biased to over optimism. There are many other cognitive biases, and any process should consider these.  
3. Potential risks are not just downturns but also up-turns that you can’t fully exploit because you weren’t prepared and have enough flex capacity in the business.

In the end Owens described what he learnt: “it’s that staying focused on the long-term horizon—where you want to go—and having a solid plan to deal with the extreme edges of what you may have to deal with.”

1. Objectivity

The ability to remain objective and to change your conclusions when facing disconfirming evidence is a key behaviour to develop, as confirmation bias is very powerful in humans. It is well known, and very difficult to break.

2. Don’t over optimise

Maintaining some ‘slack’ in the system, such as cash buffers, is very important to maintaining strategic agility. Buffers, need to strategic and placed in just the right spot to ensure you are really maintaining protective capacity. Which brings me to the next point…

3. Velocity

The speed of your business processes are of paramount importance. For example, how rapidly do on-board a new client? What about R&D processes? The speed at which you can turn-around key processes in your business is critical, as it means you need to maintain far less inventory in buffers.

4. Relationships

Just-in time manufacturing requires very strong relationships with your suppliers. Bringing them into your business and giving them insight into your goals will help them serve you better.

Little’s law states that lead time increases as the Work In Progress increases, this means you need to let go and stop doing some things in order to reach out and achieve new goals.

Once a quarter sit down and making a ‘what I will stop doing list.’ This should be personal as well as professional. For example, maybe getting a house cleaner will create more personal time, thus allowing you to achieve more in your career; two things which are usually at odds.

Strategy is very much about deciding what to leave out.

But planning rarely helps, because beyond a certain level of actions you run into a high level of uncertainty where any extra time is futile.

This is never truer than in strategy. An article in Sloan Management Review puts it well:

Strategy: Plan Less, Experiment More

Almost all thought leaders — and many executives — cite the rise of experiments and the necessity for the analytics capabilities that underpin them. Practitioners use terms like “test and learn” and “sense and respond” to describe an approach that at its most rigorous includes a hypothesis and a control group, and at its least rigorous still demands an information sophistication not all companies have.

Experiments can be large and organization-wide or tightly targeted and miniscule (which they more often are). Either way, they can powerfully supplant traditional methods of plotting a business’s course. Survey respondents may have had that supplanting in mind when placing “strategy and business development” significantly behind only “financial management and budgeting” as the business activity to which they apply analytics.

The point is, in management more experimenting is required. This implies setting a hypothesis, testing measuring, and empirical evidence.

Cal argues this concept particularly as it applies to starting a business or writing a book. Focus instead on total immersion of the facts, and fundamentals of the idea, allowing the solution to emerge.

A conceptual model

In my consulting I like to use conceptual models to help me think through problem solving and designing new processes for my clients. I wrote in this previous post a model which I use.  

One, getting clear on the purpose; two, total immersion of the current reality; three, the deep dive looking for the root cause of the problem or driving force of the idea; four, design the solutions; five, test, measure and roll out.

I think that having a conceptual model, such as the one I outlined, or any other you prefer helps you know which stage you’re in and give you a nudges to when to move to the next.

For example, you’ve been collecting facts about a problem, and you think you have some solutions or quick wins you’d like to test. But have you really thought about the root cause? If not, you will very probably only address the undesirable effects and only paper over the problem.

Paralysis by analysis

What Cal doesn’t really address is a tendency for people to succumb to paralysis by analysis; though he’d probably say the idea should have so much pent up energy of its own it should explode of its own volition.

I’m somewhere in between, where I focus on open iteration of ideas, here no pride is taken; I will show my work no matter the stage of completion. This is where perfectionists get caught: they refuse to show their work until it is just right, consequently way over engineering or missing the point altogether.

If you focus on the model, and progressive iteration throughout the phases, you will come up with an idea that will keep you awake at night with excitement.

The goal of investment banks (all banks really), is to make money. As much as possible; now and in the future. If I couldn’t frame why any idea of initiative would help them make more money, they wouldn’t listen.

This is at odds with the prevailing wisdom of the ‘triple bottom line,’ which advocates that looking after your people, and the community is as important making money.

I disagree, there can only be one goal. Only one thing to focus on.

Controversial?

Looking after people, and the community are Necessary Conditions to reach the goal, but they are not the goal itself. Taking care of people, and being good corporate citizens ceases to exist when there is no money flowing.

As the rather trite saying goes: “Follow the money.”

‘Helping Leaders build great organisations”

www.DanielLockConsulting.com

(C) Daniel Lock.

Lately I’ve become increasingly interested in Napoleon Bonaparte, particularly his character and philosophies that he developed and how they apply to life today, specifically in the business arena.

In the book, Napoleon At Work by Colonel Vachee, his ideas on success are elucidated:

“Napoleon few and simple directing principles as quoted in a letter to Lauriston, at the time in charge of the Antilles expedition:

” Always remember these three things:

Concentration of forces

Activity;

A firm determination to perish with glory.”

We are tempted to add this fourth maxim, which is also quite Napoleonic:

“Surprise the enemy by strategy and secrecy, by the unexpected and rapidity of your operations.”

There is much to learn from Napoleon and his approach to politics and war, as it applies to business in the competitive environment. Though it should be noted, that in business we are in the game of creating win-win situations, rather than all or nothing (say as with the game of chess, which is also likened to business strategy.)

These are the principles which have endured through the eons, and apply now and I continually in my work with clients implore them to consider:

• Strategy.
• Rapid Response.
• Energy.
• Determination that you will be a success. No matter.

This all take a large measure of leadership, which Napoleon obviously had in spades. There is never any shortage of capital in this world, but a shortage of able people with leadership skills.

This 10 part video series “How to Develop a Winning Strategy” was filmed at National Speakers Association Australia event in Adelaide. I will post the 10 video’ here each Friday.

You’ve got a burning passion and you want to share it with the world.
The current economic conditions pose opportunities and threat. You need a strategy and you need it quick.
You have no time for theory and jargon, and you don’t need to change the world, just pragmatic strategy that delivers bottom line results.
This seminar will show you tips, and tools so you can develop an effective strategy for your organisation.

Learn tools to help you learn:

• How to identify your strengths
• How to create a ‘Star’ business model
• How to commercialise your skills
• How to make your speaking career into a ‘machine’