categoryStrategy Management

Doing The Right Thing For Too Long

Markets and business models are shifting, and so should you keep up with these market changes if your business is to survive and succeed. Compared with the past, the current era of digitization represents an inflection point.

Consider individual trends such as artificial intelligence, virtual reality, Big Data, cybersecurity threats, drones, the Internet of Things, driverless cars, blockchain technologies, and more.

These new technologies have significantly changed the way we connect and interact as individuals, including how businesses deliver products and services to their customers.

Reinventing your business will determine whether you succeed or fail in the digital age. As the saying goes, disrupt or be disrupted. No company, business, or industry is safe from disruption. Today, individual businesses have the potential to compete against multinational companies and win.

These businesses are quick to anticipate market changes and flexible to get ahead of the curve. Sadly, many companies are blinded by their successes and aren’t willing to disrupt themselves. They are not experiencing their desired growth trajectory because they are stuck doing the right thing for too long.

Don’t get comfortable with the status quo and allow your business to get stuck on a strategy and mindset that no longer fit the market.

Here are a few questions to ponder, the answers to which will determine the future of your business:

  • What is at the core of your strategy?
  • Are you in touch with the customers you want to serve? When customers give you negative feedback, how often do you listen and act on it?
  • Are you operating your business on the premise that you know what is best for your customers therefore they are supposed to buy whatever product or service you offer them?
  • Are you keeping up with market shifts or you only know how to grow under one set of conditions or products and services, but not how to survive and strive under another?
  • How robust and flexible is your IT infrastructure to help you innovate, perform your company’s Jobs To Be Done, and scale your business?
  • Are you creating a strong culture that is focused on customers, including a culture that not only embraces change but seeks it out?

Given our world is changing faster, it’s imperative to continuously look for signs that things are changing and think about how those shifts would play out in the short-term, medium-term, and long-term, not forgetting the impact on the execution of your strategy and enterprise performance.

The signs can reveal individually. At times, they are part of a wider trend.

Nonetheless, how you adapt will determine whether you succeed or fail. Keep learning. Learn about innovations in your industry and beyond. Try out new business models and technologies and embrace a philosophy of constant change.

Once you understand how the market is changing and evolving, you can develop the right product or service and strategy that will help you achieve your desired outcomes.

We often talk of the ability to “connect the dots” and “take a helicopter view of the business” as key ingredients for success. But how often are business leaders and their teams doing this?

Across the organization, a culture of “them versus us” prevails. Important decisions are made at a functional level with little or no consideration of their impact at the enterprise level.

Having the ability to grasp the big picture and see how different trends intersect is essential for determining the right path or course of action to pursue.

So, how do you spot market transitions and develop a clear sense of where the market is going?

  • Be curious and hungry for new ideas. Continuously ask tons of key performance questions and pay attention to what’s around you.
  • From time to time, challenge conventional wisdom. It’s easy to stick with what you know about your business model, customers, competitors, markets, or industry but dare to pivot when conditions change.
  • Don’t be nostalgic about the past or worried about protecting what you’ve built in the present. Always be curious about the future and develop a willingness to take calculated risks.
  • Ask existing and would-be customers how they feel about your company’s products, services, and strategy. Instead of turning to sources that reinforce your existing point of view, seek multiple perspectives and cross-reference them as new facts come in.
  • Develop an ability to handle multiple random data points at once. This will help you generate critical market, customer, and business performance insights and make smarter, informed decisions. Be careful to distinguish between the signal and the noise since data can be deceiving, especially when you’re looking for “confirmation” that protects your business model.

Data might not tell you why something is happening, but it does tell you what’s going on.

  • Look for patterns and abnormalities that might suggest something is going on, including any interdependencies.
  • Anticipate all the various scenarios of what could happen.
  • Plan your course of action in response to what’s happening in real time.

As the signals of a market shift increase, the need to act becomes more imperative. Note, monitoring and identifying market shifts, and effectively taking the appropriate course of action is a matter of timing.

If you continue doing the right thing for too long and lack the boldness to disrupt both the market and your own organization, you risk being disrupted and left behind. There is no company that is too big to fail. Neither is there a startup that is too small to succeed.

How Feasible Are Your Strategic Objectives?

Every organization sets out its goals and objectives, to accomplish its mission and vision. The two often seem like two interchangeable phrases but there is a distinction.

A goal is a desired result you want to achieve and is typically broad and vague. An objective, on the other hand, defines the specific, measurable actions each employee must take to achieve the overall goal.

It is every leader’s job to create a coherent set of feasible objectives or what Richard Rumelt calls proximate objectives. Objectives that define targets the organization is fairly expected to achieve, even overwhelm.

This is essential for ensuring energy and resources are focused on one, or a very few, critical objectives whose accomplishment will lead to a cascade of positive outcomes.

An effective strategy defines a critical challenge or opportunity and clearly articulates how the organization is going to play to win or perform customers’ Jobs to Be Done.

Thus, the objectives an effective strategy sets should stand a good chance of being accomplished, given existing resources and competence.

On the contrary, a bad strategy results in the setting of bad strategic objectives.

Long lists of “things to be done,” are often labeled wrongly as strategies or objectives. Or the desired outcome is simply rehashed with no explanation of how this will be accomplished.

It doesn’t matter how well-thought your strategy is in response to an identified challenge or opportunity. If the resultant strategic objectives are merely a list of things to do, or just as difficult to achieve as the identified key challenge, there has been little value added by the strategy.

In today’s highly competitive, uncertain, dynamic, and complex environment in which a leader’s ability to look further ahead is diminished, it is better to focus on a few pivotal items through taking strong positions, creating options, and building advantage.

First identify the key challenges or opportunities for the business. Look very closely at the changes happening within your business, where you might get an added advantage over competition.

Next, create a list of the issues, including the actions your company should take.

Then, trim the original list to a noticeably short list of pivotal issues and proximate objectives by identifying one or two feasible objective(s), when achieved, would make the biggest difference. Remember, the identified objectives should be more like tasks and less like goals.

Now, focus on the objectives by channeling skills and available resources to accomplish the overall goal.

Once accomplished, new opportunities will open up resulting in the creation of more ambitious objectives. This cycle will help you develop a system that enables the setting of feasible strategic objectives.

Alignment is important for successful strategy execution

For many businesses and organizations, the challenge is not in formulating good strategies, rather, it is in executing their well-crafted strategies.

Of course, this does not imply that bad strategies do not exist. They do. Business literature is filled with many stories of organizations that went bust because they got so good at implementing bad strategies.

Although reasons for poor strategy execution are many, one of them is poor organization alignment.

Think of your organization as a chain link system with disparate parts functioning as links and working together to achieve the stated objectives.

These links are both internal and external to the organization.

If one link is broken or weak, then the strength of the entire chain link is compromised. In this case, it will not help you to ignore the weak link and focus resources and effort on some of the links.

After the enterprise strategy has been developed and value proposition defined, and approved by the board, aligning the company’s headquarters, business units, support units, external partners, and boards with the strategy is critical.

When the priorities and activities of your internal teams and external partners are aligned with enterprise strategy, it creates additional sources of value.

Unfortunately, aligning disparate business units to create value at the enterprise level often receives less attention than creating value at the business unit level.

There is more focus on business units, with their distinct products, services, customers, markets, technologies, and competencies.

And this lack of alignment results in poor strategy execution results.

In a rowing race, alignment stands between victory and defeat. Rowers in concert push against the water with oars in turn generating enough force to move the boat.

Oars aligned at the same angle, enter and exit the water at the same time, the same force being exerted with each oar stroke. If one of the oars goes in the water even a microsecond late or early, the boat will experience tilts, turns, and drag.

A rower is therefore taught to focus and ensure each stroke is in line with that of the rest of the team.

A small difference in alignment between the crew would mean that the team would not perform at its highest potential, and likely would lose the race. The longer the race, the more costly the compound effects of misalignment over time.

In business too, people, processes, technology, systems and culture ought to be aligned to drive strategic success. If disparate business units are managed somewhat separately, the organization can get stuck in a low-effectiveness state.

To unstuck yourself from misalignment, first identify the bottlenecks and address them directly. Don’t tip-toe around the issues. It takes leadership and willingness to absorb short-term losses in the quest for future gains.

Thus, leadership has a critical role to play in managing tensions between the need for decentralized autonomous action and the need for centralized direction and coordination.

When no one is responsible for overall organization alignment, the opportunity to create value through synergy can be overlooked.

Whenever plans are changed at the enterprise or business unit level, executives likely need to realign the organization with the new direction.

Ensuring organization alignment is not a once-off exercise. This must be managed as a continual process. Continually search for ways to make the whole more valuable than sum of its parts.

Plus, it’s not enough to talk the talk. The alignment strategy must be complemented with an alignment process.

Are You Realizing Full Benefits From Your Technology Investments?

Although the COVID-19 pandemic has accelerated digital innovation and adoption by businesses of all types and sizes, pre-pandemic, many companies had already started their digital transformation initiatives – harnessing technology to drive operational efficiencies, business change and deliver lasting performance.

Unfortunately, not all technology investments have delivered or are delivering the desired benefits.

Rather than take an enterprise approach, companies are deploying technologies in pockets, or silos, of their organizations without effectively scaling them across the enterprise.

This is according to a recent publication by Accenture Future Systems research which has found out the gap between investment and value is widening.

Pivot to Value With Living Systems makes some interesting points. Here are some excerpts with my commentary.

  • As the pace of change has accelerated so has the need to quickly embrace new technology. The best way to respond to change is by transforming the finance organization’s culture to be more agile, flexible, risk tolerant, and experimental. A sole focus on identifying, selecting and implementing the right technology, for instance, customer predictive analytics, is not likely to lead to success. Instead the organization’s people, structure and processes are also essential ingredients prerequisite for success.
  • Companies that can release new technology capabilities faster than their competitors are at a distinct advantage. New technologies such as AI, Robotics, IoT, Smart Devices, Data Analytics, and Blockchain are transforming the competitive landscape, providing new ways of delivering value to customers and new service opportunities. The factors, tools and systems that made you successful in the past may no longer be correlated with your future success. Therefore, don’t wait for your business to be disrupted first before you can act.
  • Businesses have taken innovation into their own hands, such as directly experimenting with new technologies and cloud services in “pockets” instead of across the whole company. Investment decisions are not tightly integrated with business priorities, and most companies have no easy way to measure the return on investment. The challenge today for many organizations is contending with too many priorities, a plethora of disjointed systems across the business, unnecessary costs and more than one version of the truth . The result? Inefficient data availability leading to less informed and intelligent business insights.
  • Simply investing more in technology won’t necessarily deliver the business flexibility that organizations need. Put simply, technology is an enabler of business performance. Only when the essential components of a business – it’s culture, people, structure, systems, and processes – are closely aligned can the company achieve powerful results.
  • Organizations that want to unlock the full value of technology need a growth strategy that is unified across business and technology. The focus is on exploring how technology can make the business strategy a reality and identifying greenfield opportunities in products, services and competitive positions. Before investing in new technology start with ‘Why’ then identify and understand the opportunities and threats that new technologies pose for your organization. Does the investment enable the achievement of the organization’s stated objectives?
  • Instead of acquiring new technology for one-time projects, leaders fund persistent value streams measured by business outcomes. Focus on the value case of the investment. Digital transformation is only partly about technology; it is also, and more importantly, about using technology to improve the way finance creates and delivers value across the business.
  • Realign the organization to put technology at the heart of every business. Many new technology implementations fail due to poor or lack of collaboration between business and IT teams. Reinforce collaboration between business and technology teams. Business subject matter experts play the critical role of defining operational requirements, leading process design initiatives and monitoring performance, while technologists focus on ensuring effective data security and governance, systems integration as well as monitoring identity and access and control.
  • Adopt new practices for agility and experimentation. Hire and train people to be more risk tolerant, creative, and develop a big picture and growth mindset. Also, create a culture where individuals and teams are encouraged to play and experiment with new ideas and business models, including with other parties such as universities, entrepreneurs, industry players etc.
  • Empower people to innovate with technology. Investing in new technology is not a matter of Humans vs. Machines. Instead, it is about Humans and Machines working together to drive business performance. Therefore, provide employees with opportunities to develop skills for working in a new digital environment.
  • With a culture of innovation, an agile mindset, and continuous learning, employees are equipped to capitalize on new and changing opportunities as the business evolves. Mere adoption of the latest technology will not improve your finance organization’s and business prospects. You also need to apply the time or resources necessary to make the sort of organizational changes required to benefit from the possibilities the technologies offer. Empower people to see, think and do differently. For example, anticipating and understanding changing customer behaviours and being prepared to respond accordingly. Never stop asking, ‘How can we get even better?’

I recommend business leaders to read the full report and hold a discussion with their teams on its key points and recommendations.

Challenging Conventional Growth Assumptions in an Era of Unprecedented Change

There is no doubt that 2020 will go down as a year to remember. COVID-19 has disrupted the pace of business and upended many of its traditional assumptions.

If the COVID-19 crisis has taught us anything, it is that disruption can happen at lighting speed and have profound impacts on strategic performance.

Thus, companies need to continuously rethink their assumptions about business growth and prepare for an uncertain and dynamic environment.

In order to drive growth, conventional wisdom says the company has to:

  • Introduce new products
  • Enter new markets
  • Acquire new customers
  • Add more brands
  • Acquire companies
  • Expand into adjacent businesses

The concern with blindly pursuing such strategies is that they open the door for complexity to permeate the operations of the company.

Quality is often confused with quantity, and the pursuit for growth often causes the organization to chase rabbits running in every direction.

The organization lurches from one strategic initiative to another, at times acquiring troubled businesses that aren’t in sync with its core business model.

And like a hamster on a wheel, the company is engaged in continuous spinning but lacks meaningful forward progress.

It’s ventures in markets around the world are spread-out and disconnected.

Achieving sustainable business growth is not about doing more. Rather, it’s about doing things better, focusing your efforts on that which matters most.

In other words, understanding what customers really want and how best to serve those wants. Instead of:

  • Acquiring more customers, have you considered firing non-profitable customers with steep costs-to-serve?
  • Launching more products, why not kill non-performing products, variants and brands and focus on the potential few?
  • Randomly entering new markets, how about you focus on the few markets where you can win and dominate?

Because of a lack of understanding of what customers really want, many businesses have bought into the myth of excellence – the false belief that a company must try to be good at everything it does.

Companies large and small are offering customers everything except what those customers really want.

Millions of dollars are spend on focus groups, surveys, customer panels, competitive analysis, and processing call-center reports, all to limited avail. Every business day, executives are inundated with data about their products.

They absolutely know the size of their market share, how products are selling in different markets, profit margin across hundreds of various items, etc.

Yet all this data is focused around customers and the product itself – not how well the product is delivering customers’ expectations.

In a world of increasingly ubiquitous product quality, increasingly similar market offerings, increasing price wars, and shrinking profit margins, understanding customers’ problems-to-be-solved is key to avoiding the frustration of hit-and-miss innovation and achieving sustainable growth.

What are some of the tell-tale signs that your company is addicted to doing more and trying to be the best at everything?

  • Your recent customized new products and services against target markets are increasingly less profitable than those in the past.
  • You are scraping the bottom of the barrel in acquiring new customers.
  • You are struggling in some of the geographic markets you have entered recently.
  • Your topline has been growing faster than your bottom line in recent quarters.
  • Your selling and administrative expenses are creeping up as a percentage of revenues.
  • Employees across the organization are confused about the top priorities.
  • Employee morale is on a downward spiral and attrition on the rise.

As a business, you don’t want to get yourself in a position where you are the best at something your customers don’t want or need.

By failing to understand what causes a customer to choose one product or service over another, you are leaving yourself vulnerable to disruption as better products and solutions come along and customers quickly jump ship.

Most of the time businesses are selling or pushing their products and services to the market instead of appropriately shaping and delivering offerings that customers are seeking to meet their needs and wants.

It is always difficult to abandon a business model that has been successful in the past. But times have changed.

And for those companies that move fast and early, an opportunity exists to create blue oceans of uncontested market space created by this shift.

What matters is note the bundle of product attributes you bundle together, but the experiences you enable to help your customers make the progress they want to make.

You to need to switch from a supply side perspective to a demand side perspective, and start asking a few basic questions about your customers and your business:

  • Under what circumstances are your customers purchasing and using your products and services versus other competitors?
  • What is the one thing you are not offering your customers today that they are secretly imploring you to provide them?
  • Are there segments with distinct customer expectations that you are inadequately serving with a one-size-fits-none solution?
  • What are the things that have made you who you are today? What are you good at?
  • What are the key five things about your business that you cannot, under any circumstances, afford to change?
  • Are you investing in attributes that your customers don’t truly value, and it’s not translating into profitability and business growth?
  • Which initiatives or processes need to be eliminated, curtailed or modified?
  • What is changing around you that gives rise to a shift in customer behaviours and expectations?
  • Who is not consuming your products today? How do their problems differ from those of your existing customers?
  • What’s getting in the way of these non-consumers using your products to solve their problems?

Asking questions like these help generate insights into changing circumstances that send your customers either to you or to your competition.

This enables you to define the business you are in, the size and shape of the market in which you compete, and who your competitors are.

It also helps see customers where there were none, ideas for solutions where there were only problems, and opportunities where you least expect them.

Of course answers to these questions arise from diverse sources:

  • Company internal systems.
  • Convergence of emerging trends.
  • Existing customer frustrations or pain points.
  • People who are not purchasing and using your products or services.
  • By observing how your customers use your products, especially when they do so in a way that is different from what you have envisioned.
  • Looking around at other industries. There could be something that works in another line of business that might translate neatly into yours.

The promise of new markets, more customer segments, more product categories, and more brands is almost alluring, but the payoff is hardly a definite thing.

So next time you find your company succumbing to the seduction of more, just remember achieving growth is less about producing something new and more about enabling something new and important for customers.

Growth can be found where none seemed possible before. The trick is to see what everybody sees, but think what nobody has thought – differently.

Rethinking Growth Through the Pandemic and Beyond

Whether you are looking at it from an individual, social or economic point of view, there is no doubt this calendar year 2020 is an aberration. As we partied and celebrated into the New Year with our loved ones, families, friends, work and business colleagues, the ambience was positive.

Fast forward a couple of months ahead, the outlook is grim. COVID-19 has changed the structure of just about every experience: how and what we buy, how and where we work, how we interact with other people.

Either because we suffer from micro and macro-economics myopia or we have a natural tendency to exhibit overconfidence bias even when its not necessary, many of us, including experts, failed to infer the implications and gravity of the proliferation of the novel coronavirus in China.

We assumed COVID-19 was transient thus we acted indifferently and continued with our old normal.

Then suddenly, the number of cases reported globally mushroomed. And to stymie the outbreak, governments in greater parts of the world enforced economic lockdowns except for essential businesses and service providers.

Economic activity came to a screeching halt and global supply chains got interrupted. Businesses, that over the years, have moved at a snail’s pace to digitally transform their operating models found it arduous to swiftly transition to online product and service delivery channels.

Many businesses went bankrupt, laying off millions of employees during the process. Overnight, livelihoods were turned upside-down.

Social gatherings have become a distant memory, and as social beings who are accustomed to physical interaction, we have progressively adapted in this new world and somehow learned how to lead a reclusive existence.

Are we there yet?

As of this writing, the vaccine for the novel coronavirus is yet to be discovered. The economic consequences of the pandemic thus far are significantly severe and provided a catalyst for the COVID-19 recession.

Although governments have started to relax lockdown restrictions, and are slowly reopening their economies so that they can start to grow again, what the recovery might look like is unclear.

Economic expert views on the nature of recovery are divergent. There is no consensus on whether COVID-19 economic downturn will ultimately play out to be a V, U, W or L-shaped recession.

Thus, the challenge for the business today is deciding how to effectively and efficiently commit the organization’s stretched resources to service existing and future customers, and also markets that will emerge in a distant and inherently unpredictable future.

Do you plan and prepare for a:

  • Sharp economic shock followed by a quick recovery in growth?
  • A longer period of slow trading before a rebound, which takes many months or even years for the economy to recover?
  • Double-dip recession, in which the economy begins to recover rapidly, but then falls into a second period of decline? or
  • An extended downturn, in which growth falls and does not recover for years, creating the long shape of the L?

That volatility, uncertainty, complexity and ambiguity is the norm today is an axiom. Therefore plan and prepare for a future that will be notably different from the one you may have imagined at the beginning of this year. A future that consists of different scenarios panning out.

Sketch scenarios and their outcomes, opportunities, and breakthroughs and consider what they would mean to your business. The exact scenario does not have to materialize for the process to pay off.

However, the process stimulates new thinking, expands imagination, and helps connect various insights and formulate action plans that should be taken today to protect the business’ future.

Don’t focus too narrowly on costs at the expense of innovation

In times of crisis, it’s often easier to focus on the short term future of the business and park long term strategic ambitions. The reason being that organizations find themselves defaulting into the survival mode.

Due to a decline in economic activity, working capital management and cost reduction become top priorities. Although these are necessary, you need to understand that dealing with this crisis is not an either/or question, but rather a case of managing the crisis and managing for the future.

The coronavirus pandemic has changed the experience of being a customer, an employee and a citizen. Hazy is how people’s behavior and underlying values will change for the long term, but what is crystal clear is that your business has to adapt and become agile.

Despite how successful they have made you, your old business model, past competencies and experiences won’t guarantee you success in this new world.

You have probably heard the old adage “Never waste a good crisis.” Use this pandemic as an opportunity to rethink the basics, explore and learn. In other words, revisit the company’s direction in light of external changes.

Look at your business from the outside in and discuss what is changing not only in the competition but also anywhere in the value chain, and in the global geopolitical climate.

The coronavirus pandemic has exposed the frailties of the traditional planning processes and necessitated a paradigm shift in how leaders should prepare and steer the organization to adapt in tune with sudden changes in the environment.

Leaders often miss signals that could be harbingers of change because they are immersed in the daily operating details of the business. Instead, think creatively, and see the bigger picture beyond the transactional details of day-to-day operations in the short term.

Change doesn’t wait for your annual planning cycle, hence it’s vital to regularly go through the process of trying to identify and comprehend various seeds and catalysts for change.

Create change not just learn to live with it

Rather than wait for the COVID-19 tide to turn, a number of companies have pivoted on their existing capabilities to make quick strategic changes.

For example, distilleries started producing hand sanitizer, automotive companies produced ventilators, and a shoe manufacturing company started making stylish face masks.

One key thing the above companies have in common is they were all able to conceive a new need, or redefine an existing need and business model.

Legacy companies often make the grave mistake of ignoring the risk of not embracing a new and dynamic business model and sticking too long with a business that is ripe for transformation.

The mere fact that the change does not fit your core concept of the business including your core capabilities doesn’t mean you should play ignorant.

Track companies that are using new technologies to transform their business, even if they are outside your industry and begin to imagine how some of them might decimate your industry and reshape your market place. For instance:

  • Has your business model changed and how are you adapting to that change?
  • How are your competitors adapting and re-purposing their businesses into new operating models?
  • How are you reorienting your business in a socially distanced operating environment?
  • How can you harness the power of technology to create value, at the same time achieve efficiencies that were unimaginable pre-pandemic?

You need to build new capabilities and structurally adjust your business operational model, not only to navigate this crisis effectively and efficiently, but also to reach the new future in a position of strength and more resilience.

Reassess the organization’s process and cultural anchors that are hindering progress to make smart growth bets. Any business transformation requires people to alter their methods of working in big ways and small.

As you navigate through this pandemic, always remember that each crisis reveals a future growth trajectory that your business could explore and exploit as long you widen the lens through which you see the world without being hamstrung by an existing core competency.

Identify the obstacles you need to overcome and the obstructions that are currently standing in your way, develop a growth mindset and get offensive.

Innovation in the Finance Function

Compared to other organizational functions such as Sales, Marketing and Supply Chain, the Finance function is often lagging behind when it comes to embracing innovation.

In today’s era of disruption and rapid technological advancement, the only way CFOs and Finance teams can ensure sustained relevance and create value across the enterprise is through innovation and reinventing themselves regularly.

Although companies have been innovating for years, these days the word innovation has become a cliche used to describe new, shiny feature-rich products, services, markets or breakthrough ideas.

According to the late Harvard Business School Professor, Clayton Christensen:

While all those are certainly characteristics of innovations, they are less helpful when trying to understand how companies and nations can organize themselves in ways that can truly foster growth.

Innovation is a change in the process by which an organization transforms labor, capital, materials, or information into products and services of greater value.

Applied to the Finance function, innovation is the process by which CFOs transform the function’s operating model, processes, talent, culture, and systems to eliminate inefficiencies, generate better insights about the business, and improve enterprise value.

Unfortunately, this change does not come about at the mere flip of a switch. In other words, transforming Finance from the traditional scorekeeper role, into a more strategic value enabler is more than an ideas game.

A solid foundation is critical to build upon, as this article,  Innovation Can’t Thrive Without These Fundamentals in Place, explains.

It’s easy to envision the future Finance function, but ideas are only ideas unless they are communicated across the enterprise and effectively executed through a well-crafted plan of action.

Failing is just part of the journey and a step toward figuring things out

New tools, systems and operating models continue to alter the way CFOs and their teams perform their tasks. For instance, advanced data analytical tools are enabling finance teams to collect, aggregate, analyze and generate actionable business performance insights from large data sets.

The challenge: even though CFOs are acutely aware of the need to imbue their departments with digital and analytical capabilities, quite a number are too afraid of making mistakes so they are shelving investments to avoid errors.

In some cases, most of them have also started figuring out what they need to do, but because they lack clarity on how to do so, and have heard stories about failed experiences at other organization, the innovative ideas are shelved too.

A thoughtful strategy is, of course, critical to success in nearly any business endeavor, and data and analytics initiatives are no different. However, just because other companies or your company have tested the idea before and it didn’t work should not blind you to the possibilities of the future.

Failing while moving forward at the same time is better than playing it safe. Rather than embark on a sweeping digital transformation from top down, start with use case pilots that will ultimately build into a tidal wave of change.

Create the environment

The widely held belief that leaders need to be experts and have all the solutions is incorrect. Am I therefore advocating for dumb leaders? No, great leaders understand their strengths and weaknesses.

They understand the difference between knowing and learning, and most importantly, make it a point to surround themselves with individuals and teams whose strengths complement their weaknesses.

In order to drive innovation in the Finance function, CFOs should create an environment that champions ideas, leverages strengths, organizes desired behaviours, rewards intelligent and informed risk-taking and celebrate failures.

This short article with lessons from Roger Martin’s The Design of Business: Why Design Thinking is the Next Competitive Advantage identifies ways to create an innovative environment,  Applying Design Thinking to Finance

Today, companies that are attracting and retaining the best employees are able to do so simply through empowering them to experiment with new ideas and focus more on engaging and meaningful work, in a lower stress environment, with a transparent reward system that makes sense.

Thus, it’s important as a Finance leader to get the message across to your team that failure is part of success in order to free the members from the innovation-limiting shackles of perfection.

Most successful initiatives follow the pattern that looks like this: try, fail, learn; try, fail, learn; try, succeed, repeat. You need to make this okay and let your team know that the real failure is fear of launching an idea until it is perfect.

You can’t read the label when you are sitting inside the jar

“But we have always done it this way” is one of the other obstacles to successful innovation in the Finance function. We get so used to doing our work in particular way that we become blinded to better ways of doing so.

In an era where collaboration between companies and business stakeholders is becoming a common practice, adopting both an inside-out and outside-in approach to innovation is essential.

This requires us to step back from our current standing position in order to connect the dots and gain context. We can achieve this through engaging non-finance teams across the organization, listening to their voice on the changes required and implementing the necessary changes.

Also involves forging connections for knowledge and ideation with experts around the world from outside the organization to create game-changing products and services.

Building an innovative and successful Finance function requires not only a mindset shift, but also execution and continuous iteration of ideas. Never be satisfied with the status quo, always question why you do it that way and figure out ways of how you can do your job better.

Transforming Your Business in Times of Continuous Change

In times of continuous change, there are both winners and losers. Some company’s grow to become high performing, innovative and competitive enterprises while others develop into fighters, fighting for survival on a daily basis.

Today’s business environment is constantly evolving, with many factors both internal and external to the organization affecting the achievement of its stated objectives including the level of its competitiveness compared to competitors.

Some of the contributing factors include prolonged geopolitical and economic uncertainty, unresolved trade issues, rapid advancement in technological innovation, increased competition from new market participants, and fickle customers with constantly evolving needs.

As a result, the business has to be adaptive if it is to grow and succeed in such a disruptive environment.

When everything is going well, it’s easy to focus more attention on the good stories and less on what could go wrong. The blue overshadows the red, and this is a major problem in some companies.

These companies allow their past success stories such as successful product launches, increased market share, core technologies, and other organizational capabilities to blind their ability to view the future with a different pair of eyes.

Culturally, they are locked into the old way of working, bound by legacy systems and processes. Little time is spent on reviewing and evaluating the existing business model to establish whether it is still viable or not in these disruptive times.

On the contrary, transformational companies are not satisfied with the status quo. They are appreciative of the fact that past success is not a guarantee of future success.

Just because you are doing well today doesn’t not mean you’re going to enjoy everlasting success.

Business history pages are littered with doom and gloom stories about companies that have collapsed due to lack of innovation and unwillingness to evolve with the market.

Examples of such companies include the technology company Xerox, the retailer JC Penney, the social networking company MySpace, the department store Sears, the high tech company Polaroid, the bookstore Borders, and Circuit City the consumer electronics company.

What do all these companies have in common? At some point in time, they were all mighty industry titans, too big to fail and led by great, smart people.

However, in the midst of their successes they failed to adapt to changing customer needs, new technologies, competition and business models.

Even though these companies had built their businesses from the ground to the top of their respective industries, their death knell was the self belief that no other company was capable of doing better than what they were already doing and unseat them at the top.

Unfortunately, because of this fallacious way of thinking and ignorance they all paid a hefty price.

To avoid having your company join this list of colossal business failures:

  • Don’t get comfortable doing the right thing for too long. Continuously look for opportunities ahead and remember that today’s success can obscure tomorrow’s possible failures.
  • Regularly ask yourselves if what you’re doing and how you’re doing it is enough. It’s about making productive use of the resources available to you to improve your company’s performance and competitiveness.
  • Don’t dwell too much on the past. It’s important to know what has happened, but more importantly you need to understand why it has happened and how your company would perform in the future.
  • Commit sufficient time to analyzing new technologies, industry trends and competitors. Reviewing financials provides a rearview mirror of business performance, and you need forward looking indicators to understand your customers, competitors and the competitive status of your business (in terms of products, core technologies, market share, talent, culture)
  • Stay open minded. As highlighted above, when a company has been successful for too long, very little time is spent on thinking through alternative downside scenarios. It’s so easy to focus on the good news, spurn bad news and avoid discussing negatives. Questions such as “Why haven’t we done it before, What if this doesn’t work? What would we do then? What might make this not work?” are reluctantly answered. As a result, what begins as minor issues eventually develop into major issues. Don’t be a victim of own success to such an extent that you become ignorant of change.

Transforming a business into a high performing, innovative and competitive enterprise is a journey characterized by ups and downs. Consider every challenge, every problem and every piece of bad news as an opportunity to learn and improve.

Talking about Digital Transformation

These days I’m hearing quite a number of business leaders talk about digitization, going digital or digital transformation.

Regardless of which term you’re most comfortable with, it’s a good sign that leaders are seriously considering taking advantage of the power of modern technologies to transform their businesses.

An investment in IT is no longer considered a cost to the business. Rather, in highly performing organizations, embracing emerging digital technologies is considered an enabler of business performance.

In these organizations, business leaders are cognizant of the conditions in which technology supports the overall business strategy as well as those in which it helps shape the business strategy itself.

It’s no secret that we are in the digital era. Digital technologies are everywhere. Just think of the significant increase in the pervasiveness and the power of digital technologies in new domains such as cloud computing, robotics, wearable devices, 3D printing, drones, machine learning, blockchain, virtual reality etc.

These new technologies are influencing not only the way humans live and work, but also how we learn, play, innovate, transact and govern.

Your existing strategies will not carry you into the future

Although I’m not able to predict with certainty what the business landscape will look like in the next 5 or 10 years, I strongly believe that organizations that will survive and succeed during this period will be defined by their ability to master and take advantage of the power of these emerging technologies to deliver value to customers.

Traditional, tried-and-tested ideas that propelled your business to where you’re today are no guarantee they will continually move you forward and ahead of your industry incumbents in this digital economy.

Let’s look at Amazon as an example. The global ecommerce retailer started off as an online bookstore and along the way embraced emerging technologies to become a leader in cloud computing services, media and artificial intelligence.

The company did not become successful because of its size. Rather, taking advantage of digital technologies helped it to become a powerful global brand.

Just because your current business model is working does not necessarily mean you should allow it to run its course. It’s critical to always question, refine and enhance your competencies and strategy otherwise you risk becoming irrelevant and falling victim of some successful, but now outdated, past practices.

It’s not all about a set of technologies

Simply overlaying technology, however powerful, on your existing business infrastructure does not work. A change in structures, systems, processes, skills and network relationships is paramount.

Neither does digital transformation entail simple automation of traditional, routine and repetitive processes. It’s also about embracing new rules of engagement and continually experimenting with new approaches and adapting them to suit your performance objectives.

For instance, embracing advanced data and analytics tools to learn about and better understand your customers and solve their problems, challenge your current business model and ultimately alter the sources of your revenues and profits.

Shift your focus from thinking about how digital technologies support your current business to exploring how they could also shape your future strategy and business models. In other words, think of innovative ways these digital technologies can help you create and capture business value.

Further, effective decisions on digital transformation are not hype-driven.

Different companies are at different stages of the transformation journey, experimenting with different technologies to create new capabilities, establish new relationships and identify differentiated drivers of value.

Thus, instead of just mimicking what other players in your industry are doing, acknowledge that there is no one-size-fits-all solution.

Consider how the different forms and functionality provided by digital technologies could influence your company’s strategic actions and provide better value for customers of your products and services.

Don’t go it alone

Success in today’s digital economy depends on your ability to build a network of relationships and co-create value with other digital players. As an example, think of how traditional banks are partnering with fintech and regtech entrepreneurs to fundamentally enhance, transform and disrupt their current business models.

These tech entrepreneurs are ambitious, with bold views on how they can disrupt and reorder the traditional banking model. By taking advantage of different digital technologies, they have challenged and disrupted traditional methods of delivering financial services.

So depending on your industry setting, you need to recognize the role of such specialized entrepreneurs in solving your fundamental business problems in new and effective ways.

As digital technologies increasingly pervade the very fabric of our society and business, are you keeping pace with the change or you strongly believe in your established playbooks to continually help you survive and succeed?

The Basics of Strategic Planning and Strategy Execution

Effective strategic planning and strategy execution are key to driving business success and growth. Unfortunately, leaders tend to focus more on the planning process and less on doing or executing.

Strategic planning is the process of articulating the vision of what the organization wants to be, defining its strategy, setting strategic initiatives, making decisions on allocating its resources to pursue this strategy, and aligning the organization to ensure that employees and other stakeholders collaborate toward common objectives.

The focus is on the future direction and performance of the organization. Through strategic planning exercises, organizations tend to produce 3-5 year rigid strategic plans documenting the organization’s strategic goals as well as action plans to achieve those goals.

Rigid strategic plans work best in a stable environment. However, times have changed. Today’s business environment is awash with substantial volatility, uncertainty, complexity and ambiguity. The abnormal is now normal and uncertainty is now certain.

As a result, enormous doubt has been cast on the effectiveness of strategic planning in the current environment, leading some to claim that strategic planning is dead.

I don’t buy this view. Strategic planning is not dead.

Yes, the environment is constantly evolving, and the organization needs to be flexible, adaptive and responsive. But, how can you address and navigate the future without a well laid plan and strategy?

In their book Sun Tzu: The Art of War for Managers, Gerald A. Michaelson and Steven Michaelson cite that:

A common mistake is to consider planning as only a mental process, an idea in our head that simply looks at the past and adjusts for the future. If your plan is not in writing, you do not have a plan at all. Instead, you have only a dream, a vision, or perhaps even a nightmare.

This is not about producing long strategy documents that very few read. Rather, it is about a producing a simple written plan that is easy to understand, such as a strategy map.

Strategy maps helps leaders define and communicate the strategy of the organization by creating a visual representation of the key business objectives on a single page. Strategy maps also outline the strategic aims and priorities of the organization and help to ensure everyone is working towards common goals.

The organization’s plan must not be rigid in nature, but flexible enough to accommodate changes in the environment or business requirements.

As a football fanatic and an avid Arsenal FC fan, I have experienced a fair share of exciting and disappointing matches. But, over the past few years, I have come to appreciate the fact that rigidity does not win matches.

Within the same match, I have watched Arsenal quickly switch from a 4-3-3 formation to a 4-2-3-1 and make substitutions depending on the realities of the match. Even though the manager had a 90 minutes’ game plan before kick-off, he also had other plans that allowed for flexibility in formations to adapt to reality.

The same approach should be adopted in business. Rather than stick to rigid planning systems that convey a message that obedience to the plan is key to business success and growth, leaders need to implement plans that allow the assessment of business performance under different scenarios.

Defining strategy and tactics

Put simply, strategy is about doing the right thing. It is about how an organization will move forward and figuring out how to advance its interests. In war terms, it is seeking victory before the battle.

On the other hand, tactics is doing things right. It is the implementation. The battle or action of the war.

However, often times there is confusion on whether strategy determines tactics or it is tactics that determine strategy.

Seeing that strategy definition is part of the planning process, and tactics is about implementation, it is safe to conclude that strategy always comes before tactics.

It is therefore important for leaders to understand that for tactics to effectively support the strategy by doing things right, the strategy itself must be right first. You must be doing the right thing. A bad strategy underpinned by good tactics can be a fast route to failure.

To do the right thing, leaders need to primarily stop focusing more on or reacting to competitors. Great strategies do not arise from reacting to competitors.

Instead, they are a product of intense discussion and deliberation that take into consideration the organization’s internal strengths and weaknesses including external threats and opportunities.

The focus should be on identifying unfulfilled customer needs or Jobs to Be Done, then devising solutions to meet those needs and ultimately assessing competitive realities to determine the viability of your strategy.

Oftentimes, the decision sequence is wrong. Leaders initially focus on profit requirements, and the decision on the needs of the market is secondary. First, you must satisfy the needs of the market. Then, and only then, can you profit from your actions.

Separating planning from execution

Innovation, profitability, and growth all depend on having strategy and execution fit together seamlessly. However, spending too much time in planning can breed indecisiveness and error.

The important thing is to get started. Unfortunately, many of us are good at thinking and bad at doing. With the right strategy, the battle is only half won. The strategy succeeds only with informed and intelligent execution of tactics.

Issues arise when planning is separated from execution. Majority of good strategies fail due to poor execution. Well thought-out plans are not followed through properly because of limited resources, managerial talent or operational skills. In some cases, it is because people are focusing on the wrong things, products or services.

To avoid poor execution of good strategies, leaders must have the ability to clearly define and communicate the strategy to employees in a format that is easy to comprehend. This is necessary for ensuring that everyone has an idea of what the key priorities of the organization are and their role in accomplishing these.

It is also important to measure, track and report on the progress of the strategy against the critical success factors of the business. This is essential for determining what is working and what is not working and make immediate adjustments to prevent further deterioration.

I welcome your thoughts and comments.

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