I see (www.cotlook.com) cotton prices have hit a 2½ year high on fears that the Pakistan floods will cut supply – the country produces nearly 7% of world supply. The dynamics of this are pretty easy to lay out, just like many other cyclical industries: Read more…
It Makes Sense to Adjust in strategy+business describes a simple process that any decently-led organisation should be using:
Some sensible examples illustrate the approach, such as anticipating staffing needs in a cyclical business – though one wonders what on earth the companies discussed were doing before if they didn’t do this! It contrasts sense-and-adjust with reactive styles (do nothing until forced to) and programmatic change (keep changing as you planned, regardless of changed circumstances).
The article unfortunately misses the “Create” step – strong firms don’t just ‘sense’ the environment to see what might happen to them; they decide how they want their world to change and make it happen. This may be radical innovation, but is more likely to be just the relentless pursuit of known resource- and capability-building.
Shame, too, to see these sound basics of strategy buried in more nonsense about ‘constant transformation’ with the unsubstantiated claim that “… companies must be ready to repeatedly transform themselves” and that “A review of businesses faced with burning platforms (enterprise-threatenting events) would reveal that most have failed to make the transformations required”. Sense-and-adjust is just the minimum of decent strategic management, and if properly performed would avoid most burning platforms in the first place.
Further to Analysts Getting it Wrong, a set of McKQ articles explain that just meeting investor expectations does nothing to the share price or, therefore, to total shareholder returns. Executives get on a relentless treadmill with every surprise performance requiring still another to boost TSR. It is troubling, then to see one quoted company Strategic Plan start with ‘Our aim is constantly to exceed shareholder expectations‘, which of course is impossible.
Whether a skeptic or not, any CEO should check their strategy is OK if global warming does turn out to be real. Who, doing business in Pakistan, assessed the business risk from once-a-century flooding? ? Who, serving the Russian agriculture sector, checked the consequences from unprecedented temperatures and wild-fires? Who, planning utilities’ strategies in Europe, was ready for recent wild swings in temperature and rainfall? Unfortunately, the response of many businesses to endless ill-informed cost-pressure has left them more exposed to risk, rather than more resilient.
The impact in many cases concerns infrastructure, but preparedness is nevertheless a strategic issue, best understood by distinguishing 3 dimensions – damage, resilience and recovery:
Such preparedness is a strategic issue, since it implies careful, detailed assessment and sustained investments of effort and money – the return for which should be significantly lower risk.
We’ve seen a few gung-ho CEOs mess up, especially but not exclusively in banking, but ‘Boards of Prevention‘ in strategy+business asks what the heck the supervisory Board is doing to let such nonsense happen. If they are not warning about risk, they are just overhead. Though the article largely focuses on risk in banking, some simple principles seem more generally useful [let's call them 'threats' to generalise beyond banking]:
I am reminded of a comment from a wise and successful CEO who told me “For any strategic initiative we might make, we always ask what is the worst that could go wrong – if that’s not too bad, or we can cope with the consequences, we go ahead; otherwise we drop it“.
We all know this ideal is far from reality, but in Is Decision-Based Evidence Making Necessarily Bad?, Sloan Mgmt Review offers 3 levels to define the role of evidence: Read more…
I’ve noted before the dangers of amateur, gut-feel strategy, so a new MIT Sloan Mgmt Review newsletter on the ‘Intelligent Enterprise‘ aims to explain analytical ways to exploit the ‘data deluge’, rather than get drowned in it. I’ll sign up and alert you to any especially helpful item.
strategy+business explains how IT works best when tied closely to business goals, which using an Enterprise Architecture helps ensure. Though the article explains little of what exactly an EA is, there’s plenty on the Web about it, including professional training and certification. An EA seems to rely on having a sound foundation of an ‘Operating Model’ of the business, which in turn ties together strategy maps, goals and policies.
But how do we ensure that operating model is indeed rigorous? I would start from a strategy dynamics analysis, which is theoretically rigorous, encompasses resources and capabilities, and can expand to incorporate business processes of whatever level of detail is required, but I guess most EAs don’t use that approach.
The article suggests that using EA to align technology with strategy is helpful, so it would be good to hear of any sources that clarify exactly how EA experts ensure they get a rock-solid strategic architecture on which to build.
How many firms are currently failing dismally to deliver cash-flow growth because of an obsession with cost-cutting ? The depressing focus on cost ratios features yet again in McK-Q’s Five ways CFOs can make cost cuts stick, Read more…
I’ve posted before on how often firms over-expand and over-extend themselves*. Growth through Focus in strategy+business warns of the same danger, and explains how “companies should follow a seven-step strategy for achieving more with less”.
*Search in this blog for ‘expand’ and ‘extension’ for some posts on this issue.