Kim Warren

How to clarify adaptive capacity

Strategy No Responses »
Jan 312012

There is a ton of academic stuff on this, but our dynamics terminology can be quite exact about it.

To “adapt” implies building specific resources and capabilities that previously did not exist. For example, a current client is trying to move from a hardware-sales focus to a “solution-provider”. They need to design solutions for distinct markets they serve (a solution = the hardware + control systems + ongoing support). Creating these solutions is a capability they currently do not have. Nor do they have the people (in sales, design, project mgmt) to start developing that capability.

We can specify not only the numbers of such people needed, but also the rate at which they can be hired or developed, the rate at which *they* can then build solutions, the numbers of potential customers those solutions can be sold to, the rate at which those potential customers can be developed, and thus how costs, sales and profits can grow over time – to get to a cash-flow forecast from this strategic initiative.

Posted by Kim Warren at 4:31 pm Tagged with: , , , ,

Strategy + Financial Control

Strategy No Responses »
Jan 272012

Just spoke at the Austrian Financial Controller conference, organised by Contrast, the largest training and consulting firm in the market. “Controlling” in the German-speaking world is already a more strategic role than management accounting offers in the UK or US.  Strategy seems to feature little in either the Chartered Institute of Management Accountants (CIMA) or the Institute of Management Accountants (IMA) – neither body’s professional qualifications appear to offer any content on strategic management. The Austrian controllers certainly get the need for strategy to guide business performance, and share a frustration that they get little input from strategy professionals in fulfilling their role.

Contrast’s founder, Professor Werner Hoffman is working on building strategy dynamics into the company’s training programs, as well as Vienna University’s Masters courses in strategy to help build this important link from strategy to financial performance.

Posted by Kim Warren at 1:41 pm Tagged with: , , , , , , ,

Briefings 30: When resources bring access to others

Strategy No Responses »
Jan 242012
One specially useful case where resource attributes arise is when one resource brings access to other potential resources, most often customers…
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Posted by Kim Warren at 10:00 am Tagged with: , , , , , , , , ,

To spin off or combine businesses?

Strategy No Responses »
Jan 242012

Just got this question on my LinkedIn group – Should a mid-size multi-business firm spin-off different businesses into independent companies to spur growth or pool-in collective resources for a common growth program?

This goes back to the issue of “related diversification” – not essentially much different for mid-size firms than for large ones. Back in the 1960s, unrelated diversification was all the rage, spurred by the BCG matrix ideas, but it then became clear that ‘corporate’ added no value to such random business portfolios, and raiders broke them up, selling the bits to groups where they added value.

Same applies today – if any one of your businesses really has no connection with the others, then it is probably worth more to someone else with whom it *does* fit than it is to you. How to tell? Estimate its likely future cash flows in your hands, then ask if someone else could make those cash flows grow faster – for example, do they have sales channels that could build sales faster than you can, or do they have similar manufacturing plant that could be rationalised with yours? If yes – call them up and see what it might be worth!

If one of your businesses *is* related to others you own, though, check which resources and capabilities are common, and seek ways to strengthen them. It’s not exactly a “rule”, but shareable resources and capabilities are commonly at the back end of the business – R&D, IT, sourcing, production – with the front-end (marketing, sales, service) being harder to combine across different businesses. The challenge is to make this resource-sharing effective, without becoming cumbersome and holding back any of the business units involved in the sharing.

Posted by Kim Warren at 9:37 am

Stop asking ‘What is Strategy?’

Strategy No Responses »
Jan 112012

Online groups  seem obsessed with asking what Strategy is, and what’s its value. If we don’t know, we can hardly expect others to listen to us. It’s simply setting powerful but realistic aims, and defining how to get there. It’s purpose is to create business value (NPV of future free cash flows). Because things change, these must be updated continually. (In non-commercial cases, the purpose is to achieve non-financial aims, though within financial constraints).

So, let’s stop debating this basic issue, and focus on working out, codifying, and explaining how to do strategy well, whatever the circumstances.

Posted by Kim Warren at 9:46 am Tagged with: , , , ,

Briefings 29: The resource quality curve

Strategy No Responses »
Jan 102012
There are a few candidates for title of the most useful framework in strategy dynamics – and this is sure one!
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Posted by Kim Warren at 10:00 am Tagged with: , , , , , , ,

Bfriefings 28: Quality of physical assets

Strategy No Responses »
Dec 272011
It’s not just customers and staff whose ‘qualities’ affect performance – many organizations rely heavily on physical assets for their operations.
How do they affect performance?
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Posted by Kim Warren at 10:00 am Tagged with: , , , , ,

Strategy Project Execution

Strategy No Responses »
Dec 182011

Most work on why strategies don’t get done focus on culture, but a new book [1] blames poor project management. It explains how the process should work, and tools to assess a firm’s capability to do it, but it needs a worked example to show the process actually happening.

“Projects” are certainly vital – a big part of Cisco’s past success came from its power as a ‘serial-acquirer’ of new technologies, each of which was a project. And a white-goods manufacturer recently specified a project process for entering each in a sequence of national markets.  But strategic management is not all about projects – the critical foundation is a robust set of policies for the repeated decisions that keep the plan on track, about pricing, product development, marketing, staffing and so on. Only if this is sound can we embark on the bigger steps that need project discipline.

[1] Executing your Strategy by Mark Morgan, Raymond Levitt and William Malek, Harvard Business School Press.

Posted by Kim Warren at 12:33 pm Tagged with: , , , , , ,

Briefings 27: Resource quality and performance example

Strategy No Responses »
Dec 132011
Management is concerned about the quality of resources because it has a real impact on performance – better sales people win better customers, faster, better products drive stronger customer growth and sales, better equipment causes fewer faults, and so on.
Read on as we further build on the simple example of skills amongst call-center staff from Briefing 26…
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Posted by Kim Warren at 10:00 am Tagged with: , , , , ,

Exploiting decline

Strategy No Responses »
Dec 092011

A senior exec student points out a common blind-spot – the strong cash-flow possible in mature/declining sectors. This firm, part of a global business, makes large-volume manufactured products, sold through distributors to numerous installers.
Management diverts resources away from any sector where growth slows, but as in other cases, there is easy money to be made. Everyone else avoids the sector too, so little effort is needed to steal business, and lack of interest keeps margins OK too. Profitability ratios may not be high (which can drive still faster decline as firms keep cutting costs essential to business maintenance) but quantities of cash-flow can be huge.
It’s worth revisiting the principles of the Boston Matrix [whose damaging impact resulted from mis-understanding and mis-application, rather than flaws in the basic logic] – that over an industry life-cycle, free cash-flow goes from strongly negative, while heavy investments and spending are needed to capture growth, to strongly positive, when most of that spending has been done and large volumes of business drive large revenues. A key piece to remember, though, is that competition has to be driven out, to avoid those late-life cash-flows being competed away.

Posted by Kim Warren at 4:07 pm Tagged with: , , ,
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