Assumption, what’s your strategic function?

The journey to real insight lies in debating assumptions, not outcomes.

Geoff Wilson

You know what happens when you assume? Well, the classical answer to that question involves something unsavory that happens to you and me. But that’s not what I had in mind.

What I meant is what happens when you make assumptions about the future of your business, your competition, and your market. It’s something all strategists have to do. They can’t tell the future, but they can test assumptions about it. And testing assumptions about the future is far more rewarding and sound than testing guesses about future outcomes.

Imagine you’re trying to set a business strategy for entry into a market. Let’s say it’s the market for insulated coffee mugs. You might start your business on the notion that the outcome you seek is to sell 1,000 mugs the first year, 5,000 the second, and 10,000 the third. You reach nirvana that way.

But what matters is the assumptions you make about the market and your product in order to build to the outcome. If you’re targeting coffee mugs for truckers, you must estimate the number of truckers you need to reach in order to sell those first 1,000 mugs, and then determine the number of places that you need to carry your mugs in order to reach that many truckers (which leads to an assessment of how many mugs you should have on how many racks in how many truck stops, all driving your assumptions about working capital, how many competitive mugs are on the same racks, your price point, etc.).

Before you know it, you’ve had to make assumptions about many variables that actually matter in building up to that outcome of 1,000 mugs in the first year. And assumptions (or estimates, if you will) can be debated far better than any blanket statement about sales forecasts or market share gains.

Assumptions are where the rubber meets the road for strategy. Assumptions are testable propositions.

Too many strategic-planning exercises go sideways in the gap between “We have to grow sales by 7 percent next year” and “We can’t figure a set of assumptions that allows it.” This is especially true when a decidedly top-down view of the world (“grow by 7 percent”) collides with the reality of the bottom-up assumptions (“The market is shrinking and our competition is getting stronger.”).

Something has to give, and it’s usually either the top-down whim (in the case of sound strategic planning processes) or the bottom-up assumption (in the case of personality-driven planning processes). You’ve probably witnessed both cases.

When you make strategic assumptions, you create little test tubes that can be individually experimented with far better than strategic predictions about the overall environment. You can test a proposition about the market, but you can’t really test a statement about the market’s outcome.

When seeking to build a better strategy, you should debate assumptions about what drives reality around you, not mere statements on that reality.

What do you think? 

Why your people need to mesh for your business to move

Identifying ideal mesh points within your organization is vital to strategic execution.

Geoff Wilson

Your organization is the gearbox of your strategy. It’s the structure through which the energy of people and ideas gets channeled toward the strategic intent of the company’s leadership team. An effective organization structure is priceless. It fosters contact and collaboration among people who are best positioned to capture opportunity and manage risk en route to delivering the company’s mission.

But if the organization is the gearbox, a leader’s ability to fine tune the meshing of the gears within the box becomes a key determinant of whether strategy can be executed at all. Perhaps your strategy calls for an operation to be migrated from one geography to another—maybe to capture a cost advantage or to better serve a customer.

Such a move typically requires many disparate parts of a company to mesh with one another in ways that aren’t always natural.

How so? Imagine that the operation’s leaders are focused on delivering on cost and inventory performance at the start and end of the move. Then, imagine that the very act of moving will naturally impact production costs (as one facility is ramped down and another is ramped up) and inventory levels (as inventory is built up on one side for the move, and built on the other to achieve future service levels).

What is likely to happen if the operational leaders aren’t appropriately meshed with strategic and financial leaders to reset goals and expectations? Chaos, that’s what. Customer service suffers, transitions from the one location to another take twice as long (as cost levels are over-managed), and nearly everyone wonders why this was so darn hard.

It’s necessary during times of strategic change to over-invest in organizational mesh points that ensure ideas and energy are correctly driven. These can often be artificial and temporary—program management offices provide this function for large-change programs. But sometimes, strategic organization mesh points simply need to be matters of daily business. The emergence of sales and operational-planning processes and meetings the world over reflects the value of strategic mesh points in organizations.

Maybe you have a strategy that requires an unnatural coordination across your sales and product development teams. Perhaps your strategy requires your supply chain to interact differently with your marketing team. It’s important to know this.

Be sure to consider where your organization needs to mesh in order to achieve the change you’re seeking.

What do you think?

Accelerate decision cycles to increase competitive advantage

The pace at which your organization makes decisions may outrank the quality of your choices.

Geoff Wilson

Imagine you and I are playing a game. The type of game doesn’t matter, but assume it requires taking turns or possessing a ball. It could be innings in baseball, possessions in soccer, or even turns in a basic game like checkers.

Now, imagine there’s a wrinkle: I get two turns for each one of yours. I get to make two moves in checkers for your one move. I get six outs per inning in baseball against your three. I get the ball twice for every possession you have in soccer. Here’s the question: Can you win?

I don’t think so—at least not consistently. If I get two chances for each move you make, and if I get to work from basically the same information you have, my probability of winning is greatly enhanced. This example may seem absurd, as you’d likely scoff if I dared propose such an unfair contest. But it’s analogous to how some companies handicap (or, conversely, advantage) themselves.

Strategic decision cycles are too often internally driven

Companies the world over operate as if their internal decision processes are all that matter. They do annual strategic planning, quarterly account planning (if they’re lucky), and maybe monthly resource planning. For many of these companies, big decisions—such as introducing a new product line or building a new plant—can take years, while seemingly small decisions—hiring a new salesperson, for instance—can take months.

Their decision cycles are internally driven—even when managers know that the outside world is moving faster than their own company’s internal cycle. This pace lagging restrains opportunity in the best cases, and paves the road to ruin in the worst cases. The worst cases are when the world is rapidly changing, or a shifty attacker emerges in the market.

Fast decision cycles are advantageous

We all want to make good decisions, and doing so requires reasonable deliberation time. However, if you are caught in a scenario where your competition is able to make decisions faster than you can, your slower-paced good decisions eventually won’t matter.

Why? Because the organization that can multiply its capability via a faster decision cycle will have a substantial advantage in avoiding risks and capturing opportunities. The company that moves through decision cycles faster than its competition—the one that can make multiple decisions while the competition makes just one—is an advantaged organization.

For decades, Toyota has been constantly lauded for its production system, but its product development system is only occasionally celebrated. Toyota captured substantial share in the 1980s by introducing products and product refinements on a development cycle that was significantly faster than its competition. This system gave Toyota a major advantage over the slower pack.

One could argue that Tesla is doing the same thing in today’s market with its “platform and upgrade” approach to auto ownership. In some ways, Tesla is able to operate inside of its competition’s decision cycles.

So what? Cycle faster!

Companies with faster cycles are advantaged. Such advantage doesn’t eliminate failure, but it increases the probability of success (and of killing off failures quickly) to overwhelm missteps. Would you rather be a baseball player with a .500 batting average who gets two at-bats per game, or a player with a .300 batting average who gets to the plate six times a game? If you’re playing for hits, you want to be the latter, not the former.

Fast cycling allows you to multiply your force. It enables you to disrupt and dismember the competition. Done well, it allows you to lead—even with less talent, capital, and “perfection” than larger, slower competition.

But beware the alternative: When your competition is inside your decision cycle, you are going to lose—eventually. If you drive at a tempo slower than your competition, you might find yourself on the slow road to oblivion.

What do you think?

Avoid the fifth stage of organizational (in)competence

Arrogant incompetence is a barrier to learning and strategic execution.

Geoff Wilson

On some level, every strategic leader must have a healthy appreciation for social science and psychology. Success is elusive without it. But what happens when the best that psychology has to offer actually fails?

Picture it: You’re working to ensure that a key manager in your organization executes on a project that will deliver the five key customers you absolutely must have to make plan this year. You provide all the tools, resources, and feedback that a person in the role needs, but they just don’t get through. The manager, convinced of her correctness, takes the project off the deep end. It fails, and so does your plan.

Sound familiar? I’ll bet it does. But what happened? I’ll put it mildly: You probably never learned that there’s a fifth stage of competence. And it’s the most insidious one.

I’m a huge fan of the four stages of competence learning model. The gist of it is that we progress through four phases of capability with any skill. The stages are:

  1. Unconscious incompetence: We don’t know what we are bad at, or even why it’s important. We must recognize that we might have a gap.
  2. Conscious incompetence: We realize we are bad at a skill, and why it’s valuable to improve at it.
  3. Conscious competence: We learn a skill “with reps,” as it were. We concentrate on being good at the skill.
  4. Unconscious competence: The skill is second nature and embedded. We are free to learn other things.

Those stages are outstanding, but there’s another one. Let’s call it Stage Zero: Arrogant incompetence. This is the stage where the manager’s ego lets her think she has it together, without even needing to consider that she might be wrong.

Arrogant incompetence is the realm of people who can’t stand to be critiqued or judged. It afflicts entry-level hires and CEOs alike. You see it when the entry-level hire bristles at feedback—and when the CEO ignores sound advice. It festers in organizations that close ranks to outsiders when their performance is poor.

Arrogant incompetence destroys trust. It is the opposite of truth-seeking.

Why is this important to know? Well, you’re likely reading this because you have an interest in strategy, and strategy means putting people in position to affect change. If you place your bets on people who choose arrogance over inquiry, you’re taking chances on those least likely to accept feedback, seek progress, and positively impact your organization.

The fifth stage of incompetence is a barrier to the flexibility required in today’s strategic organization. Avoid it at all costs.

What do you think?  

Don’t let butt brushes bite you from behind

The small things that turn people off from doing business with you can cause big damage.

Geoff Wilson

Millions of people shop every day. Thousands of retail executives spend millions of dollars each year trying to pinpoint what makes people lock in and buy their merchandise. They discuss store formats, look and feel, customer flow, sales interactions, and numerous other concepts. And then, some guy comes along with a perspective that attacks high-concept with a decidedly low-concept insight.

That’s what Paco Underhill did in his book Why We Buy. One of my favorite insights from that book concerns the “butt-brush effect.” Simply put, the butt-brush effect is an observation that customers tend to stop shopping when they’re touched from behind. So, when racks in stores are packed too closely together, people negotiating the cramped quarters are more likely to brush their rear ends against one another. And when that happens, they tend to get uncomfortable and stop shopping.

Butt brushes are easy to describe in a retail environment. They are, literally, butt brushes. But butt brushes exist in all business contexts. They are small portions of customer or vendor experience (yes, I’ll include vendors) that make executing your strategy just that much harder. They make people uncomfortable.

In your business, butt brushes are unintended impacts. They come from people who aren’t setting the strategy. They sometimes even occur from people just “doing their jobs.” Those are the ones that are the most insidious.

What are some examples?

  • “Aggressive attorney” butt brush: You know him. He’s the guy who makes closing the transaction a complete slog. He’s the one who focuses on the minute details to the exclusion of the relationship. He makes it hard for others to like your company.
  • “Credit Nazi” butt brush: Similar to the aggressive attorney, the contentious credit guy is a sales-prevention army of one.
  • “Purchasing” butt brush: You’ve gotten to know the senior managers of your prospective vendor. They like you. You like them. The deal is as good as done. Then, you have to pass them off to the purchasing department. Things get… brushy.

There are also the many tiny butt brushes you offer up to your prospective customers and strategic partners every day. A fantastic example is the “My smart phone is more important than you” butt brush. Yeah, you get it.

You’ve invested untold time and money into customer insights and strategy. You’ve established a path and process to get there. So why let butt brushes ruin it all? Seemingly small discomforts (sometimes driven by small mindsets) turn people off in a big way.

Keep an eye out for butt brushes before they bite you from behind.

What do you think?

(In)Attention to Details

Are we losing the ability to mind the details?  I don’t think so, but maybe!

 

Chalk this one up to amusement, but I ran across an article today that explains how the state of Oklahoma recently adopted “loser pays” for attorney fees in all civil suits.

That’s a big deal.  A really big deal.

But it was “unintentional.”

Yes, no kidding.  A bill was voted on, passed, and signed into law by a state legislative body and executive. And, its effects were unintentionally broad.  Here’s an article on this doozy.  The key quote:

The amendment, written by state Sen. Anthony Sykes, R-Moore, was intended to apply only to civil cases involving child sex-abuse.

But the amendment had a broader impact, according to the Senate author of the bill, state Sen. David Holt, R-Oklahoma City. “Upon a closer reading of the amendment, it seems evident that it makes all civil cases … loser pays,” Holt told the World. “But nobody caught that.”

But nobody caught that…

We are talking about a massive change in liability for legal fees.  And the response is, essentially, “oops.”

Well, luckily the Oklahoma legislature can change it.

But it raises the question: Are we suffering from a societal migration away from what one of my favorite coaches used to call “attention to detail?”

When a legislature can pass a bill through multiple steps and have such a big miss, imagine what details are being missed in your company or in daily life.  You need look no more than your web browser to see the effect of lowering standards for attention to detail.  Today’s news media are a caricature of the phenomenon, where we are constantly barraged with half truths and partial lies, no matter where you stand on the political spectrum.

In most pursuits, details matter.  In critical ones, they matter a lot.  When you are acquiring a company or putting together the biggest sale of your life, it’s rarely ok to say “let’s let the lawyers handle that.”   In Oklahoma’s case, the law can be changed.  That’s not so when you forget to vet the representations and warranties in your purchase agreement!

Nirvana on attention to detail is challenging.  I’ve known many people consumed by the details.  The trick, I find, is to combine the accountant’s eye for detail with the artist’s eye for completeness.  You have to get the details right, but also be able to notice what’s missing.  You have to see the forest and the trees, as it were.

The best strategists that I know are able to master this art.

Can you?

 

 

 

Formwork, Not Framework

We sometimes miss the point when it comes to the use of frameworks in business.

Have you ever been around a management guru who can’t get away from his or her framework?  You know them, they are the ones who have trademarked the framework and, by golly, they are going to use it.

No?  Well, what about this one:  Have you ever asked someone to think about a strategy, and only received a filled in framework in response?  Surely, you’ve seen this one:

You and a business leader in your company:  “Give me a sense of your marketing strategy…”

2 weeks later:  “Here’s the strategy you asked for…we used the Segment–> Target –> Position framework.”

Ay Caramba.

Framework-itis.

It happens to people who are smart, and not.  It happens to people who are experienced, and not.  And, yes, it happens to people who should know better.

WGP has carried out more than 40 engagements in our short existence, with the vast majority of those focused on business unit or corporate strategy.  Our approach is littered with frameworks.  Littered, I tell you.

Why?

Because frameworks are useful as checklists. We use derivatives of classic business strategy frameworks all the time.  I have a personal affinity for the S-C-P framework, and it’s an absolute dinosaur (Structure, Conduct, Performance for those of you who don’t share my dino-approach to business strategy).

But, and this is an important but…the frameworks are not useful as strategies.  They are useful in helping to derive the right conversation that leads to a strategy.  And, that’s where so many management strategists go wrong.  Just like a balance sheet is a common basis of presentation for the financial position of a firm, strategic frameworks provide a common basis of presentation of strategic situations.  They don’t, however, provide interpretation.

You have to provide the interpretation…and the action.

And that’s the point of this post:  If you feel yourself being fed (or, feeding) frameworks as the answer to a business strategy question, you are probably off track.   Frameworks are not the answer, they are checklists for thinking.

Perhaps we should use the word formworks instead of frameworks because classical “frameworks” only provide a format for thinking.  They can never provide the skeleton of a real strategy.

Know how to use the tools.

Be careful out there.

 

Data rich, insight poor

The secret to your organization’s success is rarely more data.

Geoff Wilson

I woke up this morning and stood on my bathroom scale. The scale is, like many things nowadays, networked and bluetooth’d. It takes my weight, heart rate, body fat percentage (don’t ask), water percentage, and something called “pulse wave velocity” that I’ve yet to understand or investigate. It logs all that data for me to shamefully view on my mobile phone whenever I like, thanks to an app that connects to my bathroom scale.

An APP that attaches to my BATHROOM SCALE, people! The United States landed a man on the moon using slide rules to calculate, and here I am today with a scale that can instantly dispatch my disgrace around the world.

But it isn’t enough for information to simply be collected and “there”—it’s what you do with it that matters. And on that note, let’s shift from the topic of my body weight (nothing to see here, folks).

Data rich, insight poor

Modern institutions have astounding arrays of data sets to access. The sets are often not only overwhelming but competing as well. One client we serve measures revenue at least three ways, and gross profit margins can be viewed in at least three more ways—as in, we could apply three different margins to each of the three different revenue stream metrics.

Management teams have access to operational statistics, people statistics, economic data, customer surveys, sales force metrics, supply chain metrics, and countless additional data bases and data points. They can, quite literally, send measured data anywhere, anytime.

So-called “big data” is here—but it isn’t always what it’s supposed to be. That’s because there’s a paucity of insight accompanying that data. For all the richness of data at our fingertips, we’re poor when it comes to insight. In the worst cases, we are paralyzed by the sheer volume of data we can access.

At one client we recently served, a long-range forecast of a global market turned into the ultimate merry-go-round, as the forecast assumptions were tweaked and adjusted to the point where debates raged about long-range global growth rates and whether they should be .1% higher or lower over 10 years. The debate, while comforting to those involved, didn’t really matter.

That, my friends, is the consequence of being data rich and insight poor. And it’s a frequent problem.

The answer

So, what’s an action-oriented executive to do? I’ll put it simply: Know when enough is enough.

Sure, employ data scientists to ensure you’re getting the right cuts of data and analysis, but be sure that you’re also focused on insight. That means you’re identifying meaning in all those numbers you can pull. Just because you have access to mountains of data doesn’t mean you have to (or should) use it all!

Bill Clinton famously wrote that he got involved in some unsavory executive behaviors because he could. In other words, he engaged in unproductive activities because his great power enabled him to.

Many of today’s executives, analysts, and advisors participate in navel-gazing exercises that result in really cool charts but no action because they have access to never-ending data and capacities to manipulate it, without the will to stop and ask two key questions:

  1. What does the data we have mean? Interpret data for insight. Don’t just admire data for merely existing.
  2. What would more data really do to improve our understanding of that meaning? Analyze for decision-worthiness. Think of data availability as a question of “enough to make a decision” vs. “enough to make a comfortable decision.” By the time you make a comfortable decision, the competition is already there.

Our mission at WGP is “to improve our clients’ strategic positioning and enduring performance by providing practical strategic data, analysis, insight, and advice to top management.” It’s true. We wrote it down. We are focused on the fact base, but we fail if we deliver no insight from it. If we can present meaning and action, we are successful. If we merely deliver data, we aren’t doing our jobs.

Our clients appreciate us for this fact-based yet practical approach. In today’s data-rich and insight-poor environments, it’s important to have a partner to help sort through the morass.

Your bathroom scale may be able to send you data while you’re chowing down on fried chicken, but does that really matter if it doesn’t result in changed behavior? Knowing is only half the battle.

What do you think? 

What If You Gig a Lemon?

As the gig economy continues to evolve, how do we define value in it?

I had this link come across my newsfeed today.

It looks like seminal gig economy facilitator TaskRabbit is pursuing a strategic sale.

From the article:

One of the earliest and most prominent startups of the so-called “sharing economy” or “gig economy” is evaluating the possibility of selling itself. As reported by Recode, freelance work marketplace TaskRabbit acknowledged that it is contemplating a sale after receiving inbound interest from a possible strategic buyer.

Now, I won’t comment on the merits fo the report other than to say that “inbound interest” usually means “we put ourselves up for sale and somebody called.”

Usually.

But it raises the question in this whole gig economy concept.  How do we place value on freelance contractors?  This issue is one that certainly matters to anybody contemplating the valuation of TaskRabbit as a company (because, one would assume, the value of a broker is in its ability to consistently snag a vig out of a high-value transaction for both the buyer and seller of a service).

When it comes to well-defined services like Uber, one can establish real regulating metrics for the service and scare out poor quality relatively quickly (especially when it comes to competing against taxis in most cities, which are decidedly…crappy). And, as with the mountains of venture capital that have underwritten Uber’s below market prices show, you can incite trial use of almost any simple service.

But, when it comes to more trust-oriented services, like those TaskRabbit sells, the ability to assure value becomes a big issue.  If I’m going to invite someone into my house to assemble furniture (one of the tasks that TaskRabbit puts right on its front page as an example), I have to know what risk I’m actually taking for the price.

And, you know what?  That risk is highly variable.  The person might break the furniture, soil the carpet, and scratch the floor.  Sure, TaskRabbit can reimburse for that, but who takes the risk of time, disappointment, and re-work?

You do.

And that’s where the gig economy will face its biggest challenge:  quality assurance a priori.

The more complex and critical the task, the more difficult the quality assurance mountain to climb.  Move from a contractor who assembles your furniture to one who builds your financial plan, and you start to see how trust gets built into the equation.  You always seek references (or the backing of a big balance sheet) when looking for a new financial advisor.

The problem with mass-market matching services (in both the consumer market, like Task Rabbit, and in professional markets, like any number of talent agencies out there), is two-fold.

First, the discerning buyer who cares deeply about quality and who is likely far more loyal to high-quality experiences–we at WGP call these the “clients you want”–won’t take the risk on a mass-market service. They will either demand a barebones price, or just go on about their business.

Second–and this is the real challenge for gig-talent-markets–people with real high-quality and trustworthy talents are usually already busy.  There’s a reason the A/V contractor all your friends like is booked 4 months out.

He’s a good one.

The confluence of these two factors leads gig-market-makers like TaskRabbit to face a version of the classic “lemons problem” in used car markets:  Because sellers can hide the true quality of their services ex-ante, buyers demand pricing that assumes the service is already a lemon.

This is a problem for any broker, and acts as a weight on prices (to the benefit of the buyer, to be sure…but to the detriment of the seller and the broker). So, companies focused on brokering services that are increasingly ambiguous will face the biggest issues and talent validation costs.  Talent markets for high profile independent consultants are already seeing some of these cracks.  Those services place, on average, very strong consultants with their companies. But that’s on average, which means not systematically.  And, it only takes one “oh crap” to screw up a whole lot of “atta boys.”

The solution?  The more critical the task, the more intense the background check and validation of the service needed. In the home furniture assembly market, it probably only means a handful of 5 star ratings on an app.  In the independent consulting market, it probably means a handful of real, solid references not coming from the broker themselves.

It’s the same as it ever was.  The outer circles may (and should) get contracted out through efficient means (like Uber, Lyft, etc.), but for the inner circles?

Trust is king.

I suppose this spells danger for the “strategic buyer” evaluating TaskRabbit today. In-home services are a challenge, and risk sharing in that world is doubtless fraught with concerns.

What do you think? 

 

Do You Have an Empathetic Strategy?

A little empathy can help your strategy.

 

I’ve kept this one in the queue for quite a while.  Sometimes things just get stuck there.

In an early 2015 insight by McKinsey, Catherine Courage, SVP of Customer Experience at Citrix Systems, landed this outstanding strategic punch while talking about “design thinking” with an interviewer:

“Design thinking is an ideal framework for us to use because it focuses on developing deep empathy for customers and creating solutions that will match their needs—as opposed to just dreaming up and delivering technology for technology’s sake.”

Design thinking has been, for me, one of those near cringe-worthy topics because of the essential nothingness of the term.  As a matter of fact, a large proportion of the interview in the link above is dedicated to merely defining “design thinking.” And, while I still think “design thinking ” is better suited to a marquee than to a management process, I think Ms. Courage nails it with her comment on empathy.

We would do well to extend her comment on empathy to our company strategies as a whole.  If design thinking is the focusing of product design and development on the experience of the customer, then strategic thinking shouldn’t stray far from a focus of resources on meeting the needs of customers.

Call it strategic empathy.

I’ll be the first to tell you that strategy is all-too-often devised for internal purposes and not for attainment of external goals.  Strategy, in the wrong management team’s hands, becomes just another process.  It becomes a set of steps to complete so that a capital request can be approved or a new project can be started.  It loses customer empathy very early on.

Similar to unenlightened product design efforts that never really touch the customer, unenlightened strategic plans ignore the market and customers as well.  The worst offenders wrap their strategy around a financial model.  As a huge believer in the financial model as a foundation of strategy, I can also say that a financial model is necessary but insufficient for defining a company’s strategic plan.

That requires listening to the market.

That requires empathy.

That requires patience.

Take the time to understand what it is your capabilities can deliver to your customers, then set direction.  You might find that a little bit of design thinking–applied empathy, just as Ms. Courage from Citrix describes–can help your strategy.

What do you think?