Who’s your customer, really?

In a “customer-centric” world, we too often lose sight of the customer.

“But I paid no attention to what mattered most”

— Ty Herndon, “What Mattered Most”

Geoff Wilson

I’ll level with you: I espouse a professional-services ethic that is decidedly “client first.” It’s frustrating to some who have worked alongside me, and perhaps edifying to others. I’ll write on where it comes from one of these days.

What “client first” means for me is this: If you’re working for or with me in serving a client on a project, the only productive discussion is one that reasonably focuses on the client mission within the defined scope.

However, I’m also experienced enough to know that not all service providers are bought into this mentality. WGP has at least once engaged specialist consultants who simply can’t step outside of their own rate structure to figure out what is best for the end client (or even WGP as their own client). The “job” is to spend time on an account and to bill fees.

What a boring mission. What a boring definition of “customer.”

In that mode of consulting, the product is hours or days of work, and the customer is actually the consultant, who seeks ways to serve herself through development of fees. The true client—the “Big C” client paying the bills—is incidental to the process.

If you employ consultants or employees who focus more on their time, their process, and their rights than on your problem to solve, you are incidental to the process. You’re like Facebook users—important to the business model because you make it go, but incidental to the business.

If you’re an executive, you have multiple customers: likely a boss, board, shareholders, and the Big C customer. And you have yourself. If you find yourself trouncing Big C in order to please your other customers or pad your income, you’re probably doing it wrong.

Some of the best consultants and executives I know make income, fees, and work nearly incidental to the client relationship. Good service is well compensated, unless you do work for bad clients (or bad bosses). But then again, why would you want to help them?

The “client first” model that we work hard to champion at WGP is simple: Listen, bring something new, do real work. Too many in professional services do too little of each of these, and then wonder why they look and act self-centered.

The key is in knowing who the customer is. Do you know yours? Is it the Big C customer, or some other customer you’re serving.

What do you think?

To succeed at strategy, you have to move fast … AND slow

The key to strategic management lies in balancing fast decision loops with slow decision loops.

Geoff Wilson

The longer I live, the more I realize that life is all about the pace at which you make decisions. But that doesn’t always mean really fast is best.

I’ll use the concept of the “OODA loop,” made famous by Air Force Col. John Boyd. The idea is that strategic action depends on establishing and executing on decision loops that run from observation to action and back again. OODA stands for: observe, orient, decide, act. A strategic actor needs to establish and execute this loop in order to act effectively within a competitive environment. And cycling faster than the competition creates an advantage.

But (and this is important), the pace at which a manager must “loop back” to ingoing assumptions about a strategic variable changes drastically based on the factor and the business environment. You can think about this practically by envisioning the difference between the fuel gauge and the throttle position in a race car. The race car driver likely assigns the fuel gauge a decision loop that runs minutes or longer during most of the race—the driver looks at the gauge and establishes an action plan at least every few minutes. The throttle has decision loop that is drastically shorter—fractions of a second at times.

Different variables mean different loop lengths. This is a crucial concept in business management and strategy. I’ve been in the middle of discussions at technology companies that involve planning for growth in a specific, established product line that exceeds 100 percent per quarter. And I’ve spent much of my career amid product lines that do well to eek out a couple of percentage points of growth above GDP. Both circumstances had something in common: They required sets of very deliberate strategic decisions, and they required sets of very rapid ones. They had long loops and short loops.

The loops didn’t look the same in both instances, but there were fast ones and slow ones. And the same is the case with your business. You not only need to know the variables to manage, but also the loop lengths you handle them within. In strategic management, there are short loops and long loops. You have to know the difference.

Short-loop strategic variables might include:

  • Staffing
  • Marketing and sales plans
  • Account plans
  • Flexible capacities (shift structures)
  • Customer feedback cycles
  • Product enhancements

These items have loop lengths that range from days to weeks—or, in some businesses, maybe a quarter. They are highly strategic (being resource allocations and positions), but many people think they are tactics.

Long-loop strategic variables might include:

  • Workforce planning
  • Technology roadmaps
  • Asset footprints
  • Market assessments
  • Statements of strategic intent
  • Overall organization structures or operating systems

These items have loop lengths that, in most businesses, last at least a year. Management “OODAs” on them on an annual basis (in the case of strategic intent, often much longer).

They key to strategic management, then, just might be establishing the variables and loop lengths that matter for your business. A business in the semiconductor space likely can’t afford to wait for annual strategic planning if the industry moves in six-month cycles. Likewise, pushing a regulated utility to do monthly strategy updates might be a waste of time—the world just doesn’t move that fast.

Where this gets really useful is when you start to see your day-to-day activities get out of sync with your expected loop lengths. Perhaps you know it’s time to act on that staffing problem you’ve had for months now, but you just don’t have the energy to do it—you are “off loop” and likely off strategy, as it were.

One thing is for sure: You have to establish what fast and slow are, know what variables fall into the two categories for your business, and learn to lead them both.

I’ll continue to develop this further, and would love your thoughts on this one.

Welcome to the real, messy world

Like the real world, real business isn’t as simple as you’d like it to be.

Geoff Wilson

I’ll confess, I’m a bit of a strategy junkie. You don’t have to be one to do what I do, but it helps. However, if you read my writing much, I hope you come away with a sense of the practical bent that I bring to the topic. The real world is the real world. Just as any engineer will tell you that lab scale processes rarely translate directly to production facilities, financial and strategic models rarely reflect reality—at all.

The below image was shown at a recent annual meeting of a private equity firm we have the privilege to serve. It shows indexed revenue and EBITDA performance over the life of a fund’s portfolio. Each line is a portfolio company. Lines that trend upward are green. Downward lines are red.

Keep in mind, this is a top-performing private equity fund. Returns for this portfolio were excellent. What do you see? The real world.

Each of those lines depicts the outcome of an actual business. It’s the result of some management team’s hopes and dreams. Those businesses were probably planned using relatively linear models and margins. But what you get is actual sausage making. And I’ll say it again: This is a top-performing portfolio.

The real world is sausage making. Real business comes with randomness, particularly in companies that are working to make things happen.

If you consider it failure that some parts of your portfolio might not stay in lockstep with your linear growth expectations, you probably don’t understand the nature of risk taking and enterprise building. You might be more comfortable investing in CDs.

The real world is messy. This is good to keep in mind when you’re futzing with a financial model that implies a precision that your business outcomes will never achieve.

What do you think?

The danger of “only winning” in business

Only beating the competition isn’t strategy.

Geoff Wilson

What a week it’s been on the political scene. We saw U.S. Senate Republicans almost (thanks to John McCain’s last-second “no” vote) pass an absurd bill to effect the “skinny repeal” of Obamacare. The bill would have stripped the economically rational parts of Obamacare (the mandates) and left the rest.

The bill was so ridiculous that Senate Republicans actually didn’t want it to be passed by the House and sent to President Trump for signature. Some just wanted to make a symbolic move in the name of winning something on healthcare.

The bill was an act that focused on “winning” against a foe, but it was ultimately grounded in no vision whatsoever for the future health of the country (literally and figuratively).

Strategy focused only on winning against the competition may not be enough

“We won the battle but lost the war.” You’ve heard that plenty, I’m sure. It’s a tired adage. The problem is that modern organizations are rife with battles yet extremely light on defining of the war. A case in point would be your functional organizations, which may define winning in ways that have nothing to do with the mission of the greater company. Your human resources team wants to hire and train, your supply chain team wants to source cheap raw materials, and your engineering team wants to create a better mousetrap. Which of these three investments make the most sense for the company? Who knows.

The same is true for business managers. So many business strategies are built on beating the competition that doing so has come to define strategy. But what if the competition is playing the same tired game? Who’s out there looking for ways to deliver value to customers that the competition hasn’t thought of yet? One of the reasons the book Blue Ocean Strategy by Chan Kim and Renée Mauborgne has captured so many imaginations is that it has exhorted us to look for ways to deliver value that others have not figured out. The concept is literally “find out where the competition isn’t,” but in a way that implies innovation in that void, not mere presence.

But doing so requires vision

The major issue with applying this “more than winning” approach to strategy is that it takes time and expertise—it requires vision. You need to have the time to think of strategy as avoiding the competition and focusing on the vision for the customer. And you have to have the expertise to actually figure out how to do it. Chances are there aren’t many people in your company who have both the time and the expertise.

The U.S. Senate nearly taught us this week that only focusing on winning against a foe can lead to really stupid outcomes. Absent a compelling vision for how to deliver stable, cost-effective health care to citizens via regulatory boundaries and mandates (an admittedly hard thing to do), the Senate simply aspired to do something to beat the competition. May your own strategy avoid such a ditch.

Now it’s your turn:  How have you seen this sort of thing play out in your career?

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?