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Using Social Media Tools to Super-Charge Your Strategy Execution and Business Performance Management Investments

The use of social media and social networking tools is exploding outside, and more recently, inside the business world. A few years ago, many business leaders were wary of using social media and networking tools in their company – they couldn’t really see the applications. Generally, the feeling was that things like Facebook and Twitter were for socializing outside of work and keeping up with your group of personal friends. And blogging and Wikipedia were simply interesting and potentially useful external information sources.

It didn’t take long, however, for savvy business leaders to see that you could transfer the concept of connecting with your friends to connecting with your company’s “friends” – AKA customers! Once people made this leap, we started seeing Facebook fan pages for companies and began hearing about businesses using Twitter to connect in “real-time” with their customers. Some leading companies were even able to harness social media for innovative and profitable marketing campaigns; to drive customer traffic to their businesses; to dialogue with customers about new products that will meet their needs; and to respond to customer inquiries pro-actively and quickly. These are just some of the examples we have all heard about. The best part is that social media and social media tools allow companies to get really innovative about how they connect with their customers.

 

With this experience under our collective belts, the time is right for business leaders to take the next leap and think about how social media and networking tools can help them connect with their company’s “internal friends” – employees, business partners, and suppliers. More specifically, there is a huge opportunity for companies like yours to leverage these powerful tools to connect with the other key players in the equation that drives business success, and get them intimately involved in designing and implementing your organization’s strategy for success.

If you’re going to take the time to make investments in strategy creation, execution, and management and change the way your organization works to produce better business performance results and sustainable success, why not consider taking action to multiply your efforts? Let’s look at the four key ways that social media and social networking tools can do this for you and your company.      

 

Supporting Better Strategy Communications

It is impossible to execute your business strategy if your stakeholders, including your employees, business partners, and suppliers, don’t know about/understand it. Not surprisingly, this is where communication comes in. The first thing that always astounds me is that so many companies don’t have a cohesive, formalized, and adequately funded strategy communication plan. So if you don’t have one, you need one. A good strategy communication plan addresses the communications required before, during, and after your strategy launch. A clear plan for ongoing strategy communications is absolutely critical for strategy execution success – don’t assume that after you launch, everything will take care of itself. Ongoing communications keep your strategy vibrant and alive in the minds of your stakeholders.

When companies do have a strategy communication plan, the next problem I see is what I call a “flat” plan – one that includes few, and possibly dated, approaches to, and vehicles for, communication. Do your communications revolve primarily around emails, town hall meetings, and hidden updates on your intra and internet? If this describes your approach then it is almost guaranteed that you are sub-optimizing your investment in strategy communications. What you need is a better balance (i.e. in face to face versus electronic modes; in long and detailed versus short and quick communication methods; etc) - this is where social media tools come in.

If, for example, your favorite communication method is email you should think again. I know some people who easily get 150+ emails each and every day and I expect that it’s the same for your employees, suppliers, and business partners. No wonder communications via email never get to these people! Short, targeted messages that are prioritized and customized based on each audience’s information needs, sent via Twitter and/or by instant messaging, have greater impact and are more likely to get through to busy, distracted people.

Many people prefer to watch their information rather than read it. Posting short and informative videos on a YouTube-like platform can help get key messages across to your target audience better and faster. While face to face interaction is a critical must in strategy communications, town halls can be replaced with web conferences, Skype sessions, and online chats from time to time. These alternatives are particularly useful when time, distance, and availability to participate make face to face communications challenging.

I could go on but I think you get the idea. Leveraging social media tools, blending them thoughtfully with other communication vehicles, and using the best combination of communication modes and content to get your messages out will only serve to enhance the uptake and effectiveness of your strategy communication (and execution) efforts.

 

Creating Two-Way Dialogue and Building Employee Engagement

While effective one-way strategy communications are good, two-way communication and dialogue are even better! You know that you have really moved your strategy management efforts forward and that your strategy has become the “way we work” (a key goal for strategy execution success) when your employees, business partners, and suppliers are talking about your business strategy with you and with each other. Until now, there weren’t many effective ways of getting the conversation going. And while some organizations have been able to facilitate excellent conversations of this type in group meetings, many more meaningful strategy conversations go on between colleagues as sidebar conversations. Unfortunately, these never filter up and throughout the organization. Essentially, most strategy conversations that happen throughout an organization go unleveraged and most employees don’t get the opportunity to benefit from the great discussions that happen in group meetings they can’t attend.

Social media tools can play a critical role in (1) getting two-way dialogue going; and (2) getting more people aware of, and involved in, the conversations. For example, online groups, discussion forums, and chat rooms can facilitate more frequent and broader conversations about strategy and strategy execution between people from across your organization while also capturing these conversations in a format that can be shared, searched, and leveraged as part of a company’s strategic learning and strategy re-creation processes. Where appropriate, group discussion meetings can be broadcast over the web and/or video-taped so that non-attendees can either participate virtually in a discussion or benefit from seeing what others are thinking and saying about the business strategy and the opportunities for implementation and improvement (for example). These are just two ways that social media and networking tools can be used to facilitate better two-way, strategy-focused dialogue in, across, and beyond an organization. Best of all, these tools can both enhance the opportunities for employee, supplier, and business partner engagement with the business strategy AND build greater levels of employee engagement.

And why should you care about employee engagement? High levels of employee engagement have been routinely shown to translate into high levels of customer and stakeholder satisfaction and loyalty which, in turn, translates into strategy execution success and better business performance results.           

 

Facilitating Learning and Knowledge Sharing

Let’s be honest. You never get your business strategy right the first time. Plus, things change – your external operating environment, your customers’ needs and expectations, and your internal capabilities. All of this means that your business strategy must be dynamic, agile, and flexible to change. How do you do this?

 

How do you capture the important changes that require a strategic response?

 

How do you funnel customer and operational insights, that could have a meaningful impact on your business strategy, into the strategy refinement process?

 

How do you share knowledge and information about what works best to execute your business strategy, including customer and operational best practices and imperatives, effectively across your organization and with suppliers and business partners? And how do you do this quickly when a key direction or strategic business priority has changed?

  

In most organizations, there is simply no easy way to do these things well. As a result, learnings never get passed along, insights never get shared widely, and opportunities to keep your business strategy relevant and effective in the current environment are lost. All of this costs money and slows down the progress of your business.

Social media and networking tools such as blogs, chat and discussion forums, document and site links, and wikis (a website whose users can add, modify, or delete its content via a web browser using a simplified "markup language" – thanks Wikipedia!) are just a few examples of tools that can help facilitate organizational learning and best practice sharing. Essentially, tools such as these can begin to FINALLY make the concept of knowledge management, as it relates to the essentials of your business strategy, a reality in your organization.      

 

Making Collaboration and Innovation a Reality

If we all waited around for the CEO and senior executive team in any organization to come up with all the best ideas about strategic direction and strategy execution and improvement, businesses would move forward at a snail’s pace! Most successful companies know this and that is why they take action to harness the brainpower of the collective group (including employees, suppliers, and business partners) and get them thinking about, and working together on, meaningful ideas and initiatives that will transform the company strategically.

These companies have found ways to get collaboration and innovation going smoothly across their organization. And while they can and do form innovation teams, they also realize that great collaboration and innovation activities often happen organically - coming and going in a very dynamic way.

In order to remain responsive to the prospect of spontaneous collaboration, these organizations implement such tools as employee profiles, groups, chat rooms and discussion forums, and wikis to facilitate connections and make collaboration easy for everyone. When sanctioned innovative teams leverage these tools in their work as well, the result is optimized collaboration and the generation of new innovations that will move the organization, its business strategy, and performance results, forward in a positive way.    

 

A Final Word on Social Media and Networking Tools

There is no doubt in my mind that companies that choose to leverage social media and networking tools to support their strategy execution and business performance management efforts will see a huge ROI on their investment. However, I must point out that there are some risks associated with social media tool use (a quick search on the topic on the internet yields numerous articles by lawyers on the risks and mitigation strategies organizations should think about when utilizing social media platforms in business). For example, security and privacy concerns related to using external platforms such as Facebook and YouTube should be considered. Also, questions exist about content ownership when using external platforms for business purposes.

However, the good news is that applications that provide secure and highly functional internal social networking platforms are now available (check out: www.igloosoftware.com).

 

I predict that this is just the beginning of a wave that will give early social media tool adopters a huge business advantage. I hope that you will consider catching this wave and riding it now in an effort to realize the benefits - super-charging your strategy execution and business performance management investments!

 

If I Could Set the New Year’s Resolutions for Your Organization, I Would Choose These 3

I read an interesting article in The Globe and Mail (Canada’s national newspaper) last week on setting New Year’s resolutions. It said that evidence shows that more people keep and achieve their resolutions for the upcoming year when someone else sets them for them! I found this really interesting.

It seems that the key pre-requisites for success are (1) that the person setting the resolutions for you knows you and has unique insights into what you could benefit from working on (things that we as individuals often can’t see for ourselves); (2) that the person receiving the resolutions find them reasonable and accept them as being worthy of the effort; and (3) that the person setting the resolutions provide ongoing support and encouragement as the other strives to achieve the resolutions.

It turns out that the two-way accountability that occurs in this situation plays a critical role in the successful achievement of the New Year’s resolutions.

 

Now, I know that many people don’t bother to set resolutions. “They’ll just get broken before the end of January” they say. Others think that using the turn of the year as the trigger for choosing to make a change in behavior is a ridiculous idea. When you think about it, resolutions are really just goals and, by custom, we give our goals a special name at the beginning of the new year – probably to give them greater importance (and to increase the chance that we’ll actually stick with them).

Goals are critical for people AND organizations, no matter what time of the year you choose to set them. Goals give us something to strive for and generally drive us forward, whether it be in our personal lives or in the performance of our companies. Whatever trigger you use to decide to establish goals, and whether you call them resolutions or not, I support anyone who wants to strive for better performance and outcomes through goal-setting.

 

Getting back to the idea promoted by that article I read – I started wondering whether having someone from outside an organization set resolutions or goals could work in the same way as it does in personal situations. I think that it could so I thought that I would make some suggestions for your organization.

Recall that the first pre-requisite for success in this effort is that the person setting the resolutions knows the person, or company, and have unique insights into what they could benefit from working on.

Do I qualify? Maybe…..

Though I may not have the luxury of having personal knowledge of your company, I have worked closely with many organizations over the past year – giving me the chance to notice some similarities in opportunities for improvement across businesses. I have also had lots of conversations with business leaders and colleagues about the critical improvement areas for companies in a variety of industries and sectors. Finally, I have been keeping my eye on the trends in business over the past 12 months and have added these insights into the mix.

Based on what I have observed in, and about, organizations over the past year, here are the goals or resolutions I would make for your organization if you were to invite me to do so.

 

Resolution 1: Break Free from Your Focus on Short-termism

Short-term thinking is a big problem in many organizations. In the private sector, it seems to be driven by the demands of the street and shareholders to see continually improving financial performance quarter after quarter. In the public sector, it is often driven by the election cycle and the term of the existing political administration. For those jurisdictions where there is the chance of frequent government and policy change, many public servants feel that they have no choice but to adopt a short-term view in their work.

While I know that it is important to deliver short-term results in any organization, I never believe that a short-term decision (and result) is worth it if it destroys the long-term value of a company or will severely limit an organization in its efforts to successfully achieve its mission.

You will get no argument from me that there can be serious tensions between short-term and long-term objectives and decisions in any organization. The key to success (and the gist of this suggested resolution) is for business leaders to get back to managing this tension rather than focusing on short-term matters and decisions almost exclusively.

Sometimes short-term decisions will have both short and long-term benefits. More often than not, a short-term objective or decision will have negative consequences in the long-term. In this scenario, tradeoffs are required by business leaders. The key to doing a better job with these tradeoffs is to make both the short and long-term objectives of your organization visible at all times and to place them front and center in the conversation when business decisions are being made. This is called conscious decision-making – making short-term decisions with a full understanding of, and consideration for, their long-term impact on the objectives and direction of your organization.

 

So, here is how you can put this resolution into action:

Do not shy away from managing the tension between short and long-term objectives in your business decision making process by always taking the short-term route. Acknowledge that both the short-term and the long-term need to be actively considered and managed in every key strategic business decision and do it in an informed and transparent way as frequently as possible. Leverage such tools as a weighted strategy map and the balanced scorecard to do this more effectively. Model this behavior to all business leaders in your organization and help them do the same in their business decision making. While you will still find yourself making short-term decisions, you may find that you make different short-term decisions that provide a good short-term result while also benefiting the long-term objectives and prospects of your business.       

 

Resolution 2: Focus on Leading, Not Managing

Are you a manager or a leader? According to a definition offered by about.com, a manager “is a person responsible for planning and directing the work of individuals, monitoring their work, and taking corrective action when necessary.” This definition suggests a top down approach where the manager controls the work of others and that the thinking about what should be done and how to do it is the sole responsibility of the manager. Because of their propensity for action, many managers are very hands-on, controlling or micro-managing every decision the employees on their team make.

Does this sound like you? Most organizations have too many managers, even at the executive level.

Successful strategy execution and business performance is built on a different model – one where leaders lead. Leading includes: establishing the playing field and boundaries for employees (i.e. what’s in and what’s out in terms of behavior, direction, and work); opening up the lines of communication across the team and organization; facilitating, connecting, and integrating people across the organization; and getting out of the way so that people from all over the company can create innovative ways of putting the business strategy into action and make aligned business decisions that will move your organization forward in the right direction.

Leading in this way requires new skills including looking out, looking in, and looking ahead. It also requires asking “Are we doing the right things right?” and thinking strategically (i.e. thinking about the impact of today’s actions and business decisions on the future of the business). Leading successfully means helping managers and employees at all levels of the organization start thinking in this way and seeing that they are actually able to spend time on this as an expectation of performance (that is, making it a part of their regular work activities).  

 

So, here is how you can put this resolution into action:

First, consciously make the switch from managing to leading behaviors. Every time you catch yourself controlling the work and decisions of those who report to you, stop and take the time to change your approach whenever possible. Next, encourage those managers who report to you to actively become leaders. Model the desired behavior for them and coach them in the fundamentals of leadership. Finally, always ask employees knowledgeable questions, with a focus on strategy, about the fundamentals of proposed decisions and action plans. Test the validity of these decisions and plans and their alignment with strategy, probe on the progress of action plans (and the impact they are having on moving the business forward), and publically praise and recognize employees who engage with the business strategy, model strategic thinking, and lead effectively.    

 

Resolution 3: Look at, and Do, Communications in a New Way

Internal and external communication is a problem for many organizations. Not enough time and/or resources are placed on communications and there is often no clear plan. Limited communication vehicles are used to drive information throughout the organization. Communications are not created within a clear framework of objectives and desired outcomes, are reactive rather than pro-active, do not reach or capture the attention of the intended audience, and are uni-directional in nature. Sub-optimization of communications is the road to sub-optimized business performance.

Your internal and external communications play a critical role in the strategic success of your business. At the very least, it keeps internal and external audiences “in the loop” with what is going on across your organization. In the best case scenarios, your communications both inform and engage audiences so that you are able to engage in two-way conversations and dialogue that move your organization forward further and faster than you ever thought possible. Unleashing the ideas, thoughts, input, and feedback of as many people as possible from inside and outside your company is very powerful and has a transformative effect on the execution of business strategy and the achievement of business performance results.

To “do” communications in this new way, it is critical to develop a solid internal and external communication plan that clearly outlines: communication triggers; messages; target audiences; vehicles; tactics; timing; timelines; spokespeople; and action owners. In addition, the new style of communication leverages such interactive vehicles as social media (e.g. twitter, blogs, videos, and Facebook) and internal business community software. Internal group conversations, wikis, and other collaboration tools are new vehicles that are key in making two-way dialogue a reality.

 

So, here is how you can put this resolution into action:

Begin by assessing the performance/success of past and current communication efforts including an inventory of communication mechanisms, approaches, and infrastructure and then evaluate the capability of each. Determine required communication campaigns including key objectives, calls to action, desired outcomes, and measures of campaign and communication success. Leveraging your knowledge of audience communication needs and preferences, as well as your communication objectives and goals, review and assess possible communication mechanisms and vehicles. With this information, create appropriate communication strategies and develop a comprehensive communication plan. Resource your communication plan (i.e. assign people to implement and manage the plan AND ensure that the plan is supported with the necessary budget) and then execute. Measure impact and adjust the plan as required as you go. Doing this will revolutionize both your organization’s approach to communication, and the success you achieve through it.

 

So, there you have it - my three resolutions for 2012 for your organization (if you would allow me to choose them for you of course!). I hope that you think that they are reasonable and worthy of effort in the upcoming year.

I have kept the list brief so that you will have the opportunity to successfully implement all of them over 2012. Based on my experience, no matter where you currently are on any of these three items, your organization will be further ahead by the end of this New Year (i.e. more effective strategy execution and better business performance results) if you focus on your particular opportunities for improvement in each of these areas.

Just a reminder – be sure to find someone to provide you and your organization with support and encouragement as you strive to achieve these resolutions (it’s a critical part of the success formula).

Here’s to a successful New Year!   

 

Don’t Bet on Strategy Maps and the Balanced Scorecard ALONE Translating into a Prosperous 2012

Are visions of strategy maps, balanced scorecards, and/or any other organizational performance management tool dancing in your head as you plan for a better business year in 2012? While adopting any combination of these tools will probably result in some improvements in operations and business results over the next year, you won’t achieve the transformational organizational shift that translates into sustained levels of exceptional business performance if implementing these tools alone is all that you do.

In fact, at the risk of sounding extremely Grinch-y as we close out 2011, you are actually better off not even starting down the strategy map-balanced scorecard adoption path if you aren’t prepared to go all the way with your commitment. That is, to achieve business success in 2012 and beyond, you need to implement the “new way to manage” - it's required if you want to unleash the full potential of all those business performance management tools we seem to grab onto in our quest to achieve the next level of business performance.

Let’s look at the key elements associated with this “new way" to manage.

 

Engage in Open Communication

Successful organizations are open and communicate their business strategy and objectives clearly, concisely, and completely with all of the internal and external stakeholders including employees at all levels of the organization, their customers, and their business partners. To do this, they get to know the communication preferences of each audience and use numerous communication vehicles to get their messages out. In addition, they focus on building mechanisms that encourage meaningful, two-way communication and dialogue, not one-sided messaging.

This level of communication doesn’t happen by accident – it takes planning, adequate support and resourcing, appropriate funding, and a dedication to focused execution and improvement. If communication in your organization is haphazard or sub-optimized, a new business performance management tool will most likely get lost in your organization. Few people will know it exists, limiting the impact it can have on the performance of your organization.        

 

 

Change the Conversation

What do conversations look like in your organization? What do they focus on?

If you are like most, they revolve around operational matters and fighting today’s crisis. Discussion and decisions are likely top down in nature with senior management determining direction, strategies, and tactics with the expectation that employees will execute them as directed. When you take the time to look at business results, you might find that you and your colleagues debate the accuracy of data, argue about the interpretation of the results, and speculate on whether an unexpected result is a one time occurrence or a trend. If this sounds like your organization, you are not alone.

While successful organizations do deal with operational activities and decisions, and firefighting, they also make sure that they spend adequate time exploring and discussing strategic matters on an ongoing basis. They engage employees at all levels of the organization in an ongoing dialogue about what the organization should be, how it should get there, how it’s doing/performing, and what should be done to improve. They create multiple venues and opportunities for these conversations to take place including business results review sessions where the root cause drivers of performance results and the impact of current performance on the future success of the organization are discussed, and evidence-based corrective action plans are created and debated.

The introduction of a new business performance management tool such as the strategy map or the balanced scorecard offers an organization the opportunity to engage with new business information and stimulate new kinds of conversations across the company. Organizations that introduce these tools without changing the nature of their conversations never reap the full potential the tools were meant to deliver.     

 

 

Set Clear Business Priorities

Success in business is as much about deciding what NOT to do as it is about deciding what to do. This is critical when defining direction and business strategy. And it is equally critical when making business decisions about relative work efforts, resource allocation, and dealing with day to day work demands. Successful organizations determine a small set of strategic priorities and then leverage their business performance management tools to communicate, test and validate, and revise their business priorities. They also use these tools to give employees at all levels of the organization the information they need to make day to day business decisions that align with organizational strategy and strategic priorities.   

If your organization doesn't do a good job today at prioritizing work and decisions, and does not use the introduction of business performance management tools as an opportunity to develop this capability, you will find that implementing any tool puts an additional and unwelcome strain on the overall capacity of your organization. Rather than seeing your business performance management tools as a help, you run the risk that employees will become resentful of them because (1) the tools have added additional strategic considerations to the overall work of the organization; and (2) utilizing the new tools has created additional administrative work for them.

When introducing business performance management tools such as strategy maps and the balanced scorecard, be sure to also take the opportunity to use them to identify and communicate a focused set of business priorities for your organization. These tools were designed to help you do this – wise adopters take advantage of this opportunity to focus the work of their entire workforce and organization.     

 

 

Build New Leadership Capabilities

Leveraging business performance management tools to get the most out of them and make the new way of managing “the way we work” at all levels of an organization is a new skill for many leaders, managers, supervisors, and employees. Managing in the new way often requires a complete change in behaviour from the previous operating and managing style and generally demands new levels of accountability from leaders and employees. Do not assume that simply introducing the strategy map or rolling out cascading balanced scorecards will automatically change the way managers lead and the types of discussions they have with their team members.

Successful organizations make their new expectations for manager and employee behaviour explicit and will then provide everyone with the education, training, and ongoing supports they need to live up to new expectations. In addition, they will offer everyone incentives to manage and work in the new way, including building behavioural and performance expectations into personal goal plans, and basing compensation on success in adopting these new skills and behaviours and building advanced levels of capability in this regard.

Don’t expect the introduction of new business performance management tools to magically transform the way your organization works. To achieve the changes outlined above and make them "the way we work", you must support tool implementation with a formalized programme that builds the appropriate skills and capabilities in every employee in your organization.

    

 

Many organizations implement strategy maps and the balanced scorecard in the hopes that these business performance management tools will provide them with the silver bullet they need to achieve improved business results over the long term. Unfortunately, the landscape is littered with stories about companies that abandoned their selected tool because it failed to perform to expectations and/or deliver the desired business results. In the majority of cases, when you dig deeper into the failure, you discover that the adopting organization simply rolled out the tool while managing in the same old way. Essentially, the sub-optimization of the tool was a result of failing to support it with the behavioural, cultural, and systemic changes required to receive the maximum benefits of business performance management tool utilization.

I think that there is one critical reason why organizations fail to go all the way when implementing a business performance management tool. While some just honestly don’t realize that the new way to manage is a key element of success, I believe that many organizations and business leaders are searching for a quick fix to their problems. Implementing a tool requires action, can be done relatively quickly, and the result is tangible – you can see a new strategy map or balanced scorecard when it is in place and it feels like progress. Culture, behaviour, and organizational systems are more intangible in nature. They can be difficult to change and often leaders are worried that it will take a long time to effect the change (particularly if they are unsure about how to do it). And when the change does happen, you often can’t see it easily (though there are some great assessment tools out there that can help you measure that the change is indeed happening).

Bottom line? Implementing a new business performance management tool is sexy while effecting the required cultural and behavioural change feels like work. However, without these fundamental changes, the business performance management tool you choose to implement will never live up to its potential for you and your organization.

 

Looking for better business performance in 2012?

Go ahead and adopt the business performance management tools that interest and inspire you the most - but also make a commitment to implement the new way to manage across your organization. The maximization of your return on your investment in business performance management and the achievement of sustained performance success in 2012 and beyond are dependent on it.

  

Have You SMaC-ed Your Company Yet?

If you haven’t done so already, I would encourage you to get and read Jim Collins’ latest book, Great by Choice, right away. Following on in the tradition of his earlier books, Good to Great, Built to Last, and How the Might Fall, Collins and his colleague Morten Hansen  focus this book on exploring the key attributes that distinguish companies that perform exceptionally well in turbulent times from those that underperform or worse.

 

Referring to these high performing companies as “10X cases”, Collins and Hansen selected 7 companies (Amgen, Biomet, Intel, Microsoft, Progressive Insurance, Southwest Airlines, and Stryker) that demonstrated three specific criteria:

1. They sustained spectacular results over a period of 15+ years (ending in 2002) relative to the general stock market and relative to its industry;

2. They achieved these results in a tumultuous environment earmarked by events that were uncontrollable, fast-moving, uncertain, and potentially harmful; and

3. They began their rise to greatness from a position of vulnerability, being young and/or small at the start of the journey in question.

 

In his usual style, Collins also selected comparison peer companies for each of his 10X cases and used these comparisons as the foundation for his analysis. These companies include Genentech (for Amgen), Kirschner (for Biomet), AMD (for Intel), Apple (for Microsoft), Safeco (for Progressive Insurance), PSA (for Southwest Airlines), and United States Surgical Corp (for Stryker).

What the authors found was that, relative to their less successful peer companies, the 10X cases were not: more creative; more visionary; more charismatic; more ambitious; luckier; more risk seeking; more heroic; or more prone to making big, bold moves. That is, both groups showed similar levels on all these attributes.

 

What DID distinguish the 10X cases from their peers was what Collins and Hansen call:

Fanatic Discipline – They demonstrated a relentless, unbending focus on their quest - maintaining constancy of purpose and adherence to a disciplined plan of execution, regardless of changing conditions

Empirical Creativity – They relied on direct observation, conducting practical experiments, and/or engaging directly with evidence rather than opinion, conventional wisdom, authority, and/or untested ideas to generate and make bold, creative moves AND manage risk at the same time.

Productive Paranoia – They maintained hyper-vigilance in good times and in bad, considering the possibility that events could turn against them at any inconvenient moment and they prepared for such an occurrence because they believe with 100% certainty that it will happen.  

Level 5 Ambition/Leadership – 10X leaders channeled their intensity into something larger and more enduring that themselves and their ambition was on a purpose such as building a great company, changing the world, or achieving a great objective that’s not about them.

 

In addition to identifying the attributes of 10X cases, the authors also take the time in this book to discuss, in detail, some of the key supporting tools, activities, and actions that all 10X cases used and/or executed to achieve success. I was particularly interested in one tool called SMaC – a set of durable operating practices/principles that create a replicable and consistent success formula (SMaC stands for specific, methodical, and consistent).

The great thing about the SMac is that it provides an operating code and decision-making tool that helps turn high level strategic concepts into reality. A SMaC acts as a set of principles that are more enduring than tactics, which can change from situation to situation. The exciting thing that Collins and Hansen uncovered about the practices outlined in a SMaC is that they usually stand up over time (in several cases for decades!) and apply across a wide range of circumstances.

A good SMaC is short and precise (often 10 tenets or less), is based on insights about what works that have been generated through the empirical validation, and outlines both what to do and what NOT to do. The clarity that the SMaC provides helps people remain steadfast and focused on the business fundamentals that have been proven to produce results, in good times and in bad.

 

Collins provides examples of the SMaC’s of several 10X companies in his book - you can read them for yourself when you pick up the book. However, just to give you an idea of what a SMac looks like, here are a few example SMaC tenets:

Remain a short-hail carrier, under two hour segments; Stay out of food services; Retain Texas as our #1 priority (Southwest Airlines)

Concentrate on non-standard auto insurance, insuring high-risk drivers whom major insurance companies would likely turn away; Exit any state where regulation makes profitable pricing with superb claims service impossible; Never use loss reserves to manage earnings (Progressive Insurance)

You get the idea.

 

10X cases adhere to their SMac with fanatical discipline but that’s not to say that they aren’t open to modifying it when required. Typically, they use empirical creativity and productive paranoia as key considerations when making the decision to amend their SMaC. However, while 10X cases did make changes to their SMaC, the authors’ research showed that the comparison peer companies changed their recipe for success, on average, four times more frequently than the 10X cases did.   

 

When I read about the SMaC concept, I got very excited about the possibilities. As we all know, a key barrier to strategy execution is the understanding of what the strategy really looks like in action. While this is seen as a critical problem at the frontlines of an organization, I know that this can also be a critical problem at the executive level and in the boardroom. I believe that, when partnered with an organization’s change agenda and strategy map, a SMaC can effectively make a company’s business strategy more actionable and facilitate consistent and aligned decision making at all levels of the organization.

I am so convinced of the value of the SMaC that I took the opportunity to introduce it a few weeks ago into my strategic planning work with a client. I think that the timing of the SMaC discussion is critical and needs enough fact-based dialogue behind it before the effort is made to create the list. As a result, I placed the SMaC discussion after: a stakeholder needs and SWOT review, the definition of the primary stakeholder value proposition, and a discussion of the organization’s purpose. In fact, I used the development of my client’s SMaC as a platform for further detailing the organization’s purpose. Once the SMaC was created, we were able to test out its robustness by running a few scenarios through the principles and using them to determine whether a go-no go decision, based on the criteria, felt “right”. With the SMaC in hand, it then became very easy for my client to define their change agenda, their 3 year vision statement, their strategy map, and gap closing projects. I found that the SMaC provided my client with a very useful tool for guiding the alignment of those subsequent elements with the overall purpose of the organization.

 While I won’t be able to see how having a SMaC in place affects my client and their strategy execution and business decision-making until some time in the future, the general consensus of the group doing the work was that the SMaC will be a very useful tool moving forward, particularly as leadership faces expected external pressures and difficult strategic and operational decisions.

 

The SMaC concept presented by Collins and Hansen has been road tested in successful organizations. It provides business leaders with an important tool that will help them put their strategy into action AND guide them in evaluating opportunities as they arise and in making strategic business decisions, in good times and in bad, that are consistent with the purpose and vision for their company. The key to success in developing and using a SMaC is to (1) leverage evidenced based insights to create a focused set of ten or less operating principles, (2) follow them with strict discipline, and (3) remain open to making adjustments when, and only when, it is required.

 

Have you SMaC–ed your company yet? If not, I encourage you to pick up Great by Choice and get SMaC-ed today!

 

Does Your Balanced Scorecard Need Surgery?

From time to time I get a call from a business leader who has been using the balanced scorecard in their organization but is underwhelmed with what it is doing for the company. In most of these situations, when I dig deeper into the problem, I quickly discover that, instead of a trim and focused set of indicators, the balanced scorecard in question is an unwieldy report containing 50+ indicators of all description that aren’t clearly linked to the business strategy.

 

A balanced scorecard that is weighed down by too many indicators is one of the leading problems organizations have with their scorecards today. The problem with these types of balanced scorecards is that they are very difficult to manage and use. They require a small army of people to populate the data and produce the results reports, making the balanced scorecard process an extra, rather than integral, part of doing business. More importantly, instead of providing business leaders with a quick snapshot of what is going on in the business strategically and facilitating evidence-based decision making, these balanced scorecards become just another huge report that is difficult to wade through and gain insights from.

 

A great balanced scorecard is a focused tool that lives up to its defined purpose – whether it’s to provide business leaders with the insights they for internal strategy management, to demonstrate compliance with external standards or regulations, or to help assess the contribution of employees in relation to the business strategy. Ideally, regardless of its purpose, a balanced scorecard should include 16 to 36 indicators with a good guideline being 1 or 2 indicators for each of the strategic objectives on your strategy map. While achieving this goal can be a challenge, it can be done with focus and an attention to what really matters for business success.

 

When a balanced scorecard has too many indicators it needs surgery – it’s as simple as that. However, the key to making the surgery easier is to identify and solve the root cause problem(s) driving indicator proliferation before the cutting starts. In my experience, there are four primary root cause problems that can, alone or in combination with the other problems, drive an overpopulated balanced scorecard. These include: (1) too many strategic objectives on the strategy map; (2) a lack of focus on one primary purpose for balanced scorecard use in the organization; (3) a failure to remember that the balanced scorecard is not meant to be a diagnostic tool; and (4) a lack of, or unclear, strategic objective definitions.

 

Let’s take a closer look at each of these problems and explore how to solve them.

 

1. Too many strategic objectives on the strategy map

A good balanced scorecard must be built on your strategy map. And while it is possible to create a balanced scorecard from a traditional strategic plan, it is far easier, and you reliably get a better product, when you leverage your strategy map to create your balanced scorecard indicator set. Ideally, your strategy map should include 4 to 6 objectives per strategy map perspective. Assuming that you are using the four traditional strategy map perspectives, this translates into 16 to 24 strategic objectives TOTAL on your strategy map. And, I would even say that 24 strategic objectives are too many for most organizations. Ideally, I try to help my clients keep the total number in the neighborhood of 18.

You see, the problem is that unless you can ruthlessly select just 1 indicator for each strategic objective on your strategy map, a high number of strategic objectives will quickly translate into an even higher number of balanced scorecard indicators. The key to controlling the number of strategic objectives on your strategy map is to following the guidelines provided in my last blog post: “Walking the Simplicity-Complexity Tightrope in Strategy Mapping” (click here to read).

Tip to make balanced scorecard surgery easy: Removing excess strategic objectives from your strategy map will naturally translate into the removal of the associated indicators from your balanced scorecard.  

 

2. A lack of focus on one primary purpose for balanced scorecard use in your organization

Did you realize that there are actually many different ways of using the balanced scorecard? The traditional way is to use the results to assist with internal strategy management, however, balanced scorecard indicator sets are also used for external reporting to shareholders, external stakeholders, accreditors, and external regulators. Balanced scorecard results can also be used to provide the basis of employee compensation and bonusing schemes and payouts. If you look closely at the profiles of the indicator sets used for these various purposes, you’ll notice that they are different. For example, scorecards used for internal strategy management will usually have the most diversity in indicators – a combination of outcome and process and qualitative and quantitative indicators. On the other hand, external reporting scorecards will generally be focused on outcome indicators. Indicators used for compensation are almost always objective and quantitative in nature (rather than subjective and qualitative) – making payout decisions more sound and defensible.

Problems start arising when you try to create your balanced scorecard with multiple purposes in mind. In these situations it is often necessary to include multiple indicators per objective on the same scorecard to accommodate to the different indicator profile requirements. In my experience, the resulting balanced scorecard doesn’t do a good job at serving any of the various purposes it was designed to fill - primarily due to lack of focus and measurement clarity.

The best advice is to build your balanced scorecard with one purpose in mind. This will make it easier to select a small number of indicators that are really relevant to your strategic objectives. Over time, and as your organization’s balanced scorecard capabilities grow, you may be able to create a streamlined, multi-purpose balanced scorecard if required. However, achieving this goal usually remains challenging.     

Tip to make balanced scorecard surgery easy: Determine the primary purpose of your balanced scorecard and then eliminate extra indicators that may have been selected to support an alternate purpose for balanced scorecard utilization.

 

3. A failure to remember that the balanced scorecard is not meant to be a diagnostic tool

A good balanced scorecard provides an organization with a view of the progress of the business strategy and the impact of strategy management efforts on strategy execution success. To do this, a balanced scorecard must include representative indicators that will register change, allowing the scorecard to play its role as an early warning/alert system when performance in key strategic areas is below expectations.

It is important to realize that a good balanced scorecard is not a diagnostic tool. That is, it is not meant to alert business leaders to problems AND provide data on the root cause drivers of those problems. A tool designed to play both of these roles would clearly require a very large measure set. Ideally, a balanced scorecard is composed of indicators that are sensitive to change and when they register a change, the organization goes to various other data sources to complete an analysis to identify the root cause(s) of the problem.  

Many organizations don’t realize, or forget, that the balanced scorecard is not meant to be a diagnostic tool and, as a result, they turn their balanced scorecard into a comprehensive measure set. By limiting the balanced scorecard to its real purpose, it becomes easier to keep the indicator set focused.

Tip to make balanced scorecard surgery easy: Look for diagnostic operational measures on your balanced scorecard and remove them. Limit your scorecard to indicators of the performance of your strategic objectives (i.e. ones that will effectively alert you to trouble spots) and be satisfied with going to other data sources for performance analysis information when required.

 

4. A lack of, or unclear, strategic objective definitions

Balanced scorecard indicators are meant to be representative of the strategic objectives on your strategy map. To select a focused set of indicators, it is critical to have a clear understanding of what is intended by each strategic objective. This is why strategic objective definitions, outlining what is, and isn’t, included under the strategic objective, are critical – they support strategy execution success and provide the key to making informed balanced scorecard indicator choices. Without these definitions there is little basis for indicator selection decisions usually resulting in an unfocused collection of indicators for each strategic objective.

Ideally, clear strategic objective definitions guide the balanced scorecard indicator selection process. As candidate indicators are developed, the final decisions can be made based on their relevance in relation to each strategic objective definition. A well written strategic objective definition is critical in the process of selecting the one or two best indicators to represent that strategic objective.  

Tip to make balanced scorecard surgery easy: Do each of the strategic objectives on your have definitions? If not, take the time to create them. Once they are in place, take the list of indicators for each strategic objective and test them against the definitions. Select the one or two indicators that are the most representative of each strategic objective. Discard the rest from your current balanced scorecard and/or save them for future consideration.

 

Does your balanced scorecard include too many indicators? If so, it’s time to trim. However, rather than jumping in with the cutting shears, the best approach is to first determine which of the four typical root cause problems for indicator proliferation you are facing and then take steps to eliminate them. This will usually lead to obvious and easy indicator cutting decisions - resulting in a lean and focused balanced scorecard that is easy to manage and use, and more than lives up to its value as a strategy management tool.

 

Walking the Simplicity-Complexity Tightrope in Strategy Mapping

It’s not unusual to hear people voice concerns about the complexity that seems to be associated with strategy maps – in fact, I’ve heard remarks to this effect at least three times in the past week alone. I think many organizations dismiss using the strategy map for just this reason – we have come to think of strategy maps as a complex mess of colors, bubbles (aka. strategic objectives), and arrows that go all over the place looking like spaghetti or the web of a crazed spider!

It’s too bad because organizations that don’t leverage the strategy map as a core component in their strategic plan are missing a huge opportunity. A good strategy map is a multi-purpose communication and business management tool that: draws out the business model business leaders believe will deliver the organization’s value proposition; highlights the key business drivers and priorities for the upcoming planning period; translates the business strategy into action so that staff at all levels of the organization can execute the strategy locally in a way that contributes to moving the business forward; and it provides employees with a guide for consistent, strategy-focused decision making.

It’s really a shame that such a powerful tool is dismissed by many organizations based on the misconception that strategy maps are inherently complex. The truth is that strategy maps don’t have to be an overly complex mess - it just seems to me that we have made them that way. I believe that the key to solving this problem is for organizations to balance the ying and yang of simplicity and complexity in their strategy mapping efforts rather than choosing one over the other.

How can this be done?

The key is to walk the simplicity-complexity tightrope in strategy mapping by (1) being sure that, in a drive for simplicity, you don’t reduce your strategy map’s ability to do all four of the things listed above well, and (2) ensuring that the level of complexity in your strategy map doesn’t obscure its power as a communication and management tool.

So, let’s talk about the two PRIMARY sources of complexity in strategy maps: strategic objectives and cause and effect arrows.

 

Strategic Objectives

The most obvious reason why a strategy map gets labeled as “too complex” is due to the number of strategic objectives on it.

I have met many people who believe that anything other than a streamlined strategy map is too complex. These folks dream of a strategy map with 8 or fewer strategic objectives on it. Unfortunately, unless you run a very simple business, I believe that this goal is unrealistic for most companies.  In my experience, I haven’t seen any real working strategy maps that are this streamlined – even in organizations I would call mature strategy map and balanced scorecard users.

As a rule of thumb, a manageable number of strategic objectives for a strategy map is between 12 and 20 (4 – 5 per strategy map perspective). It is quite usual for your first draft strategy map to include a very high number of strategic objectives (often more than 24). Your goal through an iterative process is to reduce this number by repeatedly asking the specific question associated with each strategy map perspective and then working hard to come up with a focused set of answers (translated into strategic objectives) that provide the most high value responses to each question.

The four questions by perspective are:

Financial: What financial results must we achieve to be successful in the eyes of our shareholders? (private sector); To achieve our mission and vision, how must we use our financial resources and how must we appear to our funders? (public sector)

Customer/Stakeholder: To achieve our financial performance results, want must we deliver to our customers? (private sector); To achieve our mission and vision, what must we do for our stakeholders? (public sector)

Internal Process: To satisfy our customers/stakeholders, what business processes must we excel at? (both sectors)

Organizational Capabilities: To deliver to customer/stakeholder expectations, what skills and capabilities, culture, tools, and technologies must we have? (both sectors)     

The goal in answering these questions isn’t to include absolutely everything your company does – this is where the road to overly complex strategy maps begins. The key is to identify the vital few elements in your business that will make a real difference in contributing to success. When answering the four questions above, it’s critical to keep your responses focused on the question and limited to the most important drivers. A precise approach will allow you to meet the goal of 4 – 5 (maximum) strategic objectives per perspective.

It’s important to mention that, over time, as you gain more experience using your strategy map and gather deeper insights into what really drives results in your business, you and your colleagues will probably be able to streamline your strategy map further. It’s important, however, to respect the inherent complexity in your business and not try to streamline it so much that you limit the ability of your strategy map to make its contribution to business success.

Another reason why I see strategy maps getting labeled complex is as a result of the wording of the strategic objectives themselves. As a general rule, the best strategic objective names are short (3 – 5 words maximum), descriptive, and begin with a verb. The shorter the name, the less real estate each strategic objective takes up on your strategy map. It’s a small thing but don’t underestimate its impact on reducing the perception of complexity for your strategy map. Also, short, snappy strategic objective names are more memorable – making it more likely that employees and stakeholders will be able to remember the key elements of your business strategy.

         

Cause and Effect Arrows

There is no doubt that cause and effect arrows are the number one contributor to the complexity stigma given to strategy maps! They can be so confusing that many organizations choose to leave the cause and effect arrows off of their strategy map. This is a short-sighted solution to the cause and effect arrow problem because mapping and testing the cause and effect relationships in your business is perhaps the most valuable contribution your strategy map will make to the current and future success of your business.

The problem is that most organizations don’t know where to draw the line when it comes to cause and effect arrows. They begin mapping out the relationships between strategic objectives and, before they know it, they have a mess of arrows on their hands.

The key to success with drawing cause and effect arrows is to map out the direct and most critical relationships ONLY. By avoiding the indirect relationships, it becomes easier to simplify your strategy map while also demonstrating the complex inter-relationships that exist in your business.

 

Unnecessary complexity is a real problem with strategy maps. The solution, however, isn’t to go overboard and over simplify your strategy map. Doing this ignores the true complexity of your business and reduces the ability of your strategy map to deliver on all its promises as a powerful communication and business management tool.

The key to success is to walk the simplicity-complexity tightrope so that your strategy map depicts the complexity of your business accurately but in a straightforward and understandable way.

This can be achieved by including a focused set of concisely named strategic objectives, and a limited number of cause and effect arrows, that is restricted to direct cause and effect relationships only, arranged in an aesthetically pleasing way on your strategy map (don’t underestimate the value of a “pretty” strategy map in reducing the perception of complexity!).

 

As a closing thought, I will mention that, even when a strategy map does a great job of balancing the simplicity-complexity tradeoff, some people may still try to label it as too complex. More specifically, you’ll hear them say that there is no way that someone looking at it on their own could understand it.

While I don’t agree that this is the case with a well done strategy map, I will concede that it could happen in a situation where someone doesn’t know how to read and use a strategy map. Either way, I strongly recommend that an employee’s or stakeholder’s first encounter with your strategy map should be a guided experience. Ideally, all employees and stakeholders should have the strategy map revealed to them as part of a communication process focused on sharing your organization’s “strategy story”. By talking through your strategy map gradually and in a logical sequence, employees and stakeholders will have no problem understanding your strategy map and, ideally, seeing how they fit into the picture.

 

Have you been hesitant to use a strategy map in your organization because you have been worried that it is a complex tool?

If you create your strategy map following these guidelines while placing an emphasis on focus while still respecting the true complexity in your business, I am confident that your strategy map will walk the simplicity-complexity tightrope effectively and successfully.   

 

Why Focusing on Your Target Customer and Defining Your Value Proposition Isn’t Enough for Business Success

Have you identified your company’s target customer yet?

Based on all I’ve been reading lately, your organization is behind the eight ball in this economy if you haven’t. In all honesty, there is nothing special about the current business environment that makes identifying your target customer more critical today than at any other time. It actually turns out that the power in the marketplace has been shifting for some time to the customer and, incidentally, their service expectations have been rising. Essentially, knowing who your target customer is has been a requirement for some time but it feels like it has turned into a business imperative in a tough, and suddenly tight, economy and marketplace.

Identifying your target customer gives your company someone (or a group of someones) to focus on. It gives you someone to get to know really well, allowing you to develop an intimate understanding of their evolving wants, needs, and expectations. With this information, you can identify and create products and services that will suit your target customer AND you can design a customer experience that will appeal to them on an emotional level. In other words, knowing who your target customer is allows you to gain a comprehensive understanding of what they value.

At a basic level, customer value can be looked at as a simple plus-minus equation. On the plus side are all the benefits your product or service and customer experience provide to your customer. On the minus side are the costs to the customer that are associated with using your products or services and interfacing with your company. Costs include money, time spent/wasted, and other intangible, non-monetary costs. Benefits include the product and service features that your customer is looking for as well as other benefits you deliver that exceed your customers’ basic service expectations. When the benefits offered by your product, service, and customer experience outweigh the costs in the eyes of your customer, you meet or exceed customer expectations and add value. When, however, costs outweigh the benefits, you fall short of customer expectations and your company destroys value for your customer. Customers are usually attracted to companies and products/services that provide value and are generally repelled by companies and products/services that destroy value – no real surprise here.         

However, here’s something that’s important to remember: Value is defined by your customer. That is, perceived benefits and costs are in the eyes of the customer – not yours.

Not surprisingly, different target customers buy based on different perspectives of the cost-benefit tradeoff. For example, some are looking for great products that offer high levels of quality for a low price while others want to receive a consistent product and/or service experience at a predictable (often low) price. Some customers are willing to pay a premium price just to look cool or have a first run or limited edition product or experience while others want to buy from a company that really understands them and can fulfill a variety of needs by offering a one stop shop model. Identifying your target customer and really understanding them positions you and your company to hone in on their perspective on value. And, with this understanding, you can craft your customer value proposition – the combination of benefits you are going to provide to your customer.

As you likely know, there are three classic customer value propositions. While there have recently been suggestions that there are additional value propositions (including market or niche creators/new market leadership such as seen with Cirque du Soleil), let’s stick with the big three: Operational Excellent; Product Leadership; and Customer Intimacy.

 

Operational Excellence: Companies adopting this value proposition focus on delivering exceptional levels of quality, price, and ease of purchase and they put together an offering that represents an attractive combination of these three elements. They have a reputation for executing reliably and with consistency, usually providing their customers with low prices and expedient, dependable service.

 

Product Leadership:  Companies pursuing this value proposition excel at creating new products that are on the leading edge and are highly desirable. Often, successful companies in this category seem to create and market products that the customer wants before they know they want it (often said about Apple’s products). The focus is on product innovations (not incremental improvements) that explode existing paradigms and boundaries and these companies consistently provide their customers with the newest and most innovative products and/or services, often at a premium price.     

 

Customer Intimacy: Companies with this value proposition build close bonds with individual customers within the customer group. Customer-intimate companies leverage their knowledge of what their individual customers’ needs and pain points are to create customized solutions, often at very reasonable prices. The hallmark of these companies is giving the customer more than they expect and going above and beyond to provide customers with a total solution. As a result of their focus on the individual customer and their relationship with them, these companies enjoy high levels of customer loyalty.  

 

It is important to note that while successful companies will choose one of the big three as their primary customer value proposition, they do not exclude the other two in their operations. They will, however, perform at threshold levels only on these subordinate value propositions because they realize that some of the elements in the individual value propositions are in direct conflict with each other. Determining their leading customer value proposition allows for easier prioritization of work efforts and more focused decision-making – translating into a real ability to deliver on the primary drivers of customer value.    

The key to success with customer value propositions is to leverage your understanding of your target customer AND the value propositions of your competitors to differentiate your company in the eyes of your target customer. To do this you can either choose to adopt a different customer value proposition from your competitors OR excel on different attributes within a shared value proposition – these are the two primary ways to differentiate your company in a competitive marketplace.   

 

While knowing your target customer and adopting a compelling customer value proposition are critical for business success, these two things alone are not enough. In fact, it turns out that, besides identifying a target customer to satisfy, excelling on a specific dimension of value and delivering a compelling value proposition, and performing at threshold levels on other customer-defined standards of value, to achieve sustained business success, you must deliver and improve the value you provide year after year on an ongoing basis. The only way to do this, and successfully deliver on your promised value to your customer, is to build and implement an operating model that is fully aligned with your customer value proposition.

Interestingly, the elements of a company’s operating model have a lot in common with many of the balanced scorecard’s perspectives. These elements include the organization structure and peoples’ skills and capabilities, the company’s culture, the nature of strategic information technologies, the types of management systems employed, and the range of business processes implemented. The elements of the operating model have synergies with the learning and growth/organizational capabilities and internal processes perspectives on the balanced scorecard (hold this thought).

The key to success when implementing a specific customer value proposition is to ensure that it is supported by the appropriate operating model. So, what is the right operating model for a given value proposition?

 

Operational Excellence: This value proposition features highly centralized functions with the most skilled resources residing at the core of the organization and a command and control approach to management. The organization is very disciplined and process focused with conformity with defined cost and quality specifications being highly valued. Information technology features integrated, transactional systems that support business processes that are focused on delivering products on a predictable service cycle using standardized assets. The operating model in operationally excellent organizations is built on conformity to standards and specifications rather than flexibility and is designed to deliver predictable levels of performance and profitability.

 

Product Leadership: This value proposition features a more fluid organizational structure where ad hoc teams are formed and then re-formed and high skill levels reside throughout the organization. Management is comfortable with risk and it rewards the innovation capacity of individuals within teams. Experimentation and out of the box thinking are musts and the culture is built around going for broke and playing to win. Information technologies are focused on enabling communication, co-creation, and knowledge sharing, and key business processes include invention, research and development, commercialization, and marketing. The operating model of product leaders is dynamic and agile so that new ideas are created, tested, and commercialized and profit is realized as quickly as possible.

 

Customer Intimacy: This value proposition features client-focused teams with high skill levels residing as close to the customer as possible. Management is focused on deepening the relationship with the customer and expanding wallet-share. Customization to customer specifications is the force driving company-client interactions and employees are experts at learning about the needs of their clients. Information technologies are focused on the customer and feature the ability to integrate relevant internal and external information in one knowledge hub. Key business processes are flexible and responsive and are focused in the areas of customer acquisition and relationship development, and custom solution generation. The operating model of customer-intimate organizations is client-specific and customer-focused, is geared to supporting maximum solution customization, and is focused on the lifetime value and profitability of each client relationship.

 

With the obvious synergies between the elements of a company’s operating model and the classic balanced scorecard perspectives, it is easy to see how the strategy map (which leverages the balanced scorecard perspectives) becomes the best tool for formulating, displaying, and communicating the operating model associated with a company’s primary customer value proposition. When you think of it in this way, strategy map use becomes as critical to success as defining your target customer and your primary customer value proposition.

Popular thinking about the foundations for business success is currently focused on the need to define a company’s ideal customer and the customer value proposition. However, actually delivering on that customer value proposition isn’t as easy as making a public statement of your current value proposition. Success requires an aligned operating model that is specifically designed to deliver the differentiating elements of your primary customer value proposition.

A best practice approach for success includes (1) clearly identifying your target customer; (2) identifying your primary customer value proposition and determining which specific attributes to excel on to achieve differentiation in the market place; and (3) creating a strategy map that clearly defines and lays out the operating model required to deliver that specific customer value proposition.

With all three components in place, and a approach dedicated to keeping them relevant to customer and market needs in an evolving environment, your company will be well positioned for business success over the long term.

 

Why does your customer buy from you? Why do your employees think your customer buys from you? Are the answers the same? Is your current operating model helping you exceed customer expectations?

To avoid business failure, you must be confident that your company can deliver. Interested in testing your company’s current capabilities quickly and accurately?

Find out how you can by simply clicking here.

 

Is the Balanced Scorecard Out of Date?

This is great question posed to my colleague Brett Knowles at a thought leaders panel I recently participated on (here’s the link to the webinar ). Since this is such an important question and I didn’t have an opportunity to provide my perspective on it, I thought I would now.

First, a little background.

As you may know, the balanced scorecard (BSC) was introduced to the world in the mid 1990’s by Dr.’s Kaplan and Norton as an alternate approach to measuring the performance of organizations. Historically, the focus in business measurement had been on measures of financial performance. Kaplan and Norton forwarded the notion that because these were measures of past performance and were really financial outcome metrics, they provided little insight into how the results were achieved (a critical gap in information when performance results are below target) and were not particularly useful in making decisions moving forward. In response to these flaws, Kaplan and Norton introduced the balanced scorecard, a system of measurement that included both financial AND non-financial metrics (i.e. the drivers of those financial results distributed over three primary supporting perspectives – customer, internal process, and learning & growth – arranged in a logical hierarchy).

At the time, the balanced scorecard was recognized as a revolutionary and transformative approach to business management. However, in my experience, most of the organizations I have seen adopting the balanced scorecard have tended to use the balanced scorecard as a reporting tool with a balanced set of measures (that may or may not relate to strategic objectives) and less as a business performance/strategy management tool and approach. More on this later.

 

Over time, the use of the balanced scorecard has waxed and waned. There were many early adopters who realized some success with the balanced scorecard. In the recent report “Management Tools and Trends 2011” by Bain & Co. (read the report here), survey results showed that while one half of business leaders in emerging market companies are using the BSC to tell them whether their business strategy is delivering results, only about one-third of executives in established market companies are using it. In addition, three times as many emerging market executives are using the BSC to improve their decision making as compared to business leaders in existing markets. Suggesting perhaps that the balanced scorecard has run its course in mature markets while its use is just being explored in the emerging market climate.

  

While the Bain & Co. report shows that that the balanced scorecard ranked 6^th on a list of the top ten management tools in 2010, this is the same ranking reported in 2008 – a stagnating result. It is notable that the BSC didn’t even make the list prior to 2008. Do these results suggest that the balanced scorecard was never that big a hit as a business management tool in the c-suite of businesses in the developed world in the first place and that the current appearance on the list is courtesy of the interest in the BSC in emerging market companies? I’m not sure but would really like to see that research study.

 

A closer look at a more detailed graph of the historical use of the balanced scorecard provided by Bain & Co. (see it here) tells an interesting story.

This graph shows that, with these respondents, the balanced scorecard came out of the chute strongly in 1996 with a 38% utilization rate. After some mixed results relating to use, there was a strong upswing through the late 1990’s and early 2000’s that peaked somewhere around 2006/08 at approximately 70%. By 2010, this utilization rate had dropped sharply among respondents, settling in at about 48% - roughly a 10% increase over the initial 1996 utilization rate. It will be interesting to see whether this utilization rate holds at this level moving forward.

It is also interesting to note that from 1996 to 2010, the satisfaction rate with the balanced scorecard as a management tool has remained fairly constant hovering around a score of 3.7 out of 5.0. Ironically, peak utilization of the balanced scorecard amongst respondents coincided with a slight dip in satisfaction levels.

 

So, what caused the big drop in balanced scorecard utilization around 2008? Since we know that satisfaction with the balanced scorecard as a business tool likely wasn’t the driving factor amongst survey respondents, the most obvious culprit, in my opinion, is the economic crash. Basically, it looks like many respondents abandoned the balanced scorecard when business times got rough.

Despite the fact that this study may not be providing us with the most robust data, I think that it may be an interesting indicator of BSC utilization so let’s look at this a little closer. Let’s consider that perhaps the question isn’t just “is the balanced scorecard outdated” – maybe it’s, is the balanced scorecard an outdated tool in volatile, unpredictable, and tough economic times?

 

What is needed to succeed in the business conditions we are facing today? The short list of key requirements includes the ability to:

1. Know when business performance is heading in the wrong direction as early as possible and have the business intelligence required to change course, eliminate performance gaps/root cause problems in a surgical way, and produce improved results in a short period of time;

2. Have quick access to accurate and timely data that facilitates meaningful and consistent decision-making across the organization;

3. Leverage key external and internal insights and information efficiently and demonstrate agility (the ability to modify the business strategy and align tactics quickly) in the face of changing business conditions (including customer and market needs);

4. Access cause and effect data that can help make targeted investments that are guaranteed to produce specific outcomes and results;    

5. Optimize operational efficiency and increase the capacity of existing human resources by eliminating duplication of effort and streamlining work activities; and

6. Develop the capacity to produce better business performance results on a consistent and sustained basis.

  

Even though these business imperatives actually apply whether we are in good times or in bad, I think the need to be really good at all of them is acutely magnified in a business environment like the one we are in today. Having a gap in just one critical area can mean the difference between business success and failure so when the pressure is on, all of a sudden businesses need to focus on and excel at the 6 items above.

 

So, how/can the balanced scorecard help business leaders master each of these 6 business requirements?

If you take the limited view of the BSC, often adopted by BSC users, that the balanced scorecard is simply a new type of report that contains a balanced set of financial and non-financial measures, then I would say that the balanced scorecard might only be able to help you out with items 1 and 2. Given this, it’s obvious why executives might turn away from the BSC in tough, demanding business conditions - they are looking for a more comprehensive, all in one solution.

If you view the balanced scorecard strictly as a business reporting vehicle then I would agree that it is an outdated tool, particularly in volatile, unpredictable, and tough economic times.

However, the real power of the balanced scorecard is discovered when you treat it as a strategy-focused business management system. This system includes (1) your strategy map, where a focused set of strategic objectives are placed over four perspectives in order to clarify the strategy and the cause and effect relationships that exist among them, (2) the core business processes and strategic initiatives that drive or support the actual change required by the strategic objectives, (3) the associated accountability structure, (4) the set of measures/indicators that directly reflect or represent the strategy/strategic objectives and the associated root cause commentary, AND (5) regular discussion forums where business performance and strategic information is exchanged and decisions are made.

If you look at and use the balanced scorecard in this new way, the BSC is well positioned to help businesses address the 6 key business requirements outlined above, making it a very relevant business tool in any business environment but particularly in the one business leaders are facing today.

 

Further study is required to really understand why the balanced scorecard appears to be losing favor with executives in mature markets versus emerging ones. I suspect that it has to do with both the definition and application of the balanced scorecard AND the nature of the current business environment.

So, is the balanced scorecard out of date, particularly in today’s business climate?

I say definitely not if it is used the way it was truly meant to be used – as a strategy and business management system. 

Are you and your team tempted to abandon the balanced scorecard in your search for a tool/tools that will be more effective in tough times? The better suggestion is to ramp up and expand your use of your balanced scorecard so that it can deliver the benefits it was designed to deliver!

 

When Did Strategy Become a Four Letter Word?

After several meetings and discussions with colleagues and business leaders over the past few weeks, I’ve come to the sobering realization that strategy and, more specifically, strategic planning, has developed a bad name out there. More and more frequently, I seem to receive friendly advice telling me not to use the “S word” because it turns business people off. Just call it something else, or better yet, don’t talk about it at all they say – just convince “them” to do it without naming it strategy/strategic planning.

The unfortunate reality seems to be that, in many cases, executives and business leaders deal with strategy making and management because they know they should but they do so with a hesitation based in a real dislike for the process and the resulting plan (and distractions) it produces.    

Now, for me, someone who feels passionately about the value of strategy formulation and execution in driving higher levels of organizational performance success and more sustainable business results achievement, it’s really confusing, and worrisome, to think that strategy has become a dirty word in our businesses and organizations. So, I began to think about it and found myself wondering: Why is this the case? What is turning business leaders off?

How did strategy become a four letter word?

This is what I came up with.

 

1. Strategic planning can feel like a waste of time

The Problem: In a rapidly changing business environment, strategic plans are often out of date before they are rolled out. When this is the case, it’s easy to start to question the time, effort, expense incurred, and value associated with strategic planning activities. As a result, some organizations are swearing off the 3 – 5 year strategic plan and opting to complete 90 day plans that are really more tactical than strategic.     

The Root Cause of the Problem: The traditional approach to strategic planning no longer works in this dynamic business environment -

● It takes too long (6 months from start to plan production is simply too much time);

● It is too reliant on historical data (which doesn’t really help you move forward in uncharted waters) and doesn’t involve the people who know how the business really works in the strategy creation process;

● The plan it produces, as well as the annual planning cycle approach, aren’t dynamic and agile to change (reducing the relevance of the strategic plan as an effective business management tool) and the plan often ends up sitting on the shelf;

● The strategic plan is often a short to mid-term tactical plan that isn’t guaranteed to move the organization forward towards its long-term business goals; and

● No one in the organization (often including the executives that created the plan) really understands how to implement the strategic plan locally/in their everyday work activities (largely because it is written at a very high level and, though it seems to make sense, it’s unclear what implementation looks like below the corporate or executive level).    

The Turnaround Plan: Changing times require a different approach to strategy creation/formulation – one that works with, rather than against, a dynamic, often unpredictable business environment while still helping to chart a clear and understandable path towards the ultimate business goals of the organization. This new strategic planning process -

● Must be completed in weeks, not months;

● Leverages some data but is more reliant on their interpretation by, and the wisdom and intuition of, a broad range of stakeholders, including employees and key business partners, who participate hands on in the planning process;

● May involve an annual planning event but focuses more on quarterly strategy progress review and refresh/refinement sessions AND has mechanisms to identify, make and incorporate, and communicate required changes in the business strategy quickly, effectively, and efficiently at any time so that the strategic plan is always relevant; and

● Clearly lays out the long-term strategy to achieve the organization’s mission and vision AND both the mid-term (3 – 5 years) and short-term (12 – 18 months) business priorities, within the context of the long-term strategy, in an accessible roadmap format so that all employees and stakeholders understand what the key elements of the strategy are and what they look like in action. 

How to Learn to Like Strategic Planning Again: Drop the traditional approach to strategic planning and start formulating strategy using a fresher, faster, more dynamic, and agile approach.  

 

2. Strategic planning/formal plans introduce too much structure into the way we work

The Problem: While some people like process and structure, many do not. Strategic planning is a process that often produces a fairly prescriptive plan. As a result, those who have a more spontaneous approach to management can struggle with the rigor demanded by strategic planning.

The Root Cause of the Problem: On the surface, there are many perceived characteristics of strategic planning that seem to turn people off –

● Strategic planning is a deliberate process that is followed by a group of people to produce a certain result – if you dislike following processes, you probably won’t like strategic planning much;

● Strategic planning activities can be highly data driven with little to no opportunity for intuition and insights from a broad range of sources to make their way into the process – this makes strategic planning feel like a clinical process that is disconnected from the day to day realities of the business at the front lines; and

● A documented strategic plan can feel like it limits your options for individual creativity and innovation in your work.

While I see these concerns from time to time, and hear them presented as a rationale for disliking strategic planning, I think that they are really just convenient excuses. What I think is the true root cause driver here is a reluctance to (1) commit to a plan, (2) work together with others to implement the plan, including planning and possibly modifying personal actions based on their impact on others, and (3) be held accountable for one’s part in the successful completion of the plan and the achievement of targeted business results. Working with a strategic plan requires all this of everyone in the organization – no wonder it can feel like a scary proposition that is best to be avoided.  

The Turnaround Plan: Overcoming this particular problem requires a fundamental change in organizational beliefs and attitudes about strategic planning. To achieve this goal, co-operation is required from three sources which must be aligned with, and designed to support, the goal of helping people embrace the strategic planning process and its associated discipline.

Organizational and Management Processes 

● Business leaders, managers, and employees must commit to: adopting a strategic planning process that provides some structure and produces the desired results, follow and improve it moving forward, and stick with it over the long-term;

● Add strategic planning process and discipline to your organization but resist the temptation to go too far - the key is to add just enough structure to ensure that everyone is moving forward together in the same direction but not so much that there isn’t room for innovation and creative thinking, at all levels of the organization, about the best way to implement the strategy and get the organization to its intended goals;

● Management processes must integrate seamlessly with the strategic planning process, and the resulting plan, so that the business strategy (including strategy formulation and execution) becomes just a part of the way the organization works every day;

Supports and Rewards

● The organization must support business leaders, managers, and employees in their efforts to work on and within the strategic plan – this includes facilitating their involvement in the process by giving them the time away from their work to participate, and providing them with back up on the job;

● Business leaders, managers, and employees must be rewarded and recognized when they demonstrate the desired new attitudes and behaviors – this reinforcement helps sustain change across the entire organization; and

Leadership Behaviors

● Business leaders, managers, and employees must walk the talk and model the desired behavior at all times.

How to Learn to Like Strategic Planning Again: Focus on creating an organization, from top to bottom, that embraces the structure strategic planning provides and the commitment it demands.

   

3. The strategy execution failure rate is high

The Problem: Statistics have shown that the majority of organizations fail to actually do what their strategic plan says they’re going to do, so, many think: “Why bother planning in the first place?”

The Root Cause of the Problem: While strategy execution failure is a complex problem, there are typically four critical stumbling blocks that exist in the majority of cases including:

● Lack of employee buy-in for the plan;

● An unclear strategy execution roadmap;

● Unclear ownership accountabilities or no accountability framework; and

● Low levels of organizational alignment with the business strategy (including core processes and strategic projects, human resources and their skills and capabilities, and the plans (e.g. learning and development/human capital plans), tools and technologies, and resources (including budget dollars) that support the work being completed) 

The Turnaround Plan: Steps can be taken during the strategic planning process to reduce or prevent strategy execution problems including:

● Involving employees (as members of the strategic planning working team) in a meaningful way in the strategy creation process including making decisions in the key elements of the strategy and what they look like in action;

● As members of the strategic planning working team, help employees play the role of strategy ambassador throughout the organization and involve them in the roll out and implementation of the strategic plan;

● Develop your strategic plan in the form of a strategy execution roadmap that includes key strategic objectives, aligned business processes and strategic projects, and linked performance indicators – aligning processes, projects, and measures with your business strategy effectively links action with the strategy;

● Assign ownership (for strategic objectives, indicator data, indicator commentary, core business processes, and projects) across your organization, including clear responsibilities and target dates, that leverages current work responsibilities intelligently and build a culture of follow through within your organization; and

● Strive for maximum organizational alignment at all levels of the business with the elements of your strategic plan.

How to Learn to Like Strategic Planning Again: Leverage the strategic planning process to set the scene for strategy execution success. 

 

Strategy formulation and execution management are critical activities for any business that wants to achieve maximum organizational performance and sustained business success. The act of collaborating, talking about, and writing down your organization’s goals, and plans to achieve them, has a powerful effect on the amount of time and effort required to reach those goals, reducing them significantly for most companies.

If you want to avoid using the “S word” in your organization, I’ll leave that to you. However, the fact remains that successful companies have made peace with strategy (and the strategy formulation and execution management process) and have embraced it for the invaluable business management tool and process it is.

I believe that the key to success is not to avoid strategy but to adopt it on terms that make sense for your organization so that your business strategy/strategic plan can provide your organziation with all of the benefits it has the potential to deliver.

 

Is Measurement Really to Blame for Innovation Failures?

Recently, I have seen some suggestions that measurement, and more specifically, the choice of measures used, is a prime driver of innovation failure in organizations. While I agree that innovation can be problematic in organizations, I have to wonder whether when it happens it’s actually a strategy problem (maybe) or a management problem (more likely) dressed up as a measurement problem.

I understand – a lot of people REALLY dislike measurement. Measurement can be very troublesome when it is used incorrectly – to judge, blame, and humiliate people who are working very hard to do the best they can with what they’ve got access to. This is the dark side of measurement. And when all you have experienced is the dark side of measurement then it’s no wonder that people avoid and lay blame on measurement when business problems arise. Measurement is often an easy and visible target in these cases.

However, I worry that this type of response is due to the fact that measurement is largely misunderstood. Here’s what I think.

The purpose of measurement is to: (1) provide useable information and feedback on how business processes are performing, including the results they are producing; (2) provide early warning signals about possible operational and strategic issues; (3) facilitate insights into the cause and effect relationships within the business and how the organization works in an integrated way to produce business results; (4) facilitate organizational dialogue about what’s going on and to set the stage for learning and improvement, when required; and (5) support informed decision-making.

Measurement should NEVER be used to blame people for results because measures are generally designed to provide information about the performance of business processes and systems – not people. When unexpected results and under-performance occur, you likely have a process or system (i.e. organizational, management, accountability, etc.) problem on your hands – not a people problem.

That being said, when barriers to innovation occur in an organization, my experience is that it’s either a problem with the business strategy or it’s a management issue.

 

When it comes to creating and managing your business strategy, it is important to remember that measures are simply the tools we use to represent the key strategic objectives in the business strategy. You see, if you haven’t clearly defined the key elements of your business strategy, then it’s impossible to ensure that it is properly captured by a good measure set. A good measure set includes one or two indicators for each strategic objective in your business strategy – measures that directly or indirectly relate to a strategic objective based on its definition.

Let’s look closer at a business strategy that includes innovation as a key strategic objective. The first question I would ask is: What do you mean by innovation? Is it hard core R & D? Or does it look more like the incremental but important improvements achieved through continuous quality improvement (CQI)? Do you mean something altogether different and, if so, what? It is very important to realize that, if you want innovation to make its way into your measure set, it has to be included in your business strategy AND it must be clearly articulated.

If innovation hasn’t been clearly included in your business strategy and/or described in detail, don’t blame measurement for a lack of innovation. What you really have is a strategy problem.

 

In reality, most companies know whether innovation is an important factor in the success of their business and business strategy. From there, many will include some measure(s) of innovation or CQI in their measure set. So, how does innovation still end up falling by the wayside in some organizations? The answer is management problems.

Failure to execute a business strategy, such as innovation, has three primary management-based causes: (1) lack of, or inappropriate, prioritization and balancing of business objectives; (2) poor organizational alignment; and (3) a failure to build the required accountability structure and culture. 

 

1. Prioritization and Balancing of Business Objectives

What is the relative importance, right now, of your innovation strategy in relation to the other strategic objectives in your business strategy? Is it one of the top 3 – 5 key objectives for the upcoming period or is it lower on the list? It is essential for business leaders to make these prioritization decisions because it is unrealistic to think that all strategic objectives in a business strategy can receive equal work effort at the same time – no company has the unlimited organizational capacity required to do this. Organizations that fail to define, and communicate, these relative strategic priorities make business decision-making difficult for managers and employees, setting the stage for the poor execution of all of their strategic objectives.

Another challenge is being aware of, and effectively balancing, opposing strategic objectives when they exist in a business strategy. Specifically for this discussion, objectives relating to innovation versus those related to risk management/avoidance would be examples of naturally opposing objectives. While the resulting push and pull can be handled through a business strategy prioritization approach, it is often better to soften one objective and strengthen the other through business strategy discussions. This way, the challenge that is faced by trying to implement powerful opposing strategies is worked out before it comes time for strategy execution.  

If innovation is not happening in your organization when it should be, it is important to determine whether the root cause relates to the prioritization of this objective. If innovation is a recognized business strategy for your organization but it has a lower priority at this point in time, you would expect to see evidence of some innovation activity but at lower levels of intensity. If, however, business priorities are unclear in your organization, it is important to determine whether innovation has fallen off the agenda as a result.

 

2. Poor Organizational Alignment

Is innovation, as defined in your business strategy, adequately supported by your organization? That is, does your organization have the organizational structure, business processes, and projects in place to support the execution of an innovation agenda, do employees have the skills and capabilities they need to execute the innovation objective, and are the plans, tools, technologies, and resources (including budget dollars) required to support an innovation strategy in place in your organization? Poor organizational alignment with an innovation strategic objective will prove to be a key barrier to innovation in any organization.

 

3. Failure to Build the Required Accountability Structure and Culture

Who in your organization has accountability for the completion of your innovation strategy? Who is taking ownership for ensuring that the innovation agenda moves forward appropriately? Who is the owner of your innovation processes? Who has accountability for providing the necessary data and performance commentary for your innovation measures? Do the people in your organization display a dedication to action and follow through and demonstrate a shared commitment to seeing that your innovation strategy achieves its desired results? These are all elements of the accountability structure and culture that is required to ensure that your innovation strategy is executed as planned. If your organization’s innovation agenda is falling behind, unclear or undefined accountabilities for action and a poorly developed culture of accountability could be possible root causes.

 

Innovation is an important business strategy for many organizations, however, it is frequently not fully realized. Sometimes, poor measure selection and utilization is identified as the reason for this outcome, however, this is almost always a red herring. It is far more likely that a failure to execute an organization’s innovation agenda is either a strategy problem or a management problem. When barriers to innovation exist in a business, it is critical to complete a root cause analysis and then implement the necessary changes to get the innovation strategy back on the desired course.

Is innovation an important but problematic objective for your organization? Take the time to clearly identify and then eliminate the REAL barriers to success.