There was a curious plague which beset a primitive village centuries ago. When afflicted, the victims fell into a coma so deep that they were mistaken for being dead. And, within 24-48 hours they did in fact ultimately die.
The issue was that these primitive villagers were unable to positively determine if a victim was actually in a coma and alive, or in fact already deceased. Of course, it had to happen that someone ended up being buried alive. After discovering this tragic circumstance, a town meeting was convened to account for the terrible happenings and determine what action, if anything could be taken.
The majority of townspeople living in the village, voted to include rations of food and water in every coffin, hoping to save lives.
Other members of the community suggested an alternative solution … install a sharpened stake to the inside of the coffin lids. The stake was to be positioned such that it was directly in line with the occupant’s heart. When the lid to the coffin was closed prior to burial, any doubts about the victim’s condition would vanish.
What differentiated the solutions were the questions used to find them. The first group of villagers questioned, “What if we bury someone alive again?” the second set of people asked, “How can we be certain everyone we bury is dead?”
As you attempt to solve the problems in your organisation, take two shots at the issues. The second should be from a completely different perspective.
How might you change your business thinking perspective?
We live in uncertain times, and people talk about all sorts of planning. But, as someone once said, “if you want to give the gods a real belly laugh, just make a plan!” How valuable is it, then, to make plans? Are there different types of plans?
Strategic planning often seems to mean that a company or business owner examines the future based on today’s variables. Depending on worst, best, and likely case analyses, the planner then develops a cause and response plan. This type of planning differs from tactical planning in that it usually goes out farther into the future. Tactical planning tends to be more about “how” will we do something. Strategic planning is more toward “what if” something happens.
That being said, we also see plenty of examples of long-range plans failing to take into account some unexamined event. In fact, one example is where the company has contingencies in place for twenty different problems, never expecting that all twenty events will take place simultaneously. Problems and crises have a way of coming in bunches, making planning more of an art than a science.
So what’s a person to do? Should we never bother to consider possible problems and disasters? What about considering success beyond all expectations, as with an exponentially larger number of orders or clients? Do we make plans, cross our fingers, and simply hope for the best?
Consider the entire concept of planning: At its foundation, a plan is a way to adapt to future circumstances. We can say that the better someone is at adaptation, the more successful their plans. To develop a comprehensive set of plans, one would need to be omniscient and clairvoyant. But to be skilled at adaptation requires only ordinary human capabilities, and requires much less specific planning.
An important part of adaptation is flexibility in processes. Yet many business owners don’t have a solid grasp on all the processes taking place in their business. In fact, many business owners and executives don’t actually know the key processes and critical dependencies of their core business. If that’s the case, then strategic planning ends up being more like a shotgun blast of plans, with no particular organization.
Knowing how to adapt, and making the business highly responsive to changing circumstances is a better way to prepare for the future. Explorers throughout history didn’t know what they would encounter in new places, but they did know how to survive, how to adapt, and how to quickly assess entirely new events. Along with strategic planning, why not have a rapid-response team in place?
To better prepare for the future, it makes sense to first lay out the many processes involved in the current business. Then determine the most critical processes and what they depend on outside the company’s control. But instead of devoting full attention to setting up contingencies for failures in the dependency chain, examine how quickly each process and its function can be entirely changed.
Think about the process of setting up an order from China. The process begins with inventory management, which in turn causes an order to be generated. The critical dependencies include transportation systems, remote politics, and raw materials. Rather than developing a contingency for transportation failure (e.g., a ship sinking), a local war, or a factory burning down (taking with it all the raw materials in stock), how can this process be dramatically changed?
Suppose all three events take place at the same time—war delays the ship leaving port; an explosion destroys the factory; then, even partially loaded, the ship sinks in the Pacific. If contingency plans are in place, what happens if the necessities for those contingencies also fail?
How quickly can the source for orders be fundamentally shifted from China to another country? It isn’t important which country; it’s important to know how quickly the process can be changed. Is it possible to redirect the entire order process, perhaps setting up an immediate delay notification to all waiting customers?
Substitution is an adaptation process, and it’s been around for a long time. Rain checks are a form of substitution. Regardless of what part of a process fails, or if it goes down completely, the adaptive response is to offer a substitution. That’s not the same thing as having a specific backup product or service stockpiled as a contingency. We don’t yet know what we’ll substitute, but we know that we can come up with a substitution quickly.
Contingency planning assigns a specific response to a particular event or circumstance. Strategic planning examines possible events or circumstances that might require contingencies. But process analysis with adaptation capabilities in mind is a third option. People don’t succeed because they know how to do everything; they succeed because they know how to change and adapt to circumstances, taking advantage of evolving opportunities.
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Guest post by my friend: Craig Landes of Batavia IL, USA
A leading business university undertook research into their graduates. It was discovered that their past students were successful during the early part of their careers after graduating, but ten years on, they were superseded by a more street-wise, pragmatic group.
The professor who undertook this research explained that the education the graduates had received was in “problem-solving”. What was more important was the ability to recognise opportunities.
Innovation trumps problem-solving.
Pragmatic thinking beats university degrees.
Action is the only precursor to success.
Are you looking for the opportunity in this current economic environment? Honestly?
I shared coffee with the owner of a business consultancy firm bemoaning the terrible circumstances that have decimated his business revenues. He was worried, distressed, more distressed than a consultant should be faced with such slight contretemps.
I also had coffee with the partner of a mid-tier accounting/auditing practice who relished in dissevering himself from the doomsayers. “Ric, we’ve been using your approaches to pricing, marketing and client-evaluation. Just yesterday, an existing client called to explain one of our competitors had proposed to do their audit at half the price we’ve been charging and would we reduce our fee. Remembering your advice, I calmly reiterated our value, our expertise and the significant levels of service delivery we provide which equate to greater ROI for the client. They stayed with us. Overall, we are 40% ahead of budget for this year.”
In the current business environment, there is an absurdity in the gap between the pragmatic, opportunity-thinking of successful professionals and the trivial reasons others adduce for failing.
Greek philosopher and mathematician, Plato, dictated that the circle was the perfect form for celestial movement. So, then for the next one-and-a-half millennia, astronomers said that the planetary orbits were circular even though their observational data suggested otherwise.
Even Copernicus utilised circles in his heliocentric model, explaining the universe and its relationship to the planets. Finally, it was the German mathematician and astronomer, Johannes Kepler who described the planetary paths around the sun as being elliptical.
We all have extrinsically-imposed shoulds and values that influence our views, opinions, decisions and thoughts. And, this is many a time, the reason why we are unable to get out of the dog house and enjoy the mansion.
What dogma is holding your thinking back from breaking conventional wisdom? What could you let go of that would allow you to challenge current beliefs and discover an alternative path to Executive Wisdom Blog?
Research undertaken by the Society for Executive Wisdom during the first quarter of 2011 collated the results of what Australian organisations felt would be their greatest business challenges for the financial year July 2011 – June 2012.
Here is a snapshot of the results in order of magnitude:
Cost-cutting strategies to maintain profitability – 38%
Faster financial growth – 35%
Government threats through policy and taxation – 29%
International competition caused by weaker Australian government regulations – 27%
Low-cost competition via internet – 26%
Competitor threats to market share – 22%
Requirement to expand into new markets – 17%
Requirement to launch new products and services – 15%
Requirement to refresh senior management – 11%
Coping with market changes – 9%
These results were obtained by interviewing 143 business owners or CEOs of Australian-based organisations with a turnover of more than $1M p.a. and more than 5 years in operation.
What are your top business challenges?
How will you handle these challenges?
What resources do you have on hand to assist you?
Business is constantly changing and evolving, especially in these globally-volatile times, currently. The organisations that have identified what specific challenges they will face, have developed strategies for these tough times, and have managed the necessary resources required, as well as eliciting guidance and mentoring from internal and external points – are the organisations that will not only survive but in fact, prosper.
When was the last time you were sitting in a conference room with the obligatory mints and bottled water, when it happened? That flash of brilliance where you were inspired to innovate and you generated new ideas that catapulted the performance of your business over the next six months.
How often does that happen?
Not a lot, really, does it?
Then why do it?
Inspiration, innovation and successful business ideas come out of the blue. Most times when you least expect it. They fly in from the edge of consciousness and delightfully startle us. They are random, sometimes the result of wrong turns, errors, mishaps and misdirection. They don't naturally and regularly occur when we're forcibly confined in the staleness of another conference room that emits a musty odour of damp carpet.
If you're looking for inspiration, innovation and successful business ideas you need to be having fun. Drop the qualitative thinking. Don't invite the devil's advocate. And, ignore conventional wisdom and practicality.
Inspiration, innovation, blue ocean ideas do not evolve from conservative thinking and approaches. They come from having fun and being excited. Let's do it! You know it works.
A sanguine Ric Willmot was interviewed by journalists at the CPA Australia Congress - Canberra in 2009 after his two days of MasterClass presentations. Back in 2009 Ric was very upbeat about the future of Australian business when most pundits were remaining pessimistic. How interesting it is to look back and consider of whom you would rather take note: Ric Willmot or the naysayers.
Many organisations mistakenly believe that their Mission should be all-encompassing and explain everything. The Mission should articulate the corporate objective in a simple manner that all stakeholders can comprehend and embrace. Ric Willmot gives a striking example of how to achieve this.
Sport is often correlated with business by many pundits without really considering the big picture or the fact that business does not have a set of rules by which all competitors must adhere; the playing arena is not marked with sidelines and out of bounds areas clearly identified; there is no impartial, independent referee or umpire to ensure the rules are upheld, no time-offs or full-time siren or finish line to cross. It really is naïve to compare sports with business and think that’s where it starts and ends.
However, sporting strategy theory can assist business owners, CEOs and managers make better strategic decisions when confronted with the uncertainty of competition. Competitive conduct will not always be 'fair play' and if you don’t change your game plan to seek out the advantage, your competition will. In rugby, I would always comment to the players I coached; “No opportunity is ever lost, if you fumble the ball, the opposition will always pick it up.”
Chess can teach us a lot about strategy. I coached rugby professionally in Ireland in the 90s and my assistant coach in Dublin was a brilliant chess player. His thought processes added immense value to our game-plan strategy meetings. Chess players understand that superior strategic decisions necessitate that you consider, and focus careful forethought on, the likely moves and counter-moves of your opponent. Chess players studiously examine their opponent’s methodology to the game and ascertain the expected sequence of moves that will follow any particular move they themselves make. By looking forward and reasoning backward, they drive the game toward a checkmate!
This talent to look forward and reason backward is extremely effective for strategic-decision makers. The success of new marketing or pricing strategies relies on whether competitors replicate them. In oligopoly markets, it is hard to identify a strategic decision that isn’t influenced by the retaliatory counter-moves it sets off. The finest business strategists must be accomplished at forecasting forthcoming rounds of competitive conduct.
Easier said than done, I realise. Ambiguity often surrounds competitive conduct, and many leaders either, expect the companies they compete against to employ the manner of competitive behaviour they see as typical, or make some other educated guess. But such assumptions can be treacherous. Businesses unintentionally set off value-destroying price wars, get buried when incumbents retaliate in markets those businesses have attempted to enter, and cannibalise their own core markets because they have either ignored or made incorrect assumptions about the reactions of competitors.
The good news is that game theory offers a well thought-out process that can aid you to make better strategic decisions when confronted with the uncertainty of competitive conduct. Game theory isn’t new; economists, mathematicians, and political scientists have been developing it for more than 60 years. What is new is an increased emphasis on game theory as a practical tool that real-world business owners and alike can use for making strategic decisions.
A good game theorist gets inside the heads of competitors to understand their economic incentives and likely behaviour. To do this, you should focus on five key elements of competitive intelligence.
1. Identify the strategic issue: What decision are you trying to formulate: pricing, capacity, market entry? How is it interrelated to other strategic decisions being made in the market? If your decision is on capacity investment, for example, it is vital that you know whether others in the market are also considering entering or leaving it.
2. Uncover the significant players: Which competitors’ actions will have the maximum impact on the success of your strategy? It is a mistake to assume that all your strategic games are played against competitors and that there is always a winner and a loser. Many strategic decisions revolve around the dealings of other players in the market—suppliers, distributors, providers of complementary goods—and 'win-win' outcomes are achievable.
3. Ascertain each player’s strategic objectives: In real business games players often base decisions, at least in the short term, on criteria such as market share or growth. It is vital to get such criteria correct. If you make the decision to enter a new market in the belief that the incumbent players are 'profit maximisers' when they are really driven primarily by short-run 'market share' objectives, you might suffer unexpected losses when the incumbents slash prices to maintain share.
4. Uncover the probable actions for each player: For each player in the game, including your organisation, develop a list of potential actions on the strategic issue. Generate this list from the perspective of the other organisations, not just your own. What options might they be considering? How will they evaluate these options? Don’t assume that you and your competitors have the same set of strategic options. Competitive role-playing exercises involving external experts, peers and your own employees can help generate these lists.
5. Resolve the possible structure of the game : Will decisions be made simultaneously, in isolation, or sequentially, over time? If sequentially, who is likely to lead and to follow? Will this be a one-shot decision, or will it be repeated? Most business games are repeated, sequential games; pricing decisions, for example, are made over and over in sequence in most markets.
Learning from the game
You need not identify unique, robust equilibrium solutions for this approach to be a valuable strategic-decision-making tool. Since the process itself compels you to think unambiguously about the incentives and likely moves of other players, it can generate a breakthrough in strategic insight even when the game can’t be mapped-out explicitly. Qualitative role-playing exercises and thorough discussions may engender enough insight to show the way to a variation of direction on new-entry, capacity addition, pricing, and other fundamental strategic decisions.
Importantly, while endeavouring to map-out the current industry, you invariably develop insights about how to change strategies to drive more favourable outcomes. Unlike sports such as rugby, business games don’t have fixed rules, players, and referees. Although game theory can help you play your current game better, its greatest value often comes from helping players define new strategies and 'rules.' In certain circumstances, game theory predicts that current market conditions make price wars highly likely because customers switch easily between competitors. This five step approach would help identify the need to change the strategy by implementing customer loyalty programs that create value for customers and companies and decrease incentives for destructive price competition.
Try out game theory when next you need to formulate a strategic decision about which competitive interactions are of importance. Look forward and reason backward to generate insights. If you don’t change your game to gain advantage, one of your competitors will, and there is not much value in being the best rugby player when everyone else is playing cricket.
