Looking back, looking forward

2015 will go down as the year when I really started to blog, with 36 blogs.  The dominant themes reflect my roots: leadership, strategy and business models.  Based on reader responses the three favourite posts were:

  • The disruption engine ... which gives the reader a high level overview of a couple of models which seek to explain disruption.  I conclude with a few ideas which the reader could use to 'test' their exposure to potential disruption
  • Opening Minds - lessons from Cirque du Soleil ... it may have been due to the beautiful video clip, but the blog was about understanding where you sit in terms of the strategy life cycle.  At different points in the strategy life cycle the focus of the strategy  process changes.  The biggest risk is at the high point of the cycle, just before you crest and begin the downward slide.  At this point the risk is under-reach rather than over-reach.
  • Leadership Lessons from Ross Lyons ... this was a shorter piece in which I challenge leaders to look at under-performance of their teams through the same lens Ross applies. If they are under-performing, that starts and finishes with you.  Ouch.  

So, that was the 'readers' picks'.  Among my close friends/colleagues there were two that they really enjoyed:

  • Are you ready for the next big shift ... highlights the limitations of strategy processes to really pick the big shifts.  Most practitioners reach for scenarios under conditions of real uncertainty, but this blog highlights the limitations even using scenarios.  I finish with one suggested method.  But I don't pretend it is easy.  
  • Excellence - lessons from Sting ... again, comes with a video link, it explores just what it takes to achieve excellence in your domain.  And finishes with the observation that 'pursuit of excellence should come with a product warning'.

And so finally, my favourite?  Hard to say, but recently I posted a blog on what I called the profound responsibility of leadership.  It reflects my passion: my belief that we, as leaders, have the potential to create great organisations.   I will finish with a couple of lines from a recent World Business Forum that resonate with my world view:

  • Creative leaders emotionalise ... rational thinking leads to conclusions, emotional thinking leads to action 
  • Our value share in an ecosystem comes from our share of passion ... organisations need passion to overcome ADD (ambition deficit disorder)

And so as I look forward to 2016, I've a number of fresh ideas which I will be blogging about and also talking to my clients about.  I think we should collectively declare 2016 our 'break out year'.  All the best for the festive season, and the new year.  Stay safe, share your joys with your family and loved ones.  

 

Austerity is not a strategy

Three clients, three strategy workshops, 8 days: intense.  Each client is at a different stage of the strategy life cycle (see my recent blog).  And each workshop highlighted a theme which reflected where that client sits on the strategy life cycle.

Mining services clients are clearly in the ‘rebuild’ phase.  For about two years now the mining sector has drawn up the moat bridge.  The more recent collapse of the oil price suggests the oil and gas sector is about twelve months behind the miners.  

Mining services companies have followed suit, with even more dramatic headcount cuts, many of them in survival mode.  Austerity became the main game.  

But let’s be clear: austerity is not a strategy.  So what is next?  

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The profound responsibility of leadership

The most creative conversations of our professional lives engage both our emotional and analytic selves.  These conversations are the source of inspiration and sense-making that leave you buzzing hours later; that wake you in the middle of the night; that create new insights through connecting previously disconnected ideas. 

I had such a conversation a few months ago with a colleague.  Exploring the role of purpose in organisations, he challenged me to articulate my purpose: why do I do what I do? 

One of the outcomes of that conversation was a paragraph I wrote about the profound responsibility of leadership.  I didn’t post it at the time, at least in part because I suspect for many business leaders – prospective clients – it might seem ‘too soft’.  But after some interesting conversations yesterday I decided I would share my world view.  So here’s what I wrote those months ago: 

I believe in the capacity of leadership to create great organisations … organisations that can develop and execute strategies that match the demands of a complex and changing environment; that can build connections with customers that transcend the simple transactions that characterise too many market places; that create customer experiences that build longevity into the relationships.  And this comes about through leaderships’ capacity and commitment to engage with the people who are the body and soul of any organisation and want to make a contribution that goes beyond just earning a wage. 

This is the primal responsibility of leadership.  If not this, then what is our job as leaders?

I also believe in the self-evident truth: it is the leadership teams which need to design, develop and energise the change in organisations.  Our job as consultants and advisors is to help them in that pursuit. 

This is my ‘bias.’  It shapes the conversations, approach, and expectations in my work as a strategist, facilitator and teacher.  And I think this is largely reflective of my clients.  The people I have worked with over the years who I connect most deeply with do feel a profound responsibility. 

But over time many leaders slowly, often unconsciously, withdraw from this profound sense of responsibility, reflecting a felt lack of a shared sense of responsibility among their peers and their leaders.    Or sometimes in the face of challenges that seem overwhelming.  But this model of leadership demands institutional leadership: it is beyond the capacity of individual leaders.

Do you feel this profound responsibility?  How often do you experience deep, creative conversations within your organisation which engage both your emotional and rational-analytic self as you explore your collective role as leaders?  Do the conversations leave you buzzed?  Or just frustrated?  If the latter, I suspect the ‘emotional’ self has been ‘shut out’.  Caution: the failure to engage the emotional self can ultimately lead to ‘burn out’.  

The more things change ... strategic innovation

I am often struck by how today’s 'insights' reflect the writing of past decades .  In this blog I highlight a few recurring themes on strategic innovation which we have been writing about for 20 plus years.  That we continue to talk about them suggests they are valuable levers in the pursuit of strategic innovation.

And I suggest three practices which you can introduce into your business today to improve your capacity for strategic innovation.  

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Leadership lessons from the world of Australian politics

Leadership and strategy are inextricably linked.  One without the other is like fertiliser without water: wasted.  The reader could be forgiven for raising a quizzical eye at the suggestion there is anything to learn of leadership from recent years of Australian politics.  But applying the adage we learn more from failure than we do success, perhaps there’s something here for us all. 

What follows is a summary of my five key lessons for business leaders from Australia’s recent political history.   How well does you/your organisation stack up on these issues?  

But remember this.  All leaders are flawed.  Undoubtedly Malcolm Turnbull will reveal flaws over time.  The real issue is not the existence of the flaws, but awareness of the flaws and a willingness to establish mechanisms to protect the organisation from their downsides.

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Purpose is at the heart of strategy ... but it's complicated!

Why does your organisation exist?  Because if you can’t articulate your purpose, then I’m not sure how you determine your strategy.  That might seem a simple question, and yet if you asked your executive team I wonder how many different answers you would get? 

Every business is has three distinct beneficiaries: capital; customers; and talent.  And each of these beneficiaries expects different ‘benefits’.  In reality you are competing for each of these ‘beneficiaries’ with a benefit (value proposition) that at least meets their expectations.  

Does your strategy and business model present an overarching strategic architecture which binds these three dimensions?  

(5 minutes reading)

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Opening Minds - Lessons from Cirque du Soleil

A client briefing me recently ahead of a strategy forum cautioned that they were a tough audience.  Exposed to an array of corporate leadership development programs over the years, with a lot of capability in their respective fields, the challenge was to fully engage them in the search for fresh possibilities.   

The reality is that most strategic conversations do not take place under ‘crisis’ conditions but somewhere along a spectrum of change dynamics.  And where you sit on the spectrum influences your process design.  

I opened the workshop with an exquisite video clip from Cirque du Soleil (watch here).   To learn the lessons from Cirque du Soleil read on ... 

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The Business Model Test - the narrative and the numbers

Fifteen years ago Joan Magretta (HBR) observed that all business models must satisfy two tests: the narrative – does the story make sense – and the numbers – does the P&L stack up.  This remains the standard today.  

The narrative has both an emotional and a logical dimension.  The emotional content allows people to connect with your passion.  The compelling logic shapes the numbers.  A good valuation is more about the story than the numbers … if the valuation proves to be wrong, the problem will be in the underlying narrative, not the numbers.  The pursuit of the numbers forces us to make explicit our assumptions, and crystallises the value drivers within the business model.  These critical value drivers focus our thinking at each successive level of business model design.

I finish with three questions on the business model which every executive and Board member should be able to answer. 

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The rule of three and four

Scanning the newspapers recently I noticed that the revenues of our three largest telecoms players – Telstra; Optus and Virgin – were respectively $16.4B; $9.4B and $5.3B.  Why did that capture my interest?  It looked like it might satisfy BCG’s rule of ‘three and four’

In the mid 70’s Bruce Henderson (BCG founder) hypothesised that a stable competitive industry will have no more than three substantive competitors, and will find equilibrium when their respective market shares are 4:2:1.  

BCG recently tested this hypothesis and found it prevailed in a number of industries.  But how well does it stack up in our local markets and what can we learn from it.  I suggest three actions you can take in response to the findings.  

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Can you see the 'Disruptive Edge' from where you sit?

‘Step away from the edge’ might be good advice for the young, but it could be fatal advice for businesses.  Economics has long held 'things are driven by what happens at the margin, not at the core'.  This is a central principle in Clayton Christensen’s theory of disruptive innovation[1].  He argues that most well managed companies are generally good at developing and commercialising ‘sustaining technologies’ – technologies which deliver the ‘next generation of performance’ for their existing customers – but are lost when confronted by what he labelled ‘disruptive’ technologies.  

How can you tell if a technology will be 'disruptive'?  I offer three specific practises which you could adopt to better position your business against the threat of disruption.

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Leadership Lessons from Dockers' coach Ross Lyons

In the early 90’s Paul Keating remarked that every parrot in the pet shop was squawking micro-economic reform.  Today those same parrots would be squawking productivity.  While this is a multi-dimensional challenge, leadership plays a fundamental role. 

And so I thought I’d highlight a leadership lesson from Fremantle Dockers coach Ross Lyon.  He recently observed his team needed a vast improvement if they were to maintain their position on top of the ladder.  He questioned their decision making following a ‘grinding’ 7 point win over Collingwood, highlighting some specific areas: some shocking turnovers; repeatedly slipping. 

What did he say next?  “At the end of the day that starts and finishes with me, so clearly our football program needs to improve because they should be able to do it instinctively under pressure”. Wow.  How many of our leaders today adopt this perspective?  We often lose sight of the fundamental truth: we are accountable for the performance of our teams.  So if their productivity is low, you are underperforming. 

Ouch.  That puts a different slant on it.  Try looking through this prism next time your team disappoint.  

Understanding the disruption engine: what can I do?

In Zero to One Peter Thiel decried Silicon Valley’s obsession with disruption, declaring “disruption has transmogrified itself into a self-congratulatory buzzword for anything new and trendy”.  He’s not alone.  And yet we can’t help be fascinated by the increasing number of genuinely disruptive business models.  According to CB Insights, there are 113 private companies currently valued at more than $1B (unicorns), including well known examples such as Uber ($45B), AirBnB ($10B) and DropBox ($9.5B).  To put this into perspective, Uber has about the same market capitalisation as Wesfarmers, one of Australia’s top companies (#7 on the ASX by market cap)[1].

Fascinating as these stories are, they do little to help executives and Boards evaluate the risks and opportunities for disruptive business models. What will help are models or frameworks which explain the phenomenon.  And at the end I offer a few thoughts about how you can 'protect' yourself from risk of disruption. 

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Free is not a business model

“Free is not a business model” declared the CEO of Box, a cloud based enterprise storage and collaboration company, feeling the price pressure of the competitive battle between Amazon and Google in the storage space.  While his lament is self-evidently true, it does open the broader question: what is a business model?  Business model is one of the hot topics in management today, usually alongside the adjective ‘disruptive’.      

The term business model really only took off in the first internet boom.  But today everyone is talking about business models.  HBR reported a few years ago “7 out of 10 companies are engaging in business model innovation … 98% are modifying their business model to some extent”.  Can you describe your business model?  And are you at risk of disruption?

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5 tips for better strategic decision making

Imagine you are a major retailer planning to enter an ‘adjacent’ $50B retail market, and you specifically want to attack the market leader for ‘strategic’ reasons.  But there’s a catch:

1.       The market leader has 15 years accumulated experience in the sector – you have none; and

2.       They have nearly 10x the market share of their nearest competitor … (~18% vs. ~2% market share - your likely entry point)

A tough ask.  But wait.  There’s more.   This is the story of the failure of Project Oxygen at Woolworths.  One analyst labelled it as “the greatest own goal in recent Australian business history”. 

What happened?  And how do we avoid these traps?

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Twiggy's folly

Twiggy's latest call for governments – any government will do – to ‘do something’ sits right there alongside his call for the Australia’s iron ore majors to form a cartel.  It’s not exactly clear what he’d like the government to do: set production quotas for the individual iron ore companies?  Decades ago the woodchip industry asked the government to intervene to prop up prices ...  but what seemed like a good idea at the time turned out to be a nightmare.

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Are you ready for the next big shift ...

Imagine China’s growth rate fell to 3.9% per annum within the next 12 months.  I suspect you can’t.   Ridiculous, right?  Well, actually, no, but more on that later.

Let’s start at the beginning.  Collectively we suck at picking the big strategic shifts that upend long held assumptions about the state of the world.  Look no further than the recent history of China’s economic growth and the demand for steel – and hence, iron ore.  

While there is a lot of psychology that explains why we too often fail to see these major shifts, the bigger question is: what can we do about it?  How can we improve our ability to anticipate and respond to these inflection points.  

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Stronger no longer - what now?

One of my resources clients recently shared his observations after returning from a marketing conference and from a series of meetings with many of his customers.  The message was loud and clear: the ‘stronger for longer’ mantra of the resources sector is now ‘stronger no longer’. 

What now?  Of course, most resources executives know ‘what’ to do: cut capital spend; cut exploration; reduce travel; reduce headcount; drive productivity.  But the real leadership challenge is not ‘what’ but ‘how’.   

Here’s some of the ideas I offered from the perspective of an organisational strategist. 

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Take a deep breath - iron ore markets are doing what you should expect

I remember attending an AICD forum a few years ago when one of the presenters, a non-executive Director of a mining services company, boldly declared “the iron ore price won’t fall below $100/t while I’m still around – trust me”.  I hope his health proves more robust than his forecast.

I certainly don’t make light of the incredibly difficult situation for the many individuals who will be hurt by the collapsing iron ore price.  But let’s be a little more honest in the conversation. 

This blog explains some of the pricing shifts, and what we might expect looking forward: it's not pretty.  But much of what is happening is classic industry patterning.  And it's not just iron ore.  The gold industry has suffered the same fate.  

The bottom line: be very clear about your competitive advantage.  If you don't have one, your dead.

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GE, the CEO and Strategy

Jeff Immelt, CEO, and GE present a fascinating study on the influence of the CEO vis-à-vis the influence of the environmental context in which they operate, and the pervasive influence of a global corporation’s core competency on strategy. 

Immelt followed Jack Welch as CEO of GE.  Welch was a celebrated CEO who presided over two decades of growth, creating US$350B in shareholder value (compound annual growth rate of 23% per annum[1]).  Asked a few years ago how tough was it to follow Welch, Immelt's advice was ‘plan your career so that your predecessor is a failure’. 

But what has been the record of Immelt since becoming CEO?

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Excellence ... Lessons from Sting

Want to learn what it takes to really achieve excellence in your chosen field?  Watch the first few minutes of the following video clip in which Sting is honored in the annual Kennedy Center honours.  “With all the gifts he’s been given … he’s still sort of ‘scowlie’ … still unsatisfied, he’s restless, unsettled, gazing off to the side"

There are lessons in here for all of us, but be warned: the pursuit of ‘excellence’ in our organisations should come with a product warning

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