CREATING VALUE BY STARTING WITH STRATEGY
The right strategy will make your fortune just as the wrong strategy will inevitably kill your business, whatever it is, stone dead.
Strategy is about making choices; it’s about choosing what to do but, more importantly, it’s about choosing what not to do and it must be simply articulated so that it is understood by everyone. David Collis and Michael Rukstad in their Harvard Business Review article ask; “Can you say what your strategy is?” In their view you must summarise your strategy in 35 words or less and everyone in your company should be able to put it the same way. How can you expect alignment if your strategy is not universal?
A Harvard Business School study of thousands of organisations has found that the four fundamental attributes of every successful business are strategy, structure, systems and culture which we have represented in the diagrams below.
The next step is to improve “structure”. Do you have the right people in the right positions with well-defined roles, constructive performance feedback and are they valued? Is the ratio of rent or wages or freight to revenue acceptable?
Then consider “systems”. Do your people have systems and data to make the right decisions and deliver on strategy? Does your ERP work for your business and integrate with your CRM?
We have found that some clients think that with the right hardware, everything is complete. This may be so for today but what about tomorrow? We live in a complex world with an indeterminate future. Have a look at our blog on the meaning of complexity. The only way to ensure success is to have a business “culture” that embraces improvement in this indeterminate world. Culture is not just a word, it’s the way an organisations does things. It is a system of shared assumptions, values and beliefs which govern how people behave and has a strong influence on how they perform, act and even dress. And, “culture eats strategy for breakfast,” the famous quotation attributed to the late management guru Peter Drucker.
For successful business improvement you need to work both dimensions of the matrix – strategy, structure and systems (the hardware) and culture (the software) at the same time. But what we have found is that you must work step-wise. Improvement initiatives should always start with hardware. But the improvement achieved by hardware alone will be limited by bias, mindsets and behaviors and cultural change is needed to inspire people to go beyond what they think is possible. As people aspire to do better, hardware may be lacking so need refinement. The hardware steps should predominate early, but with improvement, the cultural steps will take over in importance. It’s a step-wise journey.
We have recently completed several assignments where we have helped companies on this journey including a venture capital owned business with an underperforming subsidiary. Our advice involved the subcontract of all manufacturing and the sublease of half of the rented facility and profit has improved three-fold. The subsidiary is now strategically aligned and has added value to the VC exit.
We are available to help you in similar ways and look forward to hearing from you.