Know Thyself and Thy Environment

“The last thing IBM needs is another vision”. This is how Lou Gerstner approached leadership when he first took over IBM in 1993. He said so, not because he did not believe in vision, but rather because he had to make sure IBM understood who it was, and what was wrong with the organization.

Before talking about the future, and before deciding how to get there, comes a very critical step: understanding who we are, understanding our current situation, our current environment, our strengths and weaknesses, the threats and the opportunities. This awakening is not an exercise for the faint of hearts. You will need to confront the brutal facts, yet never lose faith⁽²⁾. It requires robust group dialogues to grasp reality, understand, and document the assumptions⁽³⁾. It assumes a straight talk, no surprises, “just the facts but all the facts” attitude. It is an awful lot healthier to deal with reality, than it is to plan based on misconceptions, erroneous assumptions and false premises. Reading the environment correctly is crucial when engaging in strategic planning.

An important component of understanding who we are is to document what Core Competencies brought the team together. Core competencies are those skills [not attributes] that are i) Distinctive (make this organization different from a customer’s perspective), ii) Inimitable (difficult for competitors and others to replicate or acquire), iii) Valuable (have been key to its success so far), and iv) Sustainable (core to success in the future). As you eventually dream of an envisioned future, it is important to remember what you are good and passionate about today, and what we could be good and passionate about in the future. Because core competencies are difficult for others to replicate or acquire, it is also hard for you the change, replicate or acquire new core competencies.

Secondly, a market analysis must be available. This market analysis should understand the various markets the organization operates, or contemplates to operate in. It is not sufficient to understand where and how big the markets are, it is also important to understand the adoption lifecycle of the various offerings for the target markets. That is an essential piece of the puzzle when you are trying to understand were you stand, were you may want to go and eventually which strategy may be used effectively to approach the target markets. How an organization sells to early adopters differs vastly from selling to mainstream customers, and this understanding needs to be built into any vision and plans to be developed.

Thirdly, a competitive analysis should be conducted. This entails an excruciating process of ploughing through competitive marketing material, websites, press releases, news articles, analyst reports, win/loss analysis and painting an exhaustive picture through which the organization needs to navigate. Particularly, the organization needs to understand what is important to their customers, and where the organization can provide a better solution than the competitors can. The output of your competitive analysis should include a Strategic Canvas⁽¹⁶⁾ depicting your competitors strategic profiles and their related parameters and factors.

Fourthly, you must learn from successes and, more importantly from failures. Therefore, the management team should pull together and document its collective set of experiences, both in the organization, and prior joining the organization. This will ensure that the future accounts from the learning from the past.

Fifth, there is nothing more important that to analyze precisely what creates value in the organization; and where the organization creates value for customers, stakeholders, and employees. Beyond value creation is the notion of value innovation which should be the cornerstone of a good strategic plan⁽¹⁶⁾.

Sixth, analyze your portfolio of initiatives and map them into the portfolio performance framework that identifies the criticality of the initiatives to the business and their ability to create innovation and newness.

Seventh, make a real assessment of the overall business health. Although many organizations would rather deny the existence of business slowdowns, the rude awakening should not be hard to witness: first sales flatten or decrease, then the Board of Directors and the CEO cut hard in the cost structure to maintain the net margins.

Eight, look at the scalability of your business model. You need to reflect, and ponder, on the compounding resource effect of adding more revenue dollars. What will it take to generate new business and deliver the customers’ outcomes? For example, if you run a consulting organization, how fast can you make your new consultants effective enough for them to deliver the expected revenue? How long will they require assimilating your methodology? If your methodology is not well documented, how long will take you to documented so others can learn? If you’re running a manufacturing organization, how much capital will it take you to acquire the necessary equipment to ramp your business volume to the next level? How long does it take a new sales person to reach the level of revenue generation you expect? You need to really understand all the business levers that affect the ability of your organization to scale up.

Finally, to understanding who you are, you need to understand your overall market conditions. Conducting a good SWOT analysis requires big SWEAT. The SWOT analysis should not only be focused out the current business conditions, but also envisage those that will appear on the journey to the Promised Land. Through the process, the team needs to instill of climate of truth by i) leading with questions, not answers; ii) engaging into dialogue and debates, and avoiding coercion; and iii) conducting autopsies, without blame; iv) building “red flag” mechanism. This last part is often ignored. Many organizations regularly conduct SWOT analysis, but the output is simply a better understanding of the situation, which is used as a backdrop for strategy definition. Although such output is an essential, it is not sufficient. There should be a high degree of correlation between the output of the SWOT analysis and the details contained in the strategic and the operational plans. And, the next time a SWOT analysis is conducted, the output should have changed considerably. In order to be effective, items in the SWOT analysis must correlate to action items in the plans being developed.

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Published at 20:01

11 March 2011