What people still don’t understand about culture and how to change it

Posted in Aktuellt, Allmänt, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on October 9th, 2019 by admin

The world of organisational culture has changed in the last 10 years. It doesn’t matter if you are a manufacturer, financial services provider, a FTSE 100 or a SME, this is what you need to know about culture today, that still seems to be misunderstood.

1. Your values are not your culture
Your values form part of the building blocks of your culture, along with your purpose and vision or equivalent but they are not the culture itself. The process of setting them does not mean that you have a great culture.

It is an often heard comment that your values on the wall do not make great culture and it is so true. Culture needs to be lived, it is seen, heard and felt throughout the business, through your customers, your employees as well as your partners and suppliers.

So, what exactly is it?

It is the beliefs, mindset and attitude that your employees turn up to work with every day
It is the leadership style leaders and management capability that’s displayed
It is the customer experience you deliver
It is how your people communicate and collaborate
It is how manageable your employees workload is and how effective the tools are they use
It is how you treat your partners & suppliers
It is how much of an effort you make to be diverse and inclusive
It is your appetite for risk and or innovation
It is how all your processes, policies and systems support what you say you want to achieve
It’s a long but not exhaustive list of what your culture is made up of and a reminder of how many facets of the organisation you need to really embed those values into.

2. Culture Change Needs to be Embedded Not Just Communicated
Firstly, if you want to design a new culture or change/enhance an existing culture whether it’s at organisational, regional, divisional or even team level, you need to do it with intentionality – there needs to be a concerted effort AND a structured approach to it.

The good news is that with all the technology, tools, data and experience that we have at our disposal these days culture change can now happen quite rapidly and in a fairly agile way but still it requires an organised approach rather a once-off intervention.

A 3-stage approach is a good starting point:
Stage 1: Understand the current culture – listen to your stakeholders and understand what their views and concerns are. Listen to your people and find out what really happens in the day to day happenings of the organisation. What’s enabling performance and results and what’s holding it back or could hamper the strategy or current transformation project?

You also need to understand what the case for change is. If there isn’t a compelling case for change then you need to create a very desirable and compelling future state.

At this point it’s also useful to explore how equipped your leadership team are to drive and lead any culture change.

Stage 2: Design the future culture required to fulfil the aims and ambitions, whether that be the purpose/mission and vision. What are the values, behaviours and mindset shift required to drive the new culture forward?

For larger companies, this might not be just at the top of the organisation- it might be what does this division want to do differently to standout or outperform from the rest. What’s the right culture to mobilise the people on your strategy? Make it personal to you. It’s not one size fits all.

Stage 3: Embed the culture. Build a roadmap and engagement plan to embed the desired culture and make it stick. This is the piece that most organisations don’t do well. Culture needs to be fully embedded across the entire business and not just into HR policies but also into processes, systems and structure that guide the organisation.

3. A Culture of Innovation is your only Choice
If you’re not innovating, you’re sliding backwards. There’s no such thing as sitting tight and waiting to see.

There is lots of innovation going on today but mostly it’s happening in pockets of organisations, in a lab or hub in a different building somewhere. Innovation needs to be embedded as a way of life where people have changed the way they think and work, with everyone contributing in some way to the innovation ecosystem.

In our book, Building A Culture of Innovation, we talk about the attributes of a Next Generation Organisation as Intelligence, Collaboration and Adaptability.

Intelligence is about getting meaningful insight so that you know what problems, opportunities or ideas will best serve you and your customers.
Collaboration is about truly leveraging skills, knowledge and experience of not only your own employees but also your partners, suppliers and customers.
Adaptability is about speed and agility to move. We’re still seeing businesses take too long to get a new proposition to market. And employees taking too long to adopt new ways of working.
Making these 3 things a way of life requires changing the mindset, behaviours and skills of your people.

4. Your Future Culture needs to be Human, Business and Technology Focussed.
Let’s start by saying that the future of work is definitely human. Even if we think that 40% of today’s jobs will be automated and the near future sees us fully working alongside robots. There will obviously still be jobs for people. The likely scenario though is that there will be an even greater skills gap and the war for talent even tougher.

This means that creating a culture which will attract and retain the best talent needs to be a priority.

Employers will have to factor in the overall wellbeing of their people (physical, mental, financial and social)
Employee experience will need to be inclusive and welcoming to people from all backgrounds and be able to appeal to the needs and wants of all generations of workers.
The rapid pace of change will mean that you will constantly need to be upskilling and creating a learning culture.

Given the pace of technological change no single technology solution is going to define your culture but you will need to provide work tools which enable people to work the way they want to. Flexibly, collaboratively, differently. You will also need to provide the tools that continually measure your culture and its impact so that you can react immediately to issues that arise. Or even with AI in culture tools, you should be able to react before the issue!

It’s obvious that you need to focus on the business aspect but don’t lose sight of your strategy! We’ve seen too many people and tech initiatives fail because they weren’t connected to the overarching strategy of the business. Define your strategy then decide what culture and tech you need to support it.

5. Equip your people to lead the culture of the future
Many of the skills that will be needed for the future will need to be learnt. Equipping people at all levels with the right skills for the future will be key for success.

Leaders: There’s always quite a bit of focus on leaders but not necessarily on the right things. Ensure they are equipped with future- focussed leadership skills such as resilience and adaptability and being an excellent communicator with strong empathy and an inclusive mindset.

Managers: Rather unhelpfully referred to as the permafrost- these people need to not only be taught how to be effective people managers, time managers and project managers, they need to be given the resources to manage their own careers and the time for their own ongoing learning.

Front-line staff– rather than herding ‘staff’ through culture change- you need to think about the individual scenarios that are going to appeal to and benefit people. The modern workplace is very diverse and its people have various needs and wants- don’t make too many assumptions that put people in buckets such as Gen Y or Mothers or LGBT- take the time to find out what they really want.

Source:Thefutureshapers.com, 8October 2019

KRONANS Apotek – Märklig syn på kunden

Posted in Aktuellt, Customer care / Kundvård, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on September 19th, 2019 by admin

Ibland funderar man på hur företag verkligen överlever i dagens stentuffa konkurrenssituation.

När jag växte upp fanns det e t t apotek. Man gick helt enkelt till Apoteket! Situationen var, som i många andra branscher, den att konkurrensen var obefintlig. Följaktligen spelade det ingen större roll hur man tog hand om kunderna. De kom ändå. Det fanns ju inga andra alternativ.

Idag finns det, tack och lov, ett flertal möjligheter (t.ex. Apoteket, Kronans Apotek, Apotek Hjärtat, Fox Farmacia, Apoteksgruppen, Lloyds, Swevet). Alla med bra affärslägen, generösa öppettider och inte minst service på nätet. Och massor av produkter. Och produkterna är i stort sett desamma. Och, i alla fall vad gäller läkemedel, är kvaliteten likvärdig. Detta sörjer Läkemedelsverket för.

Med så mycket och så bra, hur ska man då konkurrera? Jo, man kan ju sänka sina priser. Men vem vill göra det?
Med allt annat lika kvarstår då möjligheten att säkerställa ett bemötande som är bättre för mig som kund än hos de övriga aktörerna. Känner ni igen situationen? Genom att ta hand om sina kunder (nya och befintliga) på ett bra sätt (och bättre än andra aktörer) skapar man nöjda och återkommande kunder. Och stärker sin konkurrenskraft. Låter enkelt, eller hur? Men det har visat sig svårt. Och nästa omöjligt för vissa.

En del i att utveckla marknadens bästa kundbemötande (och de stora konkurrensfördelar det ger) är att hela tiden vara lyhörd för hur kunden ser på vårt erbjudande och vårt beteende. Det är idag så viktigt att det är en stående punkt på agendan för de flesta styrelser.

Och precis som vi ger återkoppling till våra barn dagligen (för att de skall kunna utvecklas som individer) är det av största vikt att företagets anställd löpande får information om vad kunderna tycker om oss. Vad gör vi bra? Och vad vill kunderna att vi utvecklar ytterligare? Både vad gäller vårt produkterbjudande och hur vi bemöter våra kunder.

Nu till min egen upplevelse av hur detta fungerar (eller snarare, inte fungerade alls) hos Kronans Apotek:
Jag besöker Kronans Apotek på Odengatan i Stockholm. Ljust, fint och massor av produkter. Men det är ju precis som hos alla andra apotek. Det vill säga – detta skapar ingen konkurrensfördel över huvud taget.
Just mängden produkter gör att jag har svårt att se skillnaden på olika alternativ. Följaktligen ber jag om hjälp, beskriver mitt behov och blir rekommenderad en produkt. Tackar och betalar. Gott så!
Väl hemma igen Googlar jag på produkten och finner at det här inte alls är det jag behöver. Och de angivna biverkningarna är dessutom direkt olämpliga för just min situation.
Nåväl, Kronans Apotek ligger ju bara ett stenkast hemifrån. Nästa dag promenerar jag över till dem och träffar nu en annan expedit än den som expedierade mig igår. När jag beskriver mitt behov (på samma sätt som för hennes kollega dagen innan) skakar hon på huvudet och utbrister att ”då ska du verkligen i n t e använda denna produkt”! Hon plockar snabbt fram en ny produkt utan de olämpliga biverkningar som fanns i produkten från igår.

Nu dyker gårdagens expedit upp. Hon kommer fram, minns mig från igår och börjar genast försvara sin rekommendation. Felet till att jag fick en direkt olämplig produkt igår är kundens! Kunden (jag) har inte alls beskrivit behovet på rätt sätt. Jag behöver inte höra detta utan ber att helt enkelt få byta produkten från igår mot den jag just rekommenderats av hennes kollega. Trots att gårdagsprodukten är betydligt dyrare, och jag berättar att det inte spelar någon roll och att jag inte behöver få mellanskillnaden tillbaka, går detta inte att genomföra utan uppvisande av kvitto. ”Hur ska man annars veta att produkten är köpt här”? Men vi har ju just stått här, ansikte mot ansikte, och talat om vårt möte igår!!! Jag lämnar nu Kronans Apotek utan vare sig den första eller andra produkten eller några pengar. Jag har inte mitt liv till diskussioner som denna! Dessutom ligger Apoteket bara ett stenkast bort och här kan jag handla det jag nu vet att jag behöver.

Kan dock inte släppa tanken på hur illa det uppenbart fungerar på just detta apotek. Väl medveten om att just denna situation inte behöver spegla kundbemötandet i alla Kronans Apoteks butiker i Sverige.
Men visst vore det väl ändå värdefullt för Kronans Apotek på Odengatan att få information om hur kunden (jag) upplevde bemötandet. Kanske kan man lära sig något av situationen för att undvika en sur kund framöver? Jag väljer (vilket jag tror att ytterst få missnöjda kunder gör) skriva till Kronans Apotek och förklara min upplevda situation.

Svaret jag får är från en central kundservicefunktion. Man berättar att det naturligtvis inte går att byta produkten (trots obruten förpackning) utan ett kvitto. Och för att ytterligare understryka detta hänvisar man till att ”det är vår policy”. Punkt!
Hur ska man t.ex. veta att den aktuella produkten är köpt just i det aktuella apoteket?
”Men expediten, hennes kollega och jag talade ju om hennes rekommendation och mitt uppföljande köp. Och hon minns ju mycket väl mitt besök” förklarar jag.

Nåväl. Jag ska inte trötta Dig mer med den fortsatta skriftväxlingen med Kronans Apoteks kundservice. Låt mig istället gå till slutet av vår mailväxling. Jag avslutar med att skriva ” Jag utgår från att apotekschefen på Kronans Apotek, Odengatan 54, får ta del av vår dialog och att hen tar en kontakt med mig om hen ser ett värde i detta”.
Nu uppkommer det märkligaste i hela situationen! Jag häpnar när jag läser detta!
Man kan nämligen i n t e förmedla detta till den som är ansvarig på detta apotek. Istället uppmanas jag att söka en personlig kontakt på plats med den ansvarige platschefen!
Varför man inte kan förmedla denna kundåterkoppling från sin centrala funktion ”kundservice” till det berörda apoteket framgår inte. Vad som dock framgår med oönskad tydlighet är att Kronans Apotek inte ser ett värde i att utveckla sitt kundbemötande baserat på faktisk kundåterkoppling.
Rent tekniskt går det ju att i alla fall (även om det skulle te en dryg minut) kopiera texten från vår maildiskussion i ett mail till den berörda apotekschefen. Men det är inte problemet. Problemet är istället att Kronans Apotek uppenbarligen inte har en kultur som uppmuntrar sina anställda att vara lyhörda för kundernas synpunkter! Och det är ytterst en ledningsfråga!

Till aktörer som Kronans Apotek kan man bara säga: Lycka till! Det kommer att behövas …

Läs gärna mer om kundvård här.

For a successful transformation, start by sprinting

Posted in Aktuellt, Allmänt, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on August 27th, 2019 by admin

No, don’t hurry through important steps. Rather, create a straightforward plan and implement it in short bursts—followed by pauses to reflect on effectiveness.

When done well, an organizational redesign fosters improved strategic focus, higher growth, better decision-making and more accountability.

However, a McKinsey survey revealed that only 30 percent of organizational redesigns are successful in terms of achieving overall objectives and improved performance. That means a daunting 70 percent of transformations fail.

Why? In the design phase, meddling by too many cooks often obscures the vision of a future operating model. Accommodating multiple opinions means the design becomes fragmented and vulnerable to individual pain points. Resources can get tied up in tasks that don’t add real value, unnecessarily prolonging the process.

More than 80 percent of executives have gone through an organizational redesign at their current company. They know that a transformation is a marathon. But to get to the finish line, it pays to do implementation sprints. That means taking a simpler, iterative approach; learning as you go; and correcting course more frequently. Under this approach, concept development and implementation are linked, running in parallel.

One high-end retailer, for example, faced difficulties with its siloed culture when redesigning its operating model and online assortment strategy. A series of focused two-week meetings, led by cross-functional teams, helped to foster a common view of what needed to change. The quick implementation of changes led to an impressive increase in its online assortment from 30 percent to more than 70 percent in just three months.

There are six things to keep in mind when going through a transformation:
1. Be bold: Set a clear and ambitious target that will help you substantially transform your organization and let it guide your future operating model.
2. Slim it down: Create a simplified first version of your envisioned end-state that will still deliver a significant amount of impact in the first phase of implementation.
3. Prioritize change initiatives: Don’t kick off all new initiatives at once. Instead, be clear about how the initiatives will be sequenced and how they relate to one another.
4. Conduct implementation sprints: Kick off the implementation in short design-test-apply cycles.
5. Adapt and hone when needed: React to requirements that emerge during the transformation and course-correct whenever needed.
6. Keep your eye on the ball: Stay focused on the actual end product: a truly transformed organization, not a perfectly designed plan. Embrace constant reality checks and adapt the plan accordingly. This helps to concentrate resources on those areas that contribute the most value.

Change is not easy, and the odds are hardly in any transformation’s favor. But tackling the root of the problem by simplifying the design and using a pragmatic approach—through implementation sprints—will boost the likelihood of success.

While we all aim for perfection, we should not do so when designing a new operating model. Sometimes complex concepts, which theoretically are superior to simpler plans, don’t get implemented. Instead, they can draw attention and energy away from more fundamental changes and delay the entire transformation.

Source: McKinsey.com, August 2019
By: Patrick Guggenberger, advises leading global companies in the consumer industry and other sectors on how to optimize organizational design and operating models to improve performance and culture, and boost organizational agility-
Patrick Simon, dvises consumer-packaged-goods, apparel, and fashion companies around the world, with a focus on organizational transformation and harmonizing a company’s operating model with its strategy and the market’s requirements

Making a culture transformation stick with symbolic actions

Posted in Aktuellt, Executive Coaching, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on August 15th, 2019 by admin

Elephant in the room: making a culture transformation stick with symbolic actions

Leaders are familiar with the challenge of making a cultural transformation. To signal changing expectations, execute carefully considered symbolic actions.

Why did a leading global agriculture player order small rubber elephants adorned with the company’s logo for its meeting rooms? Far from being mere props, these elephants were symbols to facilitate desired behavior shifts in employees.

The organization was undergoing a cultural transformation to become a higher-performing, more innovative company. Leadership realized that to achieve this goal, employees needed to become more open and comfortable having the candid conversations required to move ideas forward—they needed to be able to put the elephant on the table. To encourage this change, leadership sought a way to signal the beginning of the transformation and role model the new behaviors.

Leaders across industries are familiar with the challenge of making—and sustaining—a cultural transformation. To signal that cultural expectations are changing, leadership should execute one or two carefully considered symbolic actions.

Make expectations clear through role modeling
“Beyond Performance 2.0” discusses the importance of senior leaders employing symbolic actions—highly visible acts or decisions that indicate change in the organization—to demonstrate their commitment to the transformation. Symbolic actions can augment critical, but often less visible, day-to-day behavior shifts among leaders, addressing a common frustration: “I’m doing things differently but no one is noticing.”

Our research shows that transformations are 5.3 times more likely to succeed when leaders model the behavior they want employees to adopt. We also found that nearly 50 percent of employees cite the CEO’s visible engagement and commitment to transformation as the most effective action for engaging frontline employees.

Symbolic actions are most successful when employees connect the dots between the act and the broader change message, facilitating both a mindset and behavioral shift. For example, employees at the agriculture company were initially confused when they discovered the rubber elephants. But their confusion subsided when they saw leaders pick them up and put them on the table as they raised difficult topics others might have felt uncomfortable surfacing. The practice was eventually adopted by other employees when they too needed to call out the elephant in the room.

Develop a portfolio of symbolic actions
Leaders can identify the right symbolic actions for their organization and evolve their approaches by undertaking three key activities:

1. Define the purpose of and audience for potential symbolic actions.
Leaders should identify what specific changes they want to facilitate and which group should be part of the symbolic action. Being clear on what is being symbolized and for what purpose will focus energy on the ideas that will have the greatest impact.

2. Brainstorm symbolic actions.
Go for quantity over quality when generating ideas. Use external examples for inspiration and adopt design-thinking tactics, such as empathy mapping, to better understand the audience. Categorizing the ideas according to design dimensions such as who will execute the action and the frequency of the action (one-time, periodic or ongoing) helps the group iterate.

3. Review and prioritize ideas.
Evaluate the list as a team and identify options that you feel will be the most effective, shifting the focus to quality over quantity. Prioritized actions should be consistent with broader transformation messaging and should be designed to appeal to the different sources of meaning that motivate and inspire employees, such as doing good for society, supporting their working team, or enabling personal gain.

The behavior change and the broader culture change transformation catalyzed by the elephant on the table ultimately paid off for the agriculture company. Its employees now have more open, candid conversations, enabling improved performance and health of the organization. The company climbed to the top decile of organizational health in McKinsey’s Organizational Health Index database—an achievement that our analysis indicates correlates with clear improvements in financial performance. For shareholders, there is nothing symbolic about those returns.

For more on leading successful large-scale change programs, see our book, “Beyond Performance 2.0.”

Source: McKinsey.com, July 2019
Authors: By Jessica Cohen, Matt Schrimper and Emily Taylor

Trögt för företagen som missat digitaliseringsvågen

Posted in Aktuellt, Digitalisering / Internet, Strategy implementation / Strategiimplementering, Technology on January 17th, 2019 by admin

Hur man ska hantera digitaliseringen är en av detaljhandelns absolut största frågor just nu. Men de företag som säljer produkter till andra företag är tröga ur startblocken. Än så länge har bara vart fjärde B2B-företag e-handel.

Vanans makt är stor. I en säljkår som upparbetat kontakter och genomfört kundbesök på samma sätt under många år, vill många fortsätta på samma sätt som tidigare. Enligt undersökningen Convert 2019 som Collector Bank har gjort tror ungefär en fjärdedel av partihandelsbolagen att de inte kommer att utveckla e-handel som ny försäljningskanal.

“För säljaren fungerar de gamla säljmötena bra. Men köparna vill kanske inte lägga en timme på att fika med en säljare. De kanske hellre vill lägga sina beställningar på kvällen när de sitter i soffan”, säger Jonas Ogvall som är ansvarig för rapporten.

Digitaliseringen av B2B-försäljningen ligger långt efter digitaliseringen i konsumenthandeln. Även bland de företag som kommit igång med e-handel är det bara ungefär en sjättedel av omsättningen som kommer från digitala kanaler.

“Många inom företagshandeln tycker att just deras bransch är speciell och tror att kunderna vill handla som de alltid har gjort”, säger Jonas Ogvall.

Utvecklingen på konsumentsidan visar dock enligt honom att det argumentet inte håller. Bolag som resonerat på det sättet har fått se sig omsprungna av konkurrenter och digitala uppstickare.

“Då kanske kunden i stället upptäcker att produkten går att köpa på nätet i Tyskland istället och lägger ordern där. Dessutom går man miste om en exportmöjlighet”, säger Jonas Ogvall.

“Risken finns att svenska företag vänder sig utomlands för sina inköp i stället.”

På köpsidan är situationen en helt annan. Där handlar sju av tio företag på nätet. I många fall begränsas dock möjligheterna att handla på nätet av att varorna helt enkelt inte finns tillgängliga via e-handel.

“Glasstillverkaren Lejonet och Björnen är ett bra exempel. De köper förbrukningsmaterial på nätet, men kan inte köpa mjölk, smör och grädde. Men det vill de såklart”, säger Jonas Ogvall.

Det leder till att en hel del företag, cirka 30 procent, handlar på sajter som riktar sig mot konsumenter i stället.

En stor anledning till att förändringen i företagshandeln inte går snabbare är att kompetens saknas. För att nå ut på nätet krävs dessutom ganska stora investeringar och det är inte självklart att de återbetalar sig med en gång.

“Man kanske inte kan räkna med att få tillbaka pengarna man lägger ner redan första året, men man får en chans att vara kvar på marknaden”, säger Jonas Ogval.

Källa: DI.se, 15 januari 2019

Seeing your way to better strategy

Posted in Aktuellt, Board work / Styrelsearbete, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on December 6th, 2018 by admin

Viewing strategy choices through four lenses—financial performance, markets, competitive advantage, and operating model—can help companies debias their strategic dialogues and make big, bold changes.

When executives gather in the strategy-planning room, they’re aiming to identify and prioritize the big, bold choices that will shape the future of the company. Many times, however, their choices get watered down and waylaid.

Companies that hold no conviction about priorities too often spread resources evenly across multiple projects rather than targeting a few projects with the potential to win big. Those companies seeking to escape slowing growth in their core businesses sabotage themselves by chasing new markets without critically evaluating if or how they can win.

To avoid this fate, companies should examine their strategic choices through four critical, interdependent lenses—the company’s financial performance, market opportunities, competitive advantage, and operating model (exhibit).

Executives tend to overemphasize the first two—viewing choices strictly in the context of financial and market opportunities—because those lenses represent critical inputs into the business case. But knowing what it will take to meet or beat financial expectations and which markets are profitable won’t do much good if the company doesn’t have the assets or capabilities required to win in those markets. Nor will it do much good if the company lacks the people, processes, and organizational structure to implement the proposed strategy successfully.

By viewing strategy choices through all four lenses, executives can identify and prioritize the big moves that will lead companies to new markets and growth opportunities, or the steps they can take to consolidate the core. When combined, the lenses provide a clear, balanced, holistic view of not just the opportunities in play but also what it will take to capture them. This kind of objective strategy diligence can improve conversations in the strategy room—and, ultimately, kick corporate performance into a higher gear.1

The financial lens
Most companies necessarily initiate their strategy processes with a look at their financial performance. The financial lens can help them incorporate an outside view into these discussions and develop an objective baseline for assessing the feasibility of long-term targets.

A company can use standard valuation methods to estimate what performance levels it must achieve in the long term to justify today’s value. If the company performs at these expectations, shareholder returns would roughly equal the cost of equity, compensating investors for their opportunity cost of capital.2 This, however, is not value creation—it’s simply the lowest threshold by which leaders can say their strategy was successful.

To create value, companies must deliver returns above and beyond the cost of capital, or they must deliver returns that exceed those of peers. Thus, executives should also use benchmarks to figure out how the company must perform to move well beyond that threshold—delivering top-quintile returns to shareholders, for instance. An objective look at peers’ performance will help companies develop a meaningful three- to five-year plan for how to earn excess returns. Companies can learn a lot from this benchmarking exercise: perhaps high returns in the past were the result of a run-up in multiples in the market and, hence, expectations, but not actual performance.

To anchor those perspectives in current company performance and market position, it is critical for teams to develop a market-momentum case (MMC). Using external market data and peer-performance benchmarks, the MMC gives the company a holistic view of how financial performance will be affected if the company follows its current trajectory relative to market growth, cost evolution, and pricing dynamics without taking any countervailing actions. The end result is an objective baseline for performance that allows executives to conduct an unbiased assessment of how to prioritize new initiatives (and big moves) without counting on them in the base plan.

By assessing implied performance, aspirations for performance, and the MMC, strategy and finance professionals can arm themselves with the information required to start meaningful, objective discussions on value creation: How does the company need to perform to achieve superior returns, and how would the company perform if it remained in steady state?

The market lens
Most companies are seeing slow growth in core businesses and wishing they were in higher-growth, higher-margin businesses. In some cases, the slowing core business may even be under attack. For instance, a low-cost entrant might destroy incumbents’ economic profit in a certain segment, as happened in markets as diverse as those for aluminum wheels and children’s electronic toys. In today’s fast-moving business environments, many companies start from a baseline of deteriorating profit, not slightly increasing earnings. This creates urgency to make big moves into new markets or to block attackers.

The market lens provides a means by which companies can identify pockets of growth within existing segments and beyond, and assess them against strategic options. The critical factor here is granularity; executives should quantify and validate shifts in profit pools in relevant markets given trends that are visible now. One consumer-apparel company, for instance, examined absolute dollar growth in the product markets it operated in. It assessed growth by channel and by region. The differences were striking. In some geographies, demand was expected to continue to grow mostly in brick-and-mortar stores for at least five years, with a significant price premium for high-end products. In other geographies, online channels were capturing profits much more rapidly than expected. Using the market lens, the strategy team recognized the need to allocate resources in product development and marketing for high-end products in brick-and-mortar stores in certain regions, as well as more localized, lower-cost production in others. By running the analysis in this granular way, it could capture better profit in all regions, leading to above-average growth.

Additionally, strategy and finance leaders should always examine adjacent markets, which may be not only attractive segments for growth but also breeding grounds for potential future competitors. Many times, the adjacencies are obvious, as in online retailers’ continued push into industrial distribution for small and medium-size businesses, or technology companies’ moves into software-as-a-service businesses. Other times, they are not as obvious—for instance, raw-materials companies selling consumer goods.

After conducting the requisite analyses of markets, strategy teams should be able to address two key questions: In which market segments will we be able to grow profitably over time? What additional attractive markets should be considered?

The competitive-advantage lens
Most companies face a critical strategic choice in the planning room: Are we better off consolidating the core, where growth is slower, or can we realistically enter new high-growth, high-profit markets and win? But given time pressures, innate biases, and other factors, executives typically fall short in their consideration of assets, capabilities, and the investments required to compete more effectively against rivals. As a result, companies end up chasing unattainable growth and underinvesting relative to what it would take to win.

The competitive-advantage lens can help executives identify whether the company has what it will take to win in current markets and those going forward, or whether a big change is required to capture value. An honest assessment of current capabilities should inform how the company chooses to play in its markets, as well as partnerships or acquisitions that may be necessary.

In the wake of new realities such as digitization and the fact that many industries are reaching the limits of consolidation, the competitive-advantage lens is more important than ever. Take as an example the notion of building a digital platform, a goal shared by many executives these days: What competitive advantage will the platform provide? What sort of market share does it need to capture to be considered a “winner” and not just “average”? Is an ecosystem of third-party players required for the digital platform to succeed, or can this be done organically—and will we be able to do it quickly enough to become the preferred platform for our customers?

The analyses and insights here are typically based more on firsthand “case load” expertise than on industry databases or reports. Interviews with sales teams and postmortems on deals that went awry can be very insightful, as can customer and supplier surveys. There is a lot at stake in gaining these perspectives. The apparel company mentioned earlier discovered that competitors still owned brick-and-mortar stores in certain markets in which the apparel company worked only through online partners. The competitors’ sales representatives in these markets had special training and a structured sales approach that allowed them to collect information on customer preferences—for instance, the shapes, colors, and sizes customers wanted to see in the next season’s designs. This gave competitors a leg up in product development that the apparel company no longer had. The essential competitive advantage in these high-growth markets was real-time customer insights fed back into a rapid product-development cycle. The apparel company learned, therefore, that it had to continue to invest in brick-and-mortar stores to recapture this advantage, even in markets driven by online sales.

The operating-model lens
Companies routinely take for granted the impact of their operating models on their strategy choices. They maintain the status quo rather than asking whether they have the people, processes, technologies, and other critical components required to make big moves. The operating-model lens, then, is essential for understanding whether the company is set up for future success. Indeed, a company’s approach to resource allocation, talent management, organizational design, and performance management can either reinforce or defeat strategic objectives. Consider the following talent- and performance-management-related examples.

A pharmaceutical company estimated that more than one-third of its cash flow would come from Asia within five to seven years. That outcome never materialized, however: senior management had stationed fewer than 10 percent of the company’s sales representatives in Asia—all of whom were focused on maintaining current sales and profit, not on expanding sales according to the strategic plan. An analysis of the growth opportunity at stake (in dollars) versus the number of full-time employees allocated to the regions over the past five years revealed the degree of underinvestment. Senior management decided to hire heavily in Asia.

Rather than prescribe performance metrics from the top down—ordering, for instance, that no one can have more than a 1 percent increase in cost in the next fiscal year—a retail company picks two or three “growth cells” each year that get twice the relative marketing budget (among other investments) compared with other areas of the business. As a result, strategy discussions are now focused solely on which cells should be designated for accelerated growth, rather than minutiae about the budget.

Companies need to look at more than just financial opportunities when embarking on a new strategy or implementing a transformation program. They need to follow a due-diligence process for strategy, in the same way they would dispassionately and holistically vet critical mergers and acquisitions. Such a process can counter innate biases that lead to indecision or incremental rather than bold moves. The four interrelated lenses we’ve described provide a road map for ensuring that a strategy plan is supported by the right investments and change in operating model.

Source: McKinsey.com, December 2018
By: Kevin Laczkowski, Werner Rehm, and Blair Warner

Winning with your talent-management strategy

Posted in Aktuellt, Board work / Styrelsearbete, Executive Coaching, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on August 9th, 2018 by admin

Three best practices for managing and allocating talent support better business performance, according to a new survey.

The allocation of financial capital has long been recognized as a critical driver of an organization’s performance. The value of managing and allocating human capital, however, is less widely known. But the results from a new McKinsey Global Survey confirm the positive effects of talent management on business outcomes.1 According to respondents, organizations with effective talent-management programs2 have a better chance than other companies of outperforming competitors and, among publicly owned companies, are likelier to outpace their peers’ returns to shareholders.

The survey also sought to uncover the specific practices that are most predictive of successful talent-management strategy. While there is no one-size-fits-all approach to the effective management of human capital, the survey results reveal three common practices that have an outsize impact on the overall effectiveness of talent management as well as organizational performance: rapid allocation of talent, the HR function’s involvement in fostering a positive employee experience, and a strategically minded HR team. The survey results also point to underlying actions that organizations of all stripes can take to cultivate these practices and thereby improve their talent-management strategy and organizational performance.

Why effective talent management matters
According to the survey responses, there is a significant relationship between talent management—when done well—and organizational performance. Only 5 percent of respondents say their organizations’ talent management has been very effective at improving company performance. But those that do are much more likely to say they outperform their competitors: 99 percent of respondents reporting very effective talent management say so, compared with 56 percent of all other respondents.3

What is more, the effects of successful talent management seem to be cumulative. Like an overall effective talent-management program, the abilities to attract and retain talent appear to support outperformance. Among public companies, we see a similar effect on total returns to shareholders (TRS). At companies with very effective talent management, respondents are six times more likely than those with very ineffective talent management to report higher TRS than competitors.

Three drivers of successful talent-management strategy
To support these outcomes, the results suggest three practices that most closely link with effective talent management: rapid allocation of talent,4 HR’s involvement in employee experience, and a strategically minded HR team.

Respondents who say all three practices are in place—just 17 percent—are significantly more likely than their peers to rate their organizations’ overall performance, as well as TRS, as better than competitors. They are also 2.5 times more likely than others to rate their organizations’ overall talent-management efforts as effective.

Rapid allocation of talent
Only 39 percent of respondents say their organizations are fast or very fast at reallocating talent as strategic priorities arise and dissolve—a practice that leads to a 1.4-times-greater likelihood of outperformance. And while it is well established that companies with rapid capital allocation are likely to see higher TRS, our findings show that the same holds true for talent allocation. At public companies that quickly allocate talent, respondents are 1.5 times more likely than the slower allocators to report better TRS than competitors.5 The link between rapid allocation and effective talent management is also strong: nearly two-thirds of the fast allocators say their talent-management efforts have improved overall performance, compared with just 29 percent of their slower-moving peers.

To allocate talent more quickly, the survey results point to three specific actions that meaningfully correlate with the practice. The first of these is the effective deployment of talent based on the skills needed, which has a direct impact on the speed of allocation. Respondents are 7.4 times more likely to report rapid talent allocation when their organizations effectively assign talent to a given role based on the skills needed.

Second is executive-team involvement in talent management. Respondents who say their leaders are involved in talent management are 3.4 times more likely to report rapid talent allocation at their organizations. The frequency of leaders’ involvement also makes a difference. At organizations that quickly reallocate talent, executive teams usually review talent allocation at least once per quarter. Finally, the results suggest that organizations where employees work in small, cross-functional teams are more likely than others to allocate talent quickly.

HR’s involvement in employee experience
A second driver of effective talent management relates to employee experience—specifically, the HR function’s role in ensuring a positive experience across the employee life cycle. Only 37 percent of respondents say that their organizations’ HR functions facilitate a positive employee experience. But those who do are 1.3 times more likely than other respondents to report organizational outperformance and 2.7 times more likely to report effective talent management, though our experience suggests that the HR function’s role is just one of the critical factors that support great employee experience.

A couple of key actions underlie the HR function’s ability to ensure better employee experiences. One is quickly assembling teams of HR experts from various parts of the function to address business priorities. Just 24 percent of respondents say their organizations employ this characteristic of an agile HR operating model, and they are three times likelier than other respondents to report a positive employee experience. Second is deploying talent and skills in a way that supports the organization’s overall strategy. One-third of all respondents say their organizations’ HR business partners are effective at linking talent with strategy in this way, and those who do are over three times more likely than other respondents to say the HR team facilitates positive employee experiences.

Strategic HR teams
The third practice of effective talent management is an HR team with a comprehensive understanding of the organization’s strategy and business priorities. When respondents say their organizations have a strategy-minded HR team, they are 1.4 times more likely to report outperforming competitors and 2.5 times more likely to report the effective management of talent.

The factor that most supports this practice, according to the results, is cross-functional experience. When HR leaders have experience in other functions—including experience as line managers—they are 1.8 times more likely to have a comprehensive understanding of strategy and business priorities. Also important is close collaboration among the organization’s chief HR officer, CEO, and CFO.6 Fewer than half of all respondents say those executives work together very closely at their organizations,7 but those who do are 1.7 times likelier to report a strategy-minded HR function. The findings also point to the importance of transparency with all employees about strategy and business objectives. Respondents who say their organizations’ employees understand the overall strategy are twice as likely to say their HR team has a comprehensive understanding of the strategy.

In summary, effective talent management—and the practices that best support it—contributes to a company’s financial performance. No one approach works for every company, but the survey results confirm that rapid allocation of talent, the HR function’s involvement in fostering positive employee experience, and a strategic HR function have the greatest impact on a talent-management program’s effectiveness.

Source: McKinsey.com, 8 August 2018
About the authors: The contributors to the development and analysis of this survey include Svetlana Andrianova, a specialist in McKinsey’s Charlotte office; Dana Maor, a senior partner in the Tel Aviv office; and Bill Schaninger, a senior partner in the Philadelphia office.

The 3 things about innovation every leader should know

Posted in Aktuellt, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on June 26th, 2018 by admin

Bill wasn’t the first Chief Innovation Officer I’d met who was distressed by innovation, but he was the most colorful.
“The market for innovation consulting feels like a gold rush,” he said. “There’s a lot of dumb money spent chasing bad ideas. In five years everyone will know the good from the bad, but I can’t afford to wait five years. I don’t have dumb money to waste.”

Bill’s sentiment, as it turns out, is quite common. Even by today’s frenetic standards, the explosion of “Innovation” catchphrases is blistering. Design Thinking. Lean Start Up. Agile Innovation. Disruptive Innovation. Boxes and Whitespaces. Future Back—these are just a few of the offers on hand. And more are on the way, fueled by a mass of enthusiastic experts, academics, and gurus. In principle each offer has merit. In practice the cacophony is sowing confusion and misalignment in many departments and organizations. It makes “innovation” more difficult than it needs to be. So here are three things that you, as a leader focused on developing your organization’s capacity for innovation, need to know to take the mystery and misery out of innovation at your firm. And to set your business up for success.

How to Start Innovation Leadership
1. Innovation is an approach to finding and solving problems in new ways under conditions of uncertainty

Details: At the core, “Innovation” (regardless of the word you use to define it) is just another tool in a ’s toolkit for solving a certain type of problem: Typically, a problem for which either no solution currently exists, or for which a radical new approach is warranted. Examples of this include: How might we get a quantum reduction in our freight cost per unit? How might we re-imagine the way our partners grow revenues inside an account? How might we re-invent the insurance buying experience?

Implications: When you define Innovation as an approach to problem solving, it forces your team to begin with an important question: What is the problem we are trying to solve for which we believe ‘Innovation’ is the solution? From here you can be thoughtful about whether you are solving a problem that actually matters for the firm, and whether “innovation” is actually the right approach to use.

2. Your Innovation Strategy must be designed to advance your Firm Strategy, or else it may retard it.

Details: If your company is like many companies we work with, innovation is happening in disparate pockets, headed by a variety of disparate teams and “centers of excellence,” cultivated in disparate initiaves and “Jams,” and learning is collected in disparate places, if it is collected at all. Waste is rampant. Links to the company strategy are sporadic, or unclear. And, in the absence of a clearly defined innovation strategy, your people didn’t have a choice but to do it this way.

Implications: A cogent innovation strategy is a set of choices about where and how to allocate time and energy towards innovation in the pursuit of overall company’s goals. To execute an innovation strategy successfully, leaders must identify and communicate clearly what type of innovation they want from their people, and to what end: how those efforts are tied to the firm’s vision, strategy, and objectives.

3. Every competitor is using the same innovation methods as you – but the methods are not the issue.

For those worried about falling behind their opponents when it comes to innovation, the good news is that most of your competitors are using the same techniques as you are. (In fact, any innovation vendor/consultant who is intellectually honest will tell you that 90% of what they teach is re-branding of ideas that have been around since the 1950s). The bad news is that the techniques are not the issue. The real issue is your leaders’ mindset and willingness to create an environment in which the techniques can be used in the first place. We know from behavioral economics research that resistance to innovation can be high among many of your individual managers and leaders, Left unaddressed, this resistance will retard or even destroy your innovation ambitions.

Implications: Building the leadership capacity for innovation deserves your attention. Before you start to look at techniques or technology, you should evaluate the personal capabilities of the leaders responsible for creating the environment in which your people would use them. Leader by leader, ask: Does the leader love learning and experimentation, or deride it? Do they believe in the science of diversity and Idea flow, or do they see success coming from inward focus and regressive, blinkered thinking? Do they embrace uncertainty, or flee from it? Do they multiply the creativity of the people around them, or squash it and tell them to get back to work? These are the fundamental questions that must before answered and addressed if any innovation model or approach is to have a chance of sticking and surviving.

In summary, Innovation is here to stay. The way you define, develop, and use innovation in your firm will have profound implications for how work gets done, and the results you see. And so, clearly defining innovation as a problem-solving approach, tying it to the company strategy, and working out the leadership component are three steps you should take up front that will reduce much mystery and misery later.

Source: BTS.com, 2018
By: Peter Mulford, Executive Vice President & Head of Innovation at BTS

Posted in Aktuellt, Executive Team / Ledningsgruppsarbete, Strategy implementation / Strategiimplementering on April 20th, 2018 by admin

Eight shifts that will take your strategy into high gear

Developing a great strategy starts with changing the dynamics in your strategy room. Here’s how.

1. From annual planning to strategy as a journey
Messy, fast-changing strategic uncertainties abound in today’s business environment. The yearly planning cycle and the linear world of three- to five-year plans are a poor fit with these dynamic realities. Instead, you need a rolling plan that you can update as needed.
In our experience, the best way to create such a plan is to hold regular strategy conversations with your top team, perhaps as a fixed part of your monthly management meeting. To make those check-ins productive, you should maintain a “live” list of the most important strategic issues, a roster of planned big moves, and a pipeline of initiatives for executing them. At each meeting, executives can update one another on the state of the market, the expected impact on the business of major initiatives underway, and whether it appears that the company’s planned actions remain sufficient to move the performance needle. In this way, the strategy process becomes a journey of regularly checking assumptions, verifying whether the strategy needs refreshment, and exploring whether the context has changed so much that an entirely new strategy is necessary.
To grasp what this process looks like in action, consider the experience of a global bank whose competitive context dramatically changed following the financial crisis. The CEO realized that both the bank’s strategy and its approach to refining the strategy over time as conditions changed needed revamping. He instituted biweekly meetings with the heads of the three major lines of business to identify new sources of growth. After making a set of “no regrets” moves (such as exiting some noncore businesses and focusing on balance-sheet optimization), the bank’s strategy council devoted subsequent meetings to confronting decisions whose timing and sequencing demanded close evaluation of market conditions. The top team defined these choices as “issues to be resolved,” regularly reviewed them, and developed a process for surfacing, framing, and prioritizing the most time-sensitive strategic challenges. In doing so, the team not only jump-started its new strategy but launched an ongoing journey to refine it continually.

2. From getting to ‘yes’ to debating real alternatives
The goal of most strategy discussions is to approve or reject a single proposal brought into the room. Suggesting different options, or questioning the plan’s premise and therefore whether it should even be under consideration, is often unwelcome. Without such deeper reflection, though, you are less likely to make hard-to-reverse choices about how to win—which is problematic, because those choices are the essence of real strategy, and the planning process should be geared to shining a spotlight on them.
The conversation changes if you reframe it as a choice-making rather than a plan-making exercise. To enable such discussion, build a strategy decision grid encompassing the major axes of hard-to-reverse choices. Think of them as the things the next management team will have to take as givens. Then, for each dimension, describe three to five possible alternatives. The overall strategic options will be a few coherent bundles of these choices. Focus your debate—and your analysis—on the most difficult choices. One company we know recently brought two very different plans into its strategy discussion: the first plan assumed the present, low level of resourcing, and the second one represented a “full potential” growth scenario, which necessitated dramatically higher investment levels. The latter option was a new possibility resulting from a positive demand shock. Alongside one another, the two plans stimulated vigorous debate about the company’s road ahead and what its posture toward the business should be.
If you want real debate, you also need to calibrate your strategy. As we show in our book, the odds of a strategy leading to dramatic performance improvement are knowable based on analysis of your company’s starting endowment, the trends it is riding, and the moves you are planning. If your odds are poor, you should consider alternatives, which often will require making bigger moves than you made in the past. Forcing discussion about real strategic alternatives—such as different combinations of moves and scenarios with different levels of resources and risk—help you move away from all-or-nothing choices, as well as from those 150-page decks designed to numb the audience into saying “yes” to the proposal.
Even a simple calibration can stimulate debate about whether a strategy has a realistic chance of getting you where you want to go. Consider the experience of a consumer-goods client with $18 billion in revenue and the aspiration of achieving double-digit growth. The company did a great deal of planning, and the aspiration, which rested on a bottom-up aggregation of each business unit’s plans, looked reasonable. However, publicly available information showed that among industry peers within the same revenue range, only 10 percent generated sustained, double-digit growth over ten years. The questions became: Is our strategy better than 90 percent of our peers? Really? What makes us stand out, even though we have performed like an average company over the prior five years? These questions were uncomfortable but important, and they contributed to a strategic reset for the company.

3. From ‘peanut butter’ to one-in-ten wins
It is nearly impossible to make the big moves that successful strategies require if resources are thinly spread across all businesses and operations. Our data show that you are far more likely to achieve a major performance improvement when one or two businesses break out than when every business improves in lockstep. You have to identify those breakout opportunities as early as possible and feed them all the resources they need.
Identifying those winners is easier than you might think. If you were to ask your management team to pick them, they would probably agree strongly on number one and maybe number two—much less so on, say, numbers seven and eight. The difficulty starts when discussion shifts to resource allocation. In fashion, movies, oil exploration, and venture capital, people understand that it’s the one-in-ten win that matters, but most other businesses do not have this “hit mentality.”

To stop spreading resources too thinly, you and your management team need to focus on achieving a few breakout wins and then work to identify those potential hits at a granular level. Excessive aggregation and averaging into big profit centers can prevent you from seeing the true variance of opportunity. One CEO we know had traditionally framed strategy discussions around growth of 4 to 6 percent and accordingly meted out resources to divisions. One year, he did a much more granular analysis and realized that one geography—Russia—was growing at 30 percent. He swamped the Russian operations with resources, created a more favorable environment, and subsequently enjoyed even faster growth from that unit.
We’ve seen many senior teams move away from “peanut buttering” by using some form of voting to pick priorities. In some cases, that’s a secret ballot in envelopes. In others, CEOs set up a matrix showing all the opportunity cells and let executives allocate points to various initiatives by applying stickers to the matrix. Such a matrix can help you look at the market in ways that are different from how your organization is structured—which boosts the odds of achieving radical resource shifts. One company, for example, recently decided to examine plans one level down from the business unit and created a detailed curve of 50 or so specific, investible opportunities. The result was a much bigger shift in resources to the best opportunities.

4. From approving budgets to making big moves
The social side of strategy often makes the three-year plan a cover for the real game: negotiating year one, which becomes the budget. Managers tend to be interested in years two and three but absolutely fascinated by year one, because that is where they live and die. You need to put an end to the strategy conversation being little more than the opening act to the budget.
One of the worst culprits in these budget-driven discussions is the “base case”: some version of a planned business case anchored in various (largely opaque) assumptions about the context and the company strategy. The base case might obscure the view of where the business actually stands, which could make it hard to see which aspirations are realistic and, certainly, which strategic moves could deliver on those aspirations.
A practical way to avoid this trap is to build a proper “momentum case.” This is a simple version of the future that presumes the business’s current performance will continue on the same trajectory—the highly probable outcome absent any new actions. In this way, you get a sense of how much impact your moves need to deliver to change that trajectory.
It is also critical to understand explicitly why your business is making money today. At a retail bank in Australasia, for instance, the leaders wanted to expand into overseas markets. The logic was, we are very successful, so we must be better operators than our competitors. We will move into other markets, where the operations are not nearly as efficient as in our home markets, and we will clean up. When the team looked at how the bank really made money, however, the operating metrics were unimpressive. The company’s success was largely due to its product strategy: the bank had a big exposure to residential mortgages, for which demand was very strong in Australia at the time. Another big source of profit was the bank’s excellent record of picking branch locations. But those choices were made by two people at the head office, so there was no reason to suspect that they would be as successful in Indonesia or other new countries.
The bank gained these insights by doing a “tear down” of its results. This is a crucial part of sharpening the dialogue around big moves, and it is not that hard to do. Simply take the business’s past performance and build a “bridge,” isolating the different contributions that explain the changes. Most CFOs regularly do this for factors such as foreign-exchange changes and inflation. The bridge we are talking about considers a broader array of factors, such as average industry performance and growth, the impact of submarket selection, and the effect of M&A.
Armed with a thorough, unbiased understanding of where your business stands and what has been driving performance, you can focus on what it would take to change your trajectory. Instead of asking for a target or a budget in the strategy meeting, ask for the 20 things each of your business leaders wants to do to produce a series of big moves over the coming period. Then debate the moves rather than the numbers expected to result from them. Why should we do this big move? Why shouldn’t we? How different does the company look depending on what risk and resource thresholds we set for it? Above all, talk about moves first, budgets second. Over time, your managers will come to recognize that if they do not have any ideas for big moves or cannot inspire confidence about their ability to pull off big moves, they will lose resources accordingly.

5. From budget inertia to liquid resources
The handover between strategy and execution happens when the resources are made available to follow through on the big moves you identify. Execution can then begin, and managers can be held accountable.
To mobilize resources and budgets, a company needs a certain level of resource liquidity. And you have to start early—the date your fiscal year begins. That is when serious productivity-improvement initiatives should be under way to free resources by the time allocations are decided later in the year. Then you must hold onto those freed resources so they will be available for reallocation, which requires determination. As soon as an engineer has time, your R&D organization will have creative new product ideas; the sales organization will identify attractive new business opportunities as soon as a productivity program has freed up part of the sales force. You need to be incredibly clear about separating the initiatives that free up resources from the opportunities to reinvest them if you hope to make big moves.
Another way to enable resource reallocation is to create an “80 percent–based” budget: a variant on zero-based budgets in which you make a certain sliver (say, 20 percent) of the budget contestable every year, so money is forced into a pot that is available for reallocation when the time comes. Yet another option is to place an opportunity cost on resources that seem free but are not. You identify scarce resources, such as shelf space for retailers, and make sure they are measured and managed with the same rigor as conventional financial metrics, such as the sales and gross margins for which many retail managers are held accountable. This can be as simple as shifting to ratios (such as sales per square foot and returns on inventory for a retailer) that encourage managers to cut back on lower-value uses for those resources, thereby freeing them up for other opportunities.
US conglomerate Danaher strongly emphasizes resource liquidity and reallocation. Originally a real-estate investment trust, the company now manages a portfolio of science, technology, and manufacturing companies across the life sciences, diagnostics, environmental and applied solutions, and dental industries. To avoid budget inertia, senior management at the company spends half its time reviewing and recutting the portfolio—much like private-equity firms do. The company even has a name for its approach: the “Danaher Business System.” Under this approach, which is based on the kaizen philosophy of continuous improvement, Danaher has institutionalized the resource liquidity required to chase the best opportunities at any point in time. It systematically identifies investment opportunities, makes operational improvements to free up resources, and builds new capabilities in the businesses it acquires. Over the past decade, the company has dynamically pursued a range of M&A opportunities, organic investments, and divestments—big moves that have helped the company increase economic profits and total returns to shareholders.

6. From sandbagging to open risk portfolios
When business units develop strategic plans, they often set targets that they can be sure of reaching or exceeding. As you aggregate these plans on a corporate level, the buffers add up to a pretty big sandbag. The mechanism of aggregating business-unit strategies also explains why we see so few big moves proposed at the corporate level: individual unit heads tend to view M&A initiatives and other bold programs as too risky, so these moves never make the final list they bring into the strategy room.
To make strides against sandbagging, you need to manage risks and investments at the corporate level. In our experience, a key to doing this effectively is replacing one integrated strategy review with three sequential conversations that focus on the core aspects of strategy: first, an improvement plan that frees up resources; second, a growth plan that consumes resources; and third, a risk-management plan that governs the portfolio.
This approach triggers a number of shifts. People can lay out their growth plans without always having to add caveats about eventualities that could hamper them. You could ask everyone for growth or improvement plans, possibly insisting on certain levels to make sure everyone is appropriately imaginative and aggressive. Only after executives put their best ideas on the table do you even begin to discuss risk. By letting business leaders make risk an explicit part of the discussion, you change their perception that their heads alone will be on the block if the strategic risk cannot be mitigated. They will share what they know of their risks rather than hiding them in their plans—or not showing you an initiative at all because they deem the personal risk to be too high.
Consider the experience of a retailer whose traditional strategy approach was to roll up the plans of each of its different brands. One year, the company instead racked up the full set of about 60 investible opportunities and assessed them against one another, regardless of the brand or business unit with which they were connected. The dispersion between opportunities was striking. A portfolio-level view also led to a different answer about the right risk/return threshold than had emerged from assessments made earlier by individual divisional leaders. It turned out, perhaps counterintuitively, that there was too much capital going to the smaller businesses, while the biggest business had major, underfunded opportunities.

7. From ‘you are your numbers’ to a holistic performance view
Whatever shifts you make, you cannot make them alone; you need to bring your team along. We often see managers being pushed to accept “stretch targets”—with perhaps a 50 percent chance of being achieved, what we would call a “P50” plan—only to have these low, up-front probabilities ignored when it comes to the performance review at year end. People know that they “are their numbers,” and they react accordingly to attempts to set aggressive targets.
Bringing probabilities to the fore can reset these dynamics. You need to have a sense of whether you are looking at a P30, a P50, or a P95 plan if you hope to have a reasonable, ex post conversation about whether the result was a “noble failure” or a performance failure. You also need to dig down on what drove the outcomes. Although you don’t want to punish noble failures, you don’t want to reward dumb luck, either. Rather, you want to motivate true high quality of effort. At W. L. Gore, maker of Gore-Tex, teams get data on performance and vote on whether the team and its leader “did the right thing.” This vote is often closer to the truth of what happened than the data itself.
Ultimately, you also need a sense of shared ownership in the company’s fortunes and a clear alignment of incentives to get the full commitment of your team to the big moves you need to make. To deliver the message that people will not be punished simply because a high-risk plan did not pan out, we suggest developing an “unbalanced scorecard” for incentive plans that has two distinct halves. On the left is a common set of rolling financials with a focus on two or three (such as growth and return on investment) that connect to the economic-profit goals of the division and enterprise. On the right is a set of strategic initiatives that underpin the plan. The hard numbers on the left help establish a range for incentives and rewards, and the strategic initiatives on the right can be a “knockout” factor, with P50 plans getting treated more softly on failure than P90 moves. In other words, the way you get the results matters as much as the results themselves.
Playing as a team counts here, too. The right thing to do at a portfolio level does not always mean every individual “scoring the goal.” For example, it’s a good idea to have fire stations strategically located throughout your city, but you don’t heap rewards on the one fire station that happened to be near the big conflagration. You look at the performance of the system as a whole. The urge to push individual accountability can actually be counterproductive when it comes to strategy, which is really a team sport.

8. From long-range planning to forcing the first step
We see it all the time: big plans that excite leaders with grand visions of outcomes and industry leadership. The problem is that there is no link to the actual big moves required to achieve the vision—and, in particular, no link to the first step to get the strategy under way. Most managers will listen to the visions, then develop incremental plans that they deem doable. Often, those plans get the company onto a path—but not one that reaches the vision or exploits the full potential of the business.

That is why the first step is crucial. After identifying your big moves, you must break them down into what strategy professor Richard Rumelt calls “proximate goals”2: missions that are realistically achievable within a meaningful time frame—say, 6 to 12 months. Work back from the destination and set the milestone markers at 6-month increments. Then test the plan: Is what you need to do in the first 6 months actually possible? If the first step isn’t doable, the rest of the plan is bunk. One insurance CEO worked on a vision with his team that concluded there would be no paper in the insurance business in ten years. But when he asked for the plan for the upcoming year, paper consumption was set to increase. So, he asked, “To connect to our vision, would it be viable to be flat in paper next year and go down in the next?” Of course, the team had to say yes. By framing a first-step question, the CEO forced the strategy.

Pursuing these shifts should increase your chances of making big, strategic moves, which, in turn, increases your likelihood of jumping from the middle tier into the elite ranks of corporate performance. In fact, our research shows that making one or two big moves more than doubles your odds (to 17 percent, from 8 percent) of achieving such a performance leap. Making three moves boosts these odds to 47 percent.
But keep in mind that the eight shifts are a package deal—if you don’t pursue all of them together, you open the field to new social games—and that it takes a genuine intervention to jolt your team into this new way of thinking. How? Here’s an idea: Create a new strategy process that reserves ten days per year for top-team conversations and introduce the shifts one meeting at a time. If things go wrong in a meeting, they go wrong only in one place, and you can “course correct” for the next conversation. And if you discover at the end of the ten days that you have not been able to free up all the resources you feel are needed, that’s OK. Take the resources you were able to free up by the end of this first planning cycle and allocate them to the highest priorities that emerged from it. You will have made progress, and, more importantly, your team will now understand what this new process is all about. That is a first step in its own right, and if you want to boost the odds of creating a market-beating strategy, it’s probably the most valuable one you can take.
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Source: McKinsey.com
About the authors: Chris Bradley is a partner in McKinsey’s Sydney office, Martin Hirt is a senior partner in the Greater China office, and Sven Smit is a senior partner in the Amsterdam office. This article is adapted from their book, Strategy Beyond the Hockey Stick: People, Probabilities, and Big Moves to Beat the Odds (Wiley, February 2018).

Four secrets for turning insight into execution

Posted in Aktuellt, Executive Coaching, Executive Team / Ledningsgruppsarbete, Leadership / Ledarskap, Strategy implementation / Strategiimplementering on November 27th, 2017 by admin

A well-designed leadership off-site is a great place to generate the big ideas that can take your business to the next level. You bring in a speaker, have an in-depth discussion, walk through an analysis, and suddenly, light bulbs go off. People see what they’ve been missing or what has been holding them back.

Unfortunately, as soon as people leave the event the light often begins to fade, and even those who complete planned tasks can lose sight of the big idea. Managers may be rigorous about their vision for implementation, but still find that execution varies widely — putting their business at risk and damaging trust and confidence on the team. “Are we going to have another one of those meetings where everyone signs up for stuff, and then no one does anything?” becomes an all-too-common refrain. As a leader, you might be tempted to throw up your hands. You would think that mature professionals could be counted on to follow through on their agreed-upon actions, right? Do you really have to hold their hands?

Well, yes, in a way, you do — for two reasons. First, brain science shows that new insights are fragile. In “The Neuroscience of Leadership,” published by this magazine, David Rock and Jeffrey Schwartz show that when a new idea emerges, it is amorphous and faint, and thus more difficult to call to mind than something familiar. They explain that an engaging experience (like an off-site) is a great way to generate new insights and new connections in the brain. But to turn these new connections into repeatable action, they need to be reactivated again and again, until neural pathways become embedded in everyday thinking and decision making. Rock and Schwartz refer to this process as increasing the “attention density” given to a new idea. “Over time, paying enough attention to any specific brain connection keeps the relevant circuitry open and dynamically alive,” they write. “These circuits can then eventually become not just chemical links but stable, physical changes in the brain’s structure.” (Charles Duhigg’s analysis of habits and Dan Ariely’s description of predictable irrational behavior are both great additions on this subject.)

“Are we going to have another one of those meetings where everyone signs up for stuff, and then no one does anything?”

The second reason your people need more support for follow-up is the sheer volume of information they have to mentally sort and file every day — requests, alerts, introductions, announcements, and the list goes on. The constant noise can swamp even the most competent employee’s system for managing commitments.

Given these two factors, you can increase your team’s execution effectiveness by shifting your view of your role as a leader. Instead of being a taskmaster or allowing poor follow-up to undermine results, you can think of yourself as the architect of your team’s focus and attention — using simple practices to reactivate the insights that really matter over time. Here are four ways to start:

1. Document insights in real time, in vivid ways.
Don’t wait until the meeting or off-site ends. Instead, allocate some time near the end of the agenda for reflection — to capture key insights, outline project plans, and schedule next steps. Try sharing a project planning template. Give people time to check their calendars before asking them to commit to next steps. And, where possible, chronicle “aha” moments in ways that easily bring them back to life. I find hiring a person to serve as a graphic recorder, photographing key flip charts, or having people tell the story of the biggest insight from the meeting all make it easier to reactivate important insights later.

2. Be rigorous about your personal system for managing attention and commitments.
If you want to increase your team’s attention density, you need to proactively manage your own focus. There are many valuable methods available — for instance, David Allen’s Getting Things Done is explicitly designed to help you manage the flood of information inputs. The key is to have a personal routine for consciously directing your attention to what matters, and to follow it religiously. Having your own system helps you to choose how to direct your team’s attention, and sets the expectation that they should have similar systems. This is also the only way you or your team can make commitments you know you can keep.

3. Use questions to reactivate the “aha.”
In your team meetings, in your one-to-ones, and even when passing someone in the hall, try asking questions that prompt people to think more deeply about a big idea. “What did you find when you looked at the external market data?” “What is your goal for that sales call?” “Who are the new customers and who will be helping to set them up correctly?” Ask what the idea means to them, and how it can be applied in practice. As a leader, the questions you ask also let your team know what you expect and how they should prepare for discussions with you (an idea I learned from sales strategy expert Steve Thompson).

4. Notice everyone’s deadlines.
Too often, deadlines come and go, and no one mentions the hits or the misses. Unfortunately, this can signal that the project or the task isn’t important. By contrast, if you notice when a key date is coming up, you can ask the relevant individuals how the work is coming along, dig into challenges or delays, or thank your employees for solid execution. Doing so reinforces the idea that you are paying attention, and conveys the significance of everyone’s contributions. Simply recognizing when someone takes a crucial first step or shows signs of real effort to change can make a huge difference, especially when they are learning new habits. This need not become micromanaging if your focus is on helping people make progress toward the goal (rather than on catching their mistakes).

At first blush, you may think that adopting these four habits will cost you precious (and limited) time. But if you give them a try, I think you will find they increase the payoff from every insight your team develops. Isn’t that what we mean when we tell our teams we want them to do less and achieve more?

Source: Strategy-Business.com, November 2017
By: Elizabeth Doty
About the author: Elizabeth Doty is a former lab fellow of Harvard University’s Edmond J. Safra Center for Ethics and founder of Leadership Momentum, a consultancy that focuses on the practical challenges of keeping organizational commitments.