• First Steps Toward Accountability

    21 May 2019
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    I have 2 clients who are focused on “accountability” this year, and it’s proving a hard row to hoe for both of them.  Why?

    Well, first of all, accountability is a somewhat scary term.  If someone is saying we need it, then that must mean that we are not being accountable, and that sounds like someone’s not happy with people’s performance.

    Worse, if there’s not a way to gauge performance, then people are likely to take a need for accountability as a judgment on their dedication.  They’ll confuse accountability with work ethic.

    It’s unfortunate that accountability gets this reaction.  In Stage 2 companies, accountability is more about making things that used to be managed intuitively into things that are managed objectively.  It does make a judgment about how people are working, but not in the way they think – accountability focuses on working on the right things, not the level of effort.

    In fact, most of the time I work on accountability, people have a clearer sense of direction and less stress in their jobs.

    I can spend lots of time talking about how to make your organization more accountable, but for now, let me finish by answering the question, “How do you overcome the initial resistance to accountability?”

    I recommend 3 steps.  First, before you bring up accountability, praise the team’s work ethic (assuming it deserves praise…if it doesn’t, that’s a deeper problem…), so that they know that you know they are dedicated.  Second, give them an example of people spending more time in an area than they should.  (Serving the bottom 20% of your customer base is a fairly typical area.)  Finally, ask the team, “Do you have a way of quickly seeing whether the other people on the Leadership Team are succeeding?”  If you don’t, then you’re probably spending more time than you should simply understanding how you’re doing, instead of diving into the issues that will make your business better.


    We have a free self-assessment to use to understand the strength and weaknesses of the ‘Operating System’ that you use to manage your business. If you’d like to assess the current state of your Operating System, click here to download.

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  • Your horizon should drive your strategic planning

    12 February 2019
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    One of the first things that I look at when designing a strategic conversation is the horizon in which our decisions will have to produce results.

    Sometimes (remember 2008…), the horizon is as short as 3 months.

    Sometimes (remember the times before 2008…), the horizon is as long as 5 years.

    WHAT DETERMINES YOUR STRATEGIC HORIZON

    How do you tell what your strategic horizon should be?  I look at 2 factors

    • How substantial and dependable are the resources we’ll have?  The more of a war chest we have to work with, the less we need to worry about short-term needs, and the more we can focus on long-term goals.  If we don’t have a war chest, then how confident are we that we’ll be profitable into the future.
    • How healthy is the business model?  Are we generating a good profit?  If not, that’s a sign that we may not be delivering what the market values, or something internally is not working as needed.  And it suggests that we’ll need to use resources to fix things before we can use them for building things.

    WHAT DIFFERENT STRATEGIC HORIZONS LOOK LIKE

    Once I’ve done that assessment, I know whether we need a short-term, medium-term, or long-term discussion.

    • Short-term = 0-6 month horizon:  tactical initiatives that can capitalize on existing assets, or address existing problems, with the goal of generating revenue or cutting costs.  For example, cross-selling to existing customers, or consolidating 2 internal departments whose work has changed.
    • Medium-term = 6-18 month horizon:  evolutionary initiatives that capitalize on adjacent opportunities and needs – things that are new but close to what we’re already doing.  For example, selling an existing product into a new (similar) market, or upgrading an antiquated order-management system.
    • Long-term = 18-36 month horizon:  transformational initiatives driven by a strong internal or external driver but with major work to be done.  For example, launching a new product that needs technical development, or expanding the strategic role of a department (we’re seeing this a lot in IT departments that are being asked to drive digital transformation).

    For most small businesses, most of the time, the strategic horizon is 1-2 years.  But the horizon can vary from quarter to quarter.  So, as you prepare to talk with your leadership team, take into account the resources you have and the health of your business as you outline the agenda for your strategy meeting.

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  • The importance of framing to strategic planning

    18 January 2019
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    Are you in growth mode, or survival mode?

    I have some clients who are growing, some who are hanging on – and some who are transitioning from one to the other.  Although most businesses would like to be in growth mode, the point isn’t to say that one is right and the other is wrong – it’s to understand that different situations call for different approaches.  And that can be an issue when transitioning from one situation to the other.

    HOW GROWTH MODE AND SURVIVAL MODE DIFFER

    I did a chart recently for a client of the differences that their company would see as it switched from survival mode to growth mode.  There were 15 different areas that would see changes!

    In survival mode, your “strategic horizon” (the timing you take into account when making decisions) is the next quarter.  In growth mode, that horizon stretches out to 3 years. 

    And a lot of areas can be “good enough” in survival mode – but need to be tightened up when growing.  Those areas include accountability, processes, and hiring.  And the inverse is true, too – things that need to be tightly managed in growth mode should be loosened up in survival mode.  (Why would you want less accountability or process?  Because that takes time, and in survival mode, that time can be better spent talking with customers.)

    THE IMPORTANCE OF FRAMING

    When you’re having strategic discussions, one of the most important steps is to pick the right “frame” for the discussion.  A more tangible way of saying that is, you have to know the right question to ask.  This is something that you can do intuitively most of the time.  But when companies are going through change, picking the right frame is much harder.  And picking the wrong frame can be very costly.

    Here’s a simple example.  I can create a very different conversation, and a very different outcome, if I ask the question, “What should we do more of next year?”  rather than, “What do we need to do differently next year?”  The first question is appropriate for a company continuing in the same mode it was in the prior year – baked into the question is the idea that we already know the right “model” of how we do things, we just need to pick areas to emphasize.  The second question is appropriate for a company in transition – and in that case, doing more of something you’re already doing may actually hurt you more than help you.

    (And, yes, it often makes sense to ask both of those questions in your annual planning.)

    As a leader of strategic discussions, you need to be aware of what frame you’re using for each discussion, and you need to build your toolkit of frames, so that you can bring the right one to bear in whatever situation you find yourself in.

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  • Is the answer in the room?

    1 December 2018
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    One of the precepts of the EOS program is, “The answer is in the room.”  It’s a phrase that’s used to emphasize the importance of discussion in addressing important issues, and I am a full supporter of that idea.

    The problem is, the phrase itself is not quite right.

    WELL…SOME KIND OF ANSWER IS IN THE ROOM

    A more accurate phrase would be, “An answer is in the room.”

    And it’s the job of the CEO to know whether it’s the answer or an answer that is in the room – whether your team has the right stuff to understand and evaluate the issue and the options for solving it…or not.  Because if they don’t, but they think they do, then you are wading into dangerous territory.

    It’s not that dangerous if the issue is minor.  But if it’s a major strategic decision…having the wrong answer is a big problem.

    EVALUATING THE QUALITY OF YOUR TEAM’S ANSWER

    So, how do you gauge whether you are getting an answer (a poor or bad decision) or the answer (a good decision)?  Here are some questions you can ask:

    • Have we seen this situation before?  Or something similar?  Or has someone on our team?
    • Can we come up with a list of risks that would make our banker (or some other knowledgeable skeptic) proud for how pessimistic the list makes us appear?
    • Can we come up with 3 strong options for handling the situation?
    • Is there more than one person who is worried that the answer may not be in the room?

    A CAUTIONARY TALE

    Let me talk more about that last one.  The biggest business mistake that I have witnessed was when a client decided that the answer was not in the room for them.  They hired me to write a plan for a new initiative, discussed and agreed to the plan as a team…and then 2 weeks later the CEO came up with an alternative “short cut” approach.

    That short cut ended up costing the company between $2MM and $10MM, depending on how much you count the indirect impact that decision had.  At the time the leadership team was discussing the short cut, there were 3 members of the team who said, “We just paid for a plan, and we all said we liked the plan – why are we not following the plan?  Why do we think we have a better answer than the plan now?”  (Which is another way of saying, “The answer is not in the room.”)

    HOW THEY GOT IT WRONG

    Why did most of the team change their minds?  Because the CEO had a long history of running and building the business, and the majority of the leadership team said, “If you think this is the right thing to do, we trust you.”  What they missed was that the CEO had not pursued a strategy like this before – it was a new area for him, and it was more complicated than anything he’d worked on before.

    The team needed to listen to the skeptics more – and there’s a lesson there for you, dear CEO, if you find yourself in a similar situation.

    YOU BE THE JUDGE

    If you’re a CEO listening to your team debate a topic, you have another role you need to play – you need to raise yourself above the discussion, and look down on it, and critique whether the sophistication of the discussion matches the complexity of the issue and the quantity of the resources you’re going to commit to the answer.

     

     

     

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  • The challenges of marketing’s ROI

    30 October 2018
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    In my work as a fractional CMO, I am often helping small businesses navigate the transition from sales-driven revenue to marketing-driven revenue.  This is no small feat, because of the time and investment it takes.

    I just had lunch with the managing partner of a $5MM services firm.  He was telling me how hard it was to ask his partners to spend money on marketing – and he was talking about $20K, which was a fraction of what they would need to really become a marketing-driven company.  Why were his partners dubious?  Because the ROI was not going to be fast or definite enough.

    Compare that with a strategy meeting I was in last week for a $10MM services firm in which a partner – who was one of the biggest skeptics of marketing 2 years ago – said, “If we hadn’t invested in marketing over the last 2 years, I’m not sure we’d still be here today.”  (To his credit, he was a skeptic, but an open-minded one.)

    Let me tell you something that marketing agencies have a hard time telling you:  the ROI of marketing almost assuredly looks terrible for the first 12 months you’re doing it.  And may look terrible the second 12 months.

    But if you’ve made the right investments in that time, you almost assuredly will be reaping the rewards of your marketing machine by your third year.  And they are rewards that are beyond the scope of anything you could have generated with a sales-driven strategy.  In other words, marketing can get your business to the next level – but it’s going to cost you.

    It’s not easy for leaders to invest in something that is unproven and takes 12-24 months to start paying off – especially given the “black art” nature of marketing, which means that you can never really “arrive” at a marketing strategy that you can lock in and forget about.  Each company’s marketing recipe is different.  There are generalizations you can start from, but at least 1/3 of those generalizations will be wrong.

    Why “waste” all that money marketing, then?  Because building a marketing machine is like driving a car instead of pedaling a bike.  If you’re happy biking and it takes you where you want to go…great.  Stick with your sales-driven approach, and don’t bother building a marketing machine.  But if your market is getting more competitive, or your customers are more price sensitive, or your buying cycle is getting longer…that bike probably isn’t going to be enough anymore.

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  • Prioritizing priorities – making your strategy better

    24 September 2018
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    What do I mean by prioritizing your priorities?  Why is it important?  Why is it hard?

    It’s fairly easy for any business to come up with a dozen ideas for improvement – and most businesses wouldn’t stop there, generating dozens of possibilities.  The challenge for any leadership team is to pick the right priorities to focus extra attention on among all those many options.

    It’s easy to say, “You should have 3 big rocks that you focus on.”  It’s muuuuch harder to say, “These are the 3 rocks that will give you the best outcome.”  Why is it harder?  Because there are many variables to consider in coming up with the answer.  I’ll highlight 2 as examples:

    1. What’s the balance between financial outcomes and intangible outcomes?  You could work your staff hard for two years, get your financial results up, and then sell your business for great personal gain.  But many small companies have more connection to their employees, and so are willing to support work-life balance at the expense of financial performance.  In that case, you can’t just decide on priorities based on financial ROI.
    2. What if short-term success and long-term gain are not aligned?  Often they aren’t!  Short-term, it almost never makes sense to upgrade your systems.  But if you never upgrade systems, that will eventually undermine your results.  How do you balance those competing interests?  How do you decide whether long-term payoff is the right thing to aim for now?

    So this is a hard task.  Why not just avoid it?

    Because focus is a key part of success.  Spread yourself too thin, and you won’t have the energy to see your initiatives through to success.  As we all know, juggling 6 balls is far harder than juggling 3 balls.

    Although there are tools that can help you prioritize your priorities, this is not something that is driven by tools.  A SWOT or Gap analysis will not solve this problem.  A 1-page sheet that puts long-term vision, annual goals, and quarterly objectives…will not solve this problem.

    The center of this solution is wisdom and judgment.  It takes experience, insight, creativity, foresight, and thoughtfulness to prioritize your priorities.  Whereas operating a business is more akin to an industrial “assembly line” process, guiding a business is a craft that has as much art as science.  That’s why venture capital looks foremost at people when considering an investment.

    One of the great things about working with Stage 2 companies is that there is usually a strong team operating the business, and any gaps they have in operations can usually be filled with a toolkit from EOS or e-Myth or Rockefeller Rules.  Whether they are a strong team leading the business depends a lot on their ability to prioritize their priorities and pick the right things to choose on.

    I’ll be posting a self-assessment soon for you to gauge how your team is at leading your business.  So…well…this is just the placeholder until I get that!  But if you’re reading this and are interested, send me an email –  or give me a call and I’ll share what I have in draft form.

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  • The High-Potential Talent Stack

    13 April 2018
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    I recently gave a webinar for the SPARK.grow program on high-potential employees – how companies can identify, foster, and be attractive to high-potential employees, and how high-potentials can identify, develop, and be attractive to high-potential roles. (The recording of the webinar is here.)

    I described a “High-Potential Talent Stack.”  That stack has 6 levels – the bottom 3 are the factors that enable someone to perform at any job, and the top 3 levels are the factors that enable someone to perform as a leader.  I want to describe each level…

    Performance – this is how well the person gets work done

    Results Focus – this is the ability to not just put in the effort, but to figure out a way to go around roadblocks and keep at a task until you get the result that is needed

    Learning – high-potentials are always expanding their toolkit of skills, and learning about the work they do

    Investment Thinking – this is the ability to think in terms of Return on Investment

    Maturity – high-potentials handle themselves well, in different situations and with different people

    Leadership – this is the combination of skills that are needed to get a team to perform at a level and in a direction that they wouldn’t get to on their own

    This stack is a powerful tool.  It shows what a company can look for when hiring new staff, and what they can train and develop to improve their high-potentials – and shows high-potentials what skills to develop for further growth.

    Each level of the stack has 3 more specific components.  The target is to score a total of 12 or higher when each of those components is rated on a 1-5 scale.  Scores of 4-4-4, 5-4-3, or 5-5-2 would all qualify; scores of 5-3-3, 4-4-3, 5-5-1 would not qualify.  It’s a high hurdle – but the people that meet that standard are often the “10x-ers” – the ones who have 10x the impact on your business than your typical employee.

    Almost universally, small businesses underinvest in their high potentials.  There’s too much potential ROI for you to do that.

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  • Your business model is a depreciating asset

    9 March 2018
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    Most people recognize that markets don’t stand still.  Customers, competitors, and technology are constantly changing.

    Although most people recognize that, many don’t appreciate the imperative that that dynamic places on them as leaders.  The simplest way I’ve learned to describe that imperative is this…

    Your business model is a depreciating asset.

    In other words, the way you do business – whether that’s how you find customers, how you produce what you offer, how you deliver what you sell – is losing value every day.

    Like other depreciating assets you have – your house, car, refrigerator, computer – you have to maintain it simply for it to keep working the way it’s supposed to.  And you have to more-fundamentally change or replace it on some kind of predictable cycle – 3-4 years for a computer, 5-10 for a refrigerator.

    How quickly your business model depreciates is mostly a function of the degree of change in your market.  And, since there’s more change in every market these days, we all need to put our leadership teams on notice that we’re going to have to reinvent our business model sooner than we’re used to.  Rule of thumb:  the cycle is probably half what it used to be.  (So if the model used to last 10 years, it’s best to plan for it to last 5.)

    If your leadership team is skeptical when you tell them this, offer the following true story.  I know a smart, tech-savvy teenager who has a nose for online businesses.  He found an opportunity last Fall that he liked.  Here’s how that played out:

    • Week 0 – discovered opportunity
    • Week 1 – supply chain set up
    • Week 2 – open for business
    • Week 5 – profits to date:  $200K
    • Week 11 – profits to date $500K
    • Week 13 – rejected offer to purchase business for $100K
    • Week 16 – competitors raise cost of advertising to a level that the economics no longer work, business model no longer profitable, business closed

    To summarize, that’s a business model that was able to net $500K in 4 months – I know $15MM businesses that aren’t generating that profit for the year – but whose value depreciated to $0 in that same 4 months.

    If you talk about markets changing, it seems like something “out there” that may not impact you.  If you talk about your business model depreciating around you week by week, it gets much clearer that you need to act with some urgency.

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  • It’s light if you use a forklift

    12 January 2018
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    I was in a meeting this week with a client, and they were talking about the gigantic case they take to trade shows – which is called “The Coffin” and may have cost an employee a finger (the story wasn’t clear and I didn’t want to ask).  The person who bought it, and still saw it’s utility, countered the jokes and jabs by saying, “Well, actually, it’s light if you have a forklift.”  I’m not sure if it was a joke or a legitimate argument, but it got me thinking…

    There are a number of pitfalls that will trip up people who don’t have a lot of experience with strategic planning.  One of the more regular ones – especially in retreats where people are asked to free their thinking – is not taking into account limited resources.

    All kinds of amazing things are possible to dream up if you assume you have unlimited time, effort, strength, brainpower, flexibility, etc.

    That case is light (if a forklift is available where we’re going, and we have the money to pay for it)

    That metal is flexible (if we have a sledgehammer and the strength to wield it)

    That market is accessible (if we have the VP of Sales who knows the right people and can use their trust to benefit our product)

    That new initiative is going to be easy for people to support (if we have a culture that is very adaptive and a leader who consistently pushes it)

    Options that look good with unlimited resources often look terrible when limitations come into play.  So it’s important to take resources – money, bandwidth, expertise, relationships – into account when choosing a strategy.

    Overlooking resource constraints is just one form of a broader category that undermines strategy – the hidden assumption.

    There’s no way to avoid hidden assumptions – we all have them lurking in our blindspots.  But there are things you can do in your planning to reduce the likelihood that assumptions will lead you into a bad decision:

    • Include people with different perspectives in your discussions – and listen to them all
    • Ask, “Why is this a stupid idea?” or “Why would this fail?”
    • Think of other decisions that ended badly and were driven by hidden assumptions, and assess if there are similarities
    • Clarify the criteria that you use to evaluate your options

    One of the things that separates good strategists from poor ones is the ability to see what’s missing and hidden.  It’s a hard skill to develop – it takes knowledge and experience and inquisitiveness and discipline.

    But it’s a really valuable skill.  If you reflect on the worst decisions you’ve made, they are usually built on top of a hidden assumption that turned out to be way more off base, and way more important, than you’d have imagined…if you’d known to think about it.

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  • What your restart needs

    11 February 2017
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    Small businesses are often dealing with situations in which performance has not met expectations.  It’s not really a failure, per se, but there has to be a change.  A restart.

    It might be the European division, or the HR department, or the implementation of the new CRM.  When the gap between where the initiative is supposed to be, and where it actually is, is big enough, a restart is needed.

    (Hmmm, you say, how will I tell if my situation is “big enough” to merit a restart?  The answer is different for every situation, but basically, it comes down to whether the business can handle the underperformance for however long into the future you want to look.  A failing overseas office in one company might continue to bump along if the rest of the business can prop it up, while a similar office in another company is a crisis because it’s sucking too much cash that other parts of the business also need.)

    When I’m faced with this situation in one of my clients, I work along 4 paths to do the restart:

    –          A credible though possibly uncertain understanding of our value, and an informed belief that people want what we offer, and a vision for why it makes strategic sense to “play that game” as opposed to focusing on something else

    –          A leader or leaders who can inject the energy needed to change things and break new ground

    –          The funding needed for the plan…and the mistakes we’ll make as we learn the flaws with the plan

    –          A story that refocuses the team from the failure and the pain, to the vision and the hope

    As a leader, you know what these kinds of situations are like.  Not clear.  Not simple.  Not easy.  But if you have those 4 pieces, you’re well on your way to a successful restart, even if the results don’t come right away.  And if you don’t have those 4 pieces…then that’s the first thing you need to work on!

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