What's really holding you back?

Frustrated with results, but not entirely sure what the problem is?  Here’s a checklist to start diagnosing what’s really holding you back:

  1. Are you thinking about – and talking about – your situation productively?  What’s the balance between “we have to…” and “we want to…”? ("Want to" tends to be more productive.)
  2. How big is your definition of “we”, as in “we want to…”?
  3. What’s the level of energy, courage and confidence in the organisation? If it's low, why?
  4. How clear is the purpose of your business?  Is it only about shareholder returns, or are there aspects of your purpose that will appeal broadly?
  5. Are the values and accepted behaviours in the organisation supportive of working quickly in collaboration?
  6. Do you have reliable, fast-cycle management processes for information sharing and co-ordination of action?
  7. Is there a written set of goals, timelined plans with clear accountabilities, and measures of progress?
  8. Do you have an written, shared model of how your business works today?
  9. Do people across the business have visibility to external developments that might impact them?
  10. 10. Do you have a rich and fresh flow of analysis, insights, and intuition about the business? Could you be missing key aspects of your situation?

What to do when you just don't know

Exec teams and Boards spend a lot of time focused on risk and risk management.  Rightly so in today's world.  But, there's something else - different from risk, but often confused with it - that senior executives and Board members should be equally, if not more, concerned about. It's radical uncertainty. John Kay, in a recent column in the FT (The other multiplier effect, or Keynes's view of probability - http://on.ft.com/OslEcY) touched on this topic:

Keynes believed that the financial and business environment was characterised by “radical uncertainty”. The only reasonable response to the question “what will interest rates be in 20 years’ time?” is “we simply do not know”.

I suspect that admitting "I don't know, we don't know, it can't be known" is difficult for many business leaders - particular on any topic related to their business.  There's a lot that could be said about why that is, and the sometimes negative consequences.  But, there's a different angle I'd like to explore.  If you accept that your business is facing some degree of radical uncertainty, how does that change the way you ought to think about strategy?

A lot of strategic thinking is based on the assumption that you can forecast the future (or at least assign realistic probabilities to a known range of outcomes in the future) and then pick the actions most likely to give you what you want.  But, "radical uncertainty" means you can't even know the full list of possible outcomes, much less how likely each one is. No matter how well you do your analysis, there are just going to be some key decisions where that way of thinking doesn't work .

Of course, it's not all fog and darkness either.  Businesses have more data, more analytical tools, more knowledge available to them than ever before.  And, our ability to model complex business ecosystems and see previously unexpected interactions and outcomes has also improved. But, most of these tools work best for "how" sorts of things: How many new customers are we going to get if we spend £x? How long will it take develop the next version of our product? Plus, they are based on extrapolation from the past, which means that they only work as long as the future looks a lot like the past.  Don't assume that's going to be the case.

So, what does this mean for strategic thinking - particularly at the top team level?  At minimum, since you almost certainly face some degree of "radical uncertainty", it's worth discussing as a Board how that very fact might need to modify your decision making process. Even better, consider this question: "If we can't know for certain what will result from our actions, are there still things we would want to do or be - for themselves, not for what they bring?"

Ten Questions the Board should always ask about strategy proposals

Boards want to spend more time on strategy.  McKinsey's Global Survey in 2008 showed that 53% of Board members wanted to spend more time on long term strategy. And, over the last few years, when for many businesses there have been big questions about the right future direction, this hasn't changed.  In 2011 fully 70% said they want to spend more time on strategy.  What's even more worrying, about 1/3 said they had "limited or no understanding" of the risks the company faces, and only 14% said they had "complete understanding".  For the company's strategy, 22% said "limited or no", only 21% said "full".  Given the well known human tendency to overrate our own performance, I suspect it may be worse than that.   While time allocation is part of the issue, there's a deeper problem.  Most Boards are just responding to what the management team puts in front of them.  That can spark a bit of Q&A, and some spirited discussion.  But, it inevitably puts the NEDs on the back foot.  They are challenging, rather than contributing fully of their insights, experience and intuition.  

Put differently, it's really hard to really add to the debate once the slide deck is done.  So Board members are often left with a choice of approving a strategy they may not even fully understand, raising a few issues to be addressed at the next Board meeting, or rejecting the proposed strategy - which often means starting a search for a new CEO.     

To make a more effective impact, NEDs should push for a different approach to strategy development that allows them to contribute their experience earlier, before the models are all constructed, the charts carefully drawn and all the messy reality of decision making tidied up.  Imagine having a "pre-strategy" away day to develop a shared perspective on where the business is, what challenges and opportunities it faces, and the broad directions the Board would like to see explored.

However, even if NEDs push hard for this, it make take a while for Exec members of the Board to see why it's a good idea.  So, if you're on a Board and are faced with providing input to a set of strategy proposals, here's a list of questions to ask that should open up the debate in a more useful way.     

  1. In examining the various options in front of us, how did you decide amongst them? Whose interests have you considered and how did you balance them?
  2. Did you evaluate the various options based on how attractive they are now, or how attractive you expect them to be in the future?  If the future, how did you arrive at your view of what the future will be like?
  3. Where in your evaluations did you take into account the reaction on the part of others to our potential actions?
  4. How have you included outcomes (positive or negative) that are perhaps unlikely to occur, but game-changing if they do?
  5. Besides the options you’ve shown us here, what others did you examine and eliminate? Why were they taken out?
  6. Of the options you left in, do you think they are all strategies that reasonable people might pursue? For each, under what circumstances would they be your preferred option?
  7. Could you let us know –  of the facts you’ve shown us and the assumptions you’ve had to make to reach your conclusions  – which are the ones that you are least certain of?
  8. Where are you most concerned that your models may not have captured all the key dynamics or may in other ways be incomplete or potentially misleading?
  9. Which of your assumptions has the most impact on the conclusions you have reached?  How much would these key assumptions (together or individually) have to change before you reached a different conclusion?  How have you estimated the likely range of outcomes for these key assumptions and what were the results of that analysis?
  10. How have you taken into account the desires, hopes and aspirations of our people?
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