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Posts Tagged ‘change’

square peg round hole

Did you ever watch a toddler trying to put the pieces of a wooden puzzle in the proper hole?  Over and over again they try to find a way to get the round peg into the square hole.  It is an interesting learning and discovery process to observe.  Eventually, they discover the right hole and then move on to the next piece repeating the process.  Over time, they figure the puzzle out.  Interestingly, as adults, we have a natural tendency to continue to play this game.  The difference is we don’t know we are playing it.

While the world has gone through significant change over the past five to ten years, some have struggled to adapt to the changes.  Harder and harder they bang on the round peg believing that it must fit into that square hole.  Nowhere is this more apparent than with our political system.  What they fail to realize is that what we are experiencing is nothing like what we have experienced in the past.  It is a new playing field all together.

Unfortunately, the strongest point of reference for dealing with the “new” is often what worked for us in the past.  In effect, we tend to see the new through ‘old’ glasses.  So, our options quickly come to the surface.  And then we get upset with the results.  Maybe if we hit the peg harder.

What is interesting about change is that most businesses quickly figure it out, younger generations embrace it, and advanced institutions are riding it into the future.  However, many of our political pundits are stuck in the government labyrinth and will never figure it out. –  It looks impossible.

Many years ago, I came up with the following quote: “Nothing is more disruptive to the current state than a change in reality.”  What we are dealing with today is a change in reality, and it is disruptive.  No matter how hard they hit the round peg it is not going into square hole.

I wish I had an answer for our political quagmire; because it is painful to watch.

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Reinventive Thinking  (R) Bus Card

Over the past thirty plus years, I have had the opportunity to work with hundreds of business owners ranging from mom-and-pop stores to multi-million dollar international companies.  Regardless of the industry or size of the business, the one common issue CEO’s and owners are concerned with is effective decision-making.  In effective decisions are very costly to a business, so any improvement in this competency vastly improves the performance of their company.  The following is a very brief discussion about my ReINVENTive Thinking®, The Art of Decision-making process.

Peter Drucker once said, “…. the root cause of many of today’s business crises is not that things are being done poorly, or even that the wrong things are being done.  In most cases, the right things are being done – but fruitlessly.  The problem; the assumptions on which the business has been built and being run no longer fit reality.”  Peter Drucker said this in a 1994 Harvard Business Review article, The Theory of the Business, and it is still a big issue for businesses today.

What influences our decisions?

What influences our decisions

To the decision-maker all of these influences can be perceived as reality.

I have said for years that “Most people make decisions based on the first-order consequence of the decision.”  Do you know the second, third or possibly the fourth-order consequence of your decision?  Do you need to?  In life there is almost always a second and third-order consequence to a decision.  Coupling this with not recognizing the reality of your situation, can be very costly to the decision-maker.  So, how do you make more effective decisions?

An effective decision process consists of three unique components that are dynamic, and interdependent.

The decision process

The following schematic shows how the decision process works.

The decision process mechanics

The triangle represents three components of a decision-maker, Decision-making (leadership), Knowledge (competencies) and Action (capabilities).

In this case let’s assume that the schematic represents “how” a business makes decisions.  As outside issues impact a business, the business must be ‘programmed’ to effectively assess the issue.  Is it something that can negatively impact the business?  Is it an opportunity?  Is it meaningless?  To determine this, an organization:

  • Must be receptive to identifying issues that can impact the business. (Blue cloud)
  • Next they must test (through knowledge) the potential impact of the issue. (1)
  • Then they must identify, or design, a reaction/response to the issue. (2)
  • Next, they must test that reaction to the issue. (3)
  • Finally, they must monitor the reaction of the issue. (4)  Adjustments to the response may, or may not, have to be made.

It is important to note that the triangle does not represent an organizational structure.  It is a mindset, and competency, that is automatically applied throughout an organization.  The process can be lightning fast or applied over time.  It all depends on the complexity of the outside issue.  For example, a disruptive product entering the marketplace would require a more intense process than a routine sourcing issue for a product component.  Recognize that the decision-process is not just about operating issues, it’s about all important decisions.  For example, the blue cloud issue could represent an ownership situation that has the potential to change control of the business.

Going back to Peter Drucker’s comment on reality, let’s see how the decision process applies.

The decision process perspective

The blue circles in at the bottom represent the components of the business’s changing environment.  The circles move around, change size, disappear and new circles form.  It is the dynamic external environment within which the business operates.  You have to develop and apply knowledge to your decision process from this perspective.  It is your reality.

The following schematic shows how a business stays connected to the reality of their environment.

The decision process changing environment

The triangles at the right and center indicate that “the assumptions upon which the business has been built and being run no longer fit reality.”  Reality has moved to the left.  Doing the right things (you think) when your reality has shifted, is fruitless.

What do you do now?

There are several critical steps to get you started.

  1. Establish a sound understanding of decision-making responsibility within the organization.
    1. The focus is on the process of decision-making. It answers my favorite question, “tell me the process you used to make the decision.”
  2. Formalize your management process for distributing responsibility by providing direction.
    1. Provide a clear description of the direction, how it is connected to the strategic objectives of the organization, and the expected results.
      • Time frames are important.
    2. As a decision-maker, make clear distinctions between direction for knowledge development and direction for implementation, and manage each accordingly.
    3. Make the decision-making process dynamic, real-time, and on-going.
      1. Make it systemic to the organization. No matter what issue you are dealing with, you have an efficient way to manage it.

Why is effective decision-making so important?

  • About 70% of family businesses fail or are sold before the second generation can assume control.
  • Only 10% of the family businesses make it to the third generation.
  • Most family, and private, businesses are managed by the same ownership control, individual(s), for many years.
  • A major cause for failing is the inability to adapt to a changing environment.
    • A business must be as dynamic as their environment.
    • Assumptions about your business must fit reality. – Drucker
    • In times of drastic change, it is the learners who will inherit the future. – Eric Hoffer

So again, “Tell me the process you used to make the decision.”

 

 

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Fool's Gold

During the gold rush of the 1800’s many prospectors, in their relentless hunt for gold, discovered a mineral know as pyrite (fool’s gold), which looked like gold. The mistake, especially for naive prospectors, was only discovered after mining and transporting all of the mineral they could carry to a local surveyor. In simple terms, they were obsessed in finding their fortune. So anything that looked like what they were looking for quickly, to them, became a reality. The mineral even became a method for tricking unsuspecting prospectors into buying a gold mine that had been “salted” with fool’s gold to give the appearance of a gold mine.

In the business world today, we prospectors, in many cases, are still mining fool’s gold. We go after appearance versus substance. Why, because we see what we want to see. Somewhere along the way when I was just starting out in business I remember an old sage saying ‘nothing is as it appears to be.’ I didn’t understand it at the time, but the concept has never left me. Today, all you have to do is search the internet for something and start going through your hits. Wow, almost every hit promising to meet your need. Slick images, testimonials, reviews, offerings, promotions, guarantees, etc., etc., etc. All you have to do now is pack it up and take it to the surveyor. Unfortunately, in a noticeable number of cases, you discover you have mined fool’s gold.

In many of my blogs I talk about decision-making and how important it is to have a process. When you are obsessed in doing something, regardless if it is in response to an opportunity or a threat, you have to be aware that mines salted with fool’s gold are all around you. Venturing into one of these will consume valuable resources (time, people, and money) and, at the very least, delay you in accomplishing your objective.

Of the three components in effective decision-making, knowledge, especially in today’s world of complex imaging, becomes critical. The more knowledge you can develop before you begin your mining, the better chance you will have in discovering gold. The more you get in the habit of developing knowledge as a part of how you make decisions the more efficient you will become in managing your resources for making decisions. Remember, from your perspective, substance is based on knowledge. Appearance is not.

I’m not saying that everyone can make the ultimate decision if they just build more knowledge. I’m saying that if you can develop a decision-making process that always incorporates a knowledge component; you will make fewer trips to the surveyor with fool’s gold. – It boils down to my favorite quote; “tell me the process you used to make the decision.” Appearance versus substance.

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Future, Past & Present crossword

When you talk to a business owner about business plans, strategies or strategic planning you very quickly get into a discussion about expected changes in their business environment.  What is going to happen in the next 3-5 years?  How can I position my company to take advantage of those changes?  Where are my markets going?

It is good to see business owners focusing on the future.  No one wants to get left behind.  Adapt or die.  Game on!  In the end, however, it is about the allocation of resources; i.e., making decisions about time, people and money.  Placing bets on the future, focusing on the changes expected to take place in the marketplace.

What is really interesting is that very seldom does the business owner identify what is not expected to change in the next 3-5 years, which is a critical component of strategic thinking.  A business owner must identify and discuss these issues because they are also part of the resource allocation decision.  This is the component of your strategic equation that is constant in your projections.  You can bet on it; it is going to happen.

You will find that when you bring what is ‘not changing’ into the discussion of future plans or strategies, the strategies not only become more robust they are more focused, which means resource allocations are more efficient.

What is not expected to change in your future?

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Main Street

By many measures our economy is on the mend; to what degree depends, unfortunately, on the perspectives of political pundits championing a party, or the cadre of news anchors fighting for ratings. In most cases you are led to believe that the state of our economy, good or bad, is the result of the ‘helping hand’ of government. Somewhere in all of this muck there is a ‘real story’ that goes untold.

I assure you that while we may be in a period of measured growth, or even moderate growth, and more positive consumer confidence, the root cause is not the ‘helping hand.” Reams of economic statistics or elaborate algorithms describing some economic state miss the mark. A politician standing behind a podium in an empty chamber engaged in verbal combat with himself misses the mark. The ‘helping hand’ can only be a hindrance or a catalyst for economic prosperity, it cannot create it!

The following photograph was taken on December 30, 1917 at Pittsburgh Plate Glass on Main Street in downtown Cincinnati, Ohio. My grandfather and uncle are in the photo.

Pittsburgh Plate Glass 1917_edited-4

I’ve always liked this photograph because it depicts the foundation of our economy; a business whose survival depends on its capability to create economic value. No ‘helping hand’ back then.

Well guess what? The basic model hasn’t changed; businesses are still being formed and run to create economic value. Their success or failure is determined by their efforts, regardless of the environment; including the ‘helping hand.’ I am sure that if you could ask those in the 1917 photo if their economic environment was tough, they would, without question, say yes. Just like we do today. The difference is the structure and complexity of that environment.

I live near a small community that has a Main Street lined with a variety of small shops and eateries. Outside the downtown area are small industrial companies; manufactures, distributors, service providers, etc. Almost all of them are small privately-held companies and family businesses. This is a microcosm of the substance of our economy; the ‘real story’ that goes untold.

When you talk to these business owners, somewhere in the conversation the ‘helping hand’ topic always comes up. But most of all, they talk about things like;

  • Plans on growing their business.
  • Developing new products or markets.
  • Fighting competition.
  • Family issues.
  • Finding qualified workers.
  • Developing better management competencies.
  • Starting another business.
  • Funding.

Main Street is the driving force of our economy; not the ‘helping hand’ of government. It won’t be a headline on national television or on the front page of newspapers; but it is without a doubt the lifeline of our economic future. It is the untold story.

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Reality Concept
Reality

”Nothing is more disruptive to the current state than a change in reality.”

George T. James

At what point in an organization is imminent danger of disruption, destabilization, collapse, etc. expected? – When denial loses its foothold and reality springs up and exposes its unsettling message.

To some, organizations are like organisms; living creatures. To others, they are like the physical universe; held together by known and unknown forces. Both portray an environment where ‘things just happen.’ In each case, you live within the context of a perspective that enables you to explain away, or deny, the reality of what you are experiencing. It’s not a cold, it is my sinuses. My competitor must be getting cheap components from China to be able to price at that level. Their products will never last. – Denial. Back to work!

I once read a quote that said, “If you don’t know its texture or complexity, you haven’t grasped reality.” Perspectives, without substance, are not reality. I need to watch this cold thing. Do I have a fever? Should I see my doctor? Or, how can my competitor price at that level? I need to find out more details and develop strategies to take advantage of the situation. Yes, I said advantage; reality provides opportunities if recognized in the early stages.

Unfortunately, unannounced reality is, at the very least, expensive to address. How long have you been coughing like this? A little over a week. You have pneumonia! – Two weeks lost. Or, the longshoremen are threatening to strike on the west coast where a lot of our products are delivered from Asia. Should we ramp up production in our local plant? No, they have too many businesses dependent upon the flow of goods to potentially destabilize the economy. How many ships are backed up? Hundreds; it could take several months to get our products off-loaded. – True stories.

On the positive side, a new reality is great if you are prepared to take advantage of it. Otherwise you are going to spend a lot of unplanned resources just to get into the game; or it may already be too late.

Are you denying a reality?

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Attributes

Over the past year I have had the opportunity to work with four privately-held companies. One company was a rather large second generation business, while the others were relatively small. I had only worked previously with one of the companies, which was a third generation business. Interestingly, this business had a fourth generation high school student working during the summer months. Of the other three, I had conducted considerable research on one before engagement, while the other two were recommended by an existing relationship.

Since all of the businesses were in the same industry and not competitors, I made an effort to make sure that the owners of each company were exposed to one of the other owners. As I observed this interaction I noticed something that you would not normally find on many of the popular lists of the attributes that make business owners successful. What do you think it was? Write down several important attributes that come to mind.

What did I observe that I found so interesting? The business owners had an “insatiable appetite to learn” from others. After brief introductions they quickly moved to areas of interest where each party learned from the other. On every occasion, the business owners picked up something that could help them in their business. They soaked up ideas and recommendations like a sponge. To these successful business owners it occurred naturally.

In dynamical systems theory, this inquisitiveness is referred to as learning on the fringe; the area of existence where change takes place. It is arguably the difference between advancement and survival, and is a game-changer for those who can do it.

Was this attribute on your list?

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