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Posts Tagged ‘strategy’

Board Mtg

A common misconception of business owners is that outside advisory boards are for larger companies – multi-million dollar international firms you read about in the news.  Smaller mom and pop shops, individual proprietors, or firms with less than $5 million in revenue would never have an outside advisory board. – Not true.

An outside advisory board consists of three or four individuals (outside of your business) that have the competencies and capabilities to help you be more successful.  It is that simple.

Most businesses are started by an individual, or several individuals, who invest their personal capital (time and money) in an idea.  In the beginning, they do everything, primarily because they simply don’t have the funds to hire employees.  If successful, they gradually develop into a more structured organization with numerous employees, customers, business relationships, and a defined capital base.  Along this journey, it becomes increasing difficult for the owners to break away from business operations to spend time thinking about the strategic perspective of the business.  They can’t work on the future because they stuck in the day-to-day.

This is where an outside advisory board can help a lot of companies.  Its primary purpose is to help/guide owners to spend time working on the future of their business.  In other words, planning for the future.  Of course, outside advisory boards also help owners work on the day-to-day stuff; but their greatest value is strategic.

There is a long list of reasons why companies say they have not considered outside advisory boards.  In many cases, the reasons are based on a lack of understanding of the role and responsibilities of outside advisors.  In other cases, the owner simply does not want outside advisors.  For companies that set up advisory boards, the board is one of the most valuable assets an owner can draw upon; regardless of the size of the business, its products or services, or its industry.  Clay Mathile, founder of Aileron and former owner of The Iams Company, has said that “if I had a popcorn stand on the corner of Third and Main in Dayton, I would have an outside board; it is the best investment you will ever make in your life.”  I know quite a few companies that have set up a Board of Advisors, and not a single one has regretted that decision.  Most wish they had done it sooner.

There are organizations that can help you develop a better understanding about the value of an outside advisory board.  Check local business listings, organizations, chambers, etc. to find out more.

On the other hand, I realize that outside advisory boards aren’t for many business owners.  If this is the case, find an strategic business expert that can help you develop and implement a “strategic perspective” of your business.  Like advisory boards, a strategic business expert is also a valuable asset business owners can draw upon to help them to be more successful.

Regardless, of setting up an outside advisory board or using an expert, you must take charge of your future; don’t leave it to chance.

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old-man

In the new normal, data has become the Holy Grail for making business decisions.  Everywhere you look the importance of data comes to the surface.  Marketing programs, websites, hiring practices, social media, finance, sourcing, and manufacturing, to name just a few, all rely heavily on data as a feedstock for decision-making.  Throw this data in to a computer and ‘presto,’ you have your answer.

As the world moves to the age of data scientists, data engineers, data analysts and data architects, I reflect on something I experienced many years ago that I believe remains true today.

I took a course at Massachusetts Institute of Technology in computer simulation of business strategies.  Part of the course was a three-day forecasting competition using the data of a real business.  We set up four groups.  Each group developed their own business strategies and entered the data into the computer system each night.  The next day we reviewed the results and decided on new input for the next run.  It was a financial simulation model that involved using random number generators and distribution functions that mirrored historic company data and performance.  At that time, this type of simulation modeling was very sophisticated.  It was like the data analytics of today.

One group who corralled at the back end of the class room, included an older gentleman (old man).  He didn’t say much but when he did, his questions and comments were measured and well thought-out.  On the final day, when we were comparing our results, he spoke up.  Out of the back of the room came, “It won’t work.”  What?  “Your models won’t work.  I just cut off your raw material supply.”  Silence.  Game over.  Using his 40 plus years of business experience, intuition, and knowledge of the industry, he made a human decision that trumped our models.  It didn’t matter what the data was saying.  I never forgot this experience.

I have built many financial simulation models in my business career and realize that in every fancy algorithm, there is an old man.  I believe he also exists in today’s data analytics.  –  Beware of the old man.

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The Porch

It is funny how we can look back on life and remember things that had a significant influence on where we are today. When you ask people about things that ‘shaped’ them during their developmental years you almost always get the name of a family member, teacher, coach, or perhaps a professor. Rightfully so, no one could argue that role models, or people we admire and respect, can have a significant influence on our development.

Interestingly when I go down this memory lane I eventually come back to what happened to me when I was around 12 or 13 years old. What makes this interesting is that it is out of the ordinary and could have easily passed by me without me ever noticing. My event? The porch!

During the spring and summer months as a young boy, I would walk the surrounding neighborhoods looking for houses that needed their grass cut; with my push mower! I would carefully watch yards to see when it would be an opportune time to ask the owner if they would like their yard cut. Actually, it was a lot of walking with little grass cutting; but I did earn some money and became very comfortable in approaching adults.

About a block from my house lived a friend whose father was having a difficult time finding work. Day after day I would see Mr. W sitting in his rocker on his porch. I would wave as I walked by and he would occasionally say something like, “Find any yards lately?” I would also see Mr. W in church on Sundays with his large family thinking how he must have been praying for some luck in his life.

Spring turned to summer, summer to fall and fall to winter; when I switched from cutting grass to shoveling walks. Seasons changed but the porch remained. One day as I walked by Mr. W’s house on a cold snowy day, I saw the empty rocker sitting on the porch; obviously too cold for Mr. W to be sitting outside. And then it hit me like a ton of bricks.

The Discovery

I really don’t know why this hit me; all I know is that it had a significant impact on me.  During all of the months that I had observed this unfortunate situation, I didn’t connect the significance of what I was observing. I don’t really know if my perception of Mr. W’s situation was accurate, but my perception was reality to me. The revelation was simple: you have to get off of the porch. What a simple concept! No one is going to come into my yard, walk up on my porch and offer me grass cutting and snow removal jobs. I have to take responsibility for accomplishing what is important to me, and it will not happen by just sitting on the porch.

Opportunities/solutions do not come to you sitting in a rocker on a porch; you have to wander the streets in search of your desired outcome. Over the past thirty plus years I have been amazed at the number of business owners that I have met that have been sitting on the porch expressing concern about some ‘big’ issue that they weren’t actively addressing – for many different reasons. These were significant issues that could have an impact on the future success of their business. Think about the businesses in the recent recession that took on a ‘bunker mentality’ and were trying to hold out until things got better; waiting on the porch. I wonder if their competition was sitting on their porch.

Porch sitting is about making the choice not to do something when action is required, usually supported by an ill-conceived rationalization of a situation. Consider the following:

  • A sixty year-old family business owner saying, “I really don’t need to do succession planning now, I have plenty of time.”
  • “I know we really should have a strategic plan in place for the future of our business, but I just don’t have the time to do it, plus I don’t know where to begin.”
  • “Eighty percent of our business comes from one large company. One of these days, I’m going to have to find other customers so all of my eggs aren’t in one basket.”
  • “I could really use some help in developing better management skills to run my company, but I’m embarrassed to seek the help. I don’t want people to see me as weak.”

Unfortunately, porch sitters do not understand, or simply dismiss, the sense of urgency required for ‘Find any yards lately?’

Opportunities, or solutions, do not conjure up out of doing nothing; they appear as a result of ‘knocking’ on doors. It doesn’t matter if you are trying to grow your business, develop a strategic plan, establish a succession plan or put an outside board in place; you have to start taking some type of action to make these happen. Remember, in almost all situations where action is required but not taken, TIME will eventually make the decision for you. Unfortunately, it won’t be the caliber of action you would have taken earlier, or it wouldn’t even be your desired result. Oh, by the way, the sixty year-old business owner mentioned above just had a major heart attack without a succession plan in place. Where does that leave the family business?

Think about the strategic issues that need action in your business. What are you sitting on the porch waiting for?

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Question

Years ago, I found myself in a unique position that, for me, redefined the ‘approach-avoidance’ phenomenon. I had a tremendous drive to move forward on something that I knew was critically important and at the same time, caution lights were going off all around me. This was a new area for me.

My boss, a Vice President, was struggling with an objective he was trying to implement to the point that it was becoming challenging for him to focus on other matters. From my perspective I saw things that I would be doing. Granted, I realized that I did not have the same information he did. But to me, the way forward was clear. So I decided to have a meeting with my boss so I could set the stage for asking him ‘the question.’ – How can I help you?

All of us at some point in our career find ourselves in this same position. Based on my experience and observation most of us choose yielding to the caution lights. But why? What is the distinction between those that forge ahead and those that choose not to?

How do you get to the point where you are willing to take the chance?

  • Frist, prove yourself in your current responsibilities, show that you are on top of your game. This gives you the confidence to test your perimeter.
  • Observe, observe, observe. Try to understand the challenges your superiors are facing and how they are connected to your skill-set and experience.
  • Formulate ways you might help them. This is not just an idea or an opinion, but a well thought-out perspective using your competencies and capabilities. Work up an outline, make notes, etc. Develop a strategy on how you would move forward. All of this becomes critically important when discussing the challenges with your boss. – Listen carefully, interject slowly.
  • Be prepared for rejection. However, you can’t lose if you do this right; you will learn a lot.
  • Be prepared for taking on additional, higher risk, responsibilities.

By the way, I became actively engaged in the project, working with other senior people in the organization. Over a period of about eighteen months my recognition and contribution grew. The project was successfully implemented and I never looked back.

Ask the question!  –  How can I help you?

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Open

Recently, I was talking to a business owner about his strategic perspective of the future of his growing manufacturing business. As expected, we got into a discussion about how difficult it is to plan with so many uncertainties in Washington (D.C.), coupled with the tendency of our government to over regulate all aspects of our economy. He said, “they are like helicopter parents hovering over our every move waiting to intervene”. The past six years have been some of the most challenging times for businesses, especially small businesses. First the collapse of our economy, followed by a dysfunctional Washington.

Businesses, for the most part, are resilient in times of economic crisis. They get knocked down, shoved to the side, tripped up, mulled over, and sometimes destroyed. But they never stop fighting for their survival. They do without, sacrifice things the rest of us take for granted, and put more of their capital at risk; they do whatever it takes to survive and prosper.

The sad part is that it is not just economic conditions they are fighting. A good part of their effort is dealing with the uncertainties being touted by the town criers of Washington. It is not my purpose to get into a political debate; I’m not looking for who did what. Regardless of why certain things happen in Washington, businesses have to make decisions about how they run their organizations in response to what is happening, or what they think may happen. Business decisions involve resources, which are time, people, and money. This is not a game or political jousting; it’s real. They know that the survival of their business depends on good decision-making.

“So, how do we factor in the multitude of political perspectives on healthcare, immigration, minimum wage, energy, taxes, climate debate, foreign trade, sequestration (debt limit), Middle East, etc., etc., etc. into our decisions, when there is a lack of earnest debate or compromise amongst the parties” he asked. “Where are we headed?” “What should I bet on?”

As we were wrapping up our conversation he said something thought-provoking; “Just give us a fighting chance to run our businesses. We can improve the economy, provide jobs, benefit our communities, and pay our fair share of taxes. All we want is a fighting chance.”

Just give us a fighting chance. – Are you listening Washington?

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Wake-up Call

In spite of all of the challenges the 2008-09 Recession has caused businesses, it has been a wake-up call for many – a call to action, a call for change, a call for survival, and, unfortunately for some, a call to bunker down.

A quote I developed years ago to help explain simulation modeling is “Nothing is more disruptive to the current state than a change in reality.” Fortunately, for me, I recognized this at a young age, and have been able to witness first-hand both the impact of a change in reality and the resulting actions by those impacted. Interestingly, no matter what the change, most businesses react in a predictable manner.

Businesses that have been successful in getting through this quagmire have changed, or are changing, their organizations to be able to continuously adapt to a changing environment. They are now playing on the fringe of change; no more settling down in the comfort zone. Ask any of these businesses and they will tell you that this journey has not been easy; in fact, they often thought that they would not make it. The interesting thing is that the changes do not have to be earth-shattering. They are subtle, they are calculated, and they are pursued with vigor. In fact, they are not recognizable to the outside, which in itself is a strategic advantage. They are often told, ‘you have been lucky.’ Luck may have saved some, but luck isn’t something they can use as a foundation for future change.

Some say that history repeats itself, and many businesses will probably wander back to the comfort zone as the economy improves. I’m not sure about this. Why? I am watching the impact this recession has had on young people; many of whom are facing an uncertain future. I talk to college graduates who are trying to build their careers in this difficult time, while others are working as part time servers in restaurants, working two jobs to make ends meet, living at home at age 24, and beginning to rethink their reality. High school graduates are simply in a survival mode, some choosing to serve our Country in the military as the only option to make money. I also talk to second generation family business members who are realizing the business they grew up in is not the same carousel they saw as children. I don’t think this generation will wander to a comfort zone anytime soon. It reminds me of the impact the Great Recession had on my grandparents. The current generation of young workers is not waiting for things to get back to normal. They know that this is the new normal; their wake-up call. Good for them; good for business.

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Focus

Why is it so hard for people to maintain a focus on those significant issues that are impacting their lives or businesses? Looking back over the years, I can tell you many stories of how people in business rationalized not dealing with the ‘tough stuff.’ While the stories are as varied as the businesses, the eventual outcomes were similar. In most cases it was like a bad cold that never went away, or in some cases got worse. Eventually, they came to believe that having a bad cold was normal. – Why?

A few years ago, there was a CEO of a fairly large third generation business that was struggling with how to recapture the strategic focus of the business; they had lost their energy and just existed in a slumbering market. Revenues and earnings were suffering, morale was down, and customers were looking for something new. The CEO just couldn’t bring himself to focus on this challenge. Financially, the family was doing ok. Fast forward to today – no change. They have come to accept their lot in life but their future is uncertain.

On the other hand there was Jack and Ashley. Jack is in his late twenties, works two jobs and is a full-time student studying business. After high school, Jack wandered in and out of school and different jobs not really thinking about the future. Then one day, he sat down and began mapping out where he was headed and where he thought he wanted to go. He told me that where he was headed scared the bejabbers out of him; he had to do something. So he mapped out where he wanted to end up and began taking steps to get there. That was three years ago and he hasn’t lost his focus.

Ashley is in her mid-thirties, works one job, and is studying to become a Registered Nurse. This young lady had an extremely rough childhood, left home when she was eighteen and has been on her own ever since. After crashing at the bottom, she made the decision to make something of herself. She had a lot of catching up to do in her academic studies, took extra classes, and worked long hours; all while maintaining a full class load. Failing to achieve her goal was not an option. She will graduate in about a year and is already talking about getting her Masters. Her focus is solid.

You might be asking why I used these last two stories to compare to the one about the CEO. Who runs companies? People. It is all about individual decisions. Entities do not make decisions about what to focus on, CEO’s do. If Jack and Ashley had continued down their original path for a few more years, they might not have changed and simply adjusted to their current state. However, both got to the point where they recognized that the pain of not changing was greater than the pain of changing. Thus, they started to focus on a new path to the future, in effect, they developed a plan of action to do whatever it takes to get there. While their plans weren’t formal like you would expect in business they had many of the same attributes; e.g. strategies, actions, progress, setbacks and adjustments.

It doesn’t matter if you are struggling as individual or a business, your mind will not accept what it is not prepared to deal with. This is the point of reality; the point that you realize you must do something. It’s the beginning of focusing, planning and taking actions for a new future. What are you waiting for?

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