Archive for the ‘Business Development’ Category
In this week’s Business Surgery, Conor Wilcock discusses the merits of ringing in the changes
As far as months go, March was pretty tumultuous. I recently upped the proverbial sticks, threw caution to the proverbial wind, and flew across the (not so) proverbial Atlantic Ocean to begin anew a life in the United States. Such an upheaval brings change thick and fast, whether you like it or not. I’ve had to swap my Ss for Zs, and my right-hand drive for my left-hand drive. I’ve even had to kick Elizabeth II from my wallet in anticipation of Messrs Lincoln, Hamilton and Jackson setting up stall (Queenie seems pretty disgruntled about it, even though I keep telling her it’s nothing personal).
All of this got me thinking about change in other arenas as well, namely business (after all, this blog isn’t called “personal surgery”). Why do companies feel the need to change? Is it healthy for companies to initiate change as standard? Are there occasions where change is ill-planned and can jeopardize future performance?
At this point, I did a little digging, and encountered an article by Stephen Hall, Dan Lovallo & Reiner Musters in the McKinsey Quarterly: “How To Put Your Money Where Your Strategy Is.”
Though the full article is available to subscription-readers only, the abstract captures the gist of the argument:
“Most companies allocate the same resources to the same business units year after year. That makes it difficult to realize strategic goals and undermines performance.”
In a nutshell, the article claims that a company which constantly evaluates the performance of business units, and allocates resources according to market opportunities, is likely to be worth more than a company which has a more stagnant strategy: one which allocates capital consistently every year.
“Worth more” to the tune of 40% over 15 years. 40%. Staggering stuff.
The article proceeds to make two interesting observations:
Upon first glance, I was waving my researcher arms in the air in celebration at this article. Of course change is good! Of course stagnation is bad! By habitualizing change, companies will ride on an inevitable path to profit and shareholder glory.
Or perhaps it’s not quite as straightforward as that.
To get to the bottom of this, we need to make a number of distinctions. Firstly, evaluation and change are two very different things. To change something for change’s sake can be damaging indeed. Has anyone bought a can of Coca Cola II recently? I didn’t think so. Regular (if not constant) evaluation on the other hand, is necessary and rewarding. Companies should replace the old adage with (the admittedly less memorable), “If it ain’t broke, evaluate it anyway.”
To extend on the point, there is a difference between positioning oneself for change and actually changing. Companies should never allow themselves to sink into the mire by assuming that resources are being allocated appropriately. The “plain sailing” approach renders companies susceptible to the iceberg of spiralling losses. And this is where research comes in. Research can help establish when and where change is necessary. The key here is that evaluation can lead to a “no” decision as well as a “yes” decision. Both have their place, both are valuable, and both can lead to reduced costs and increased margins.
That being said, let’s return to the article in question, which suggested a positive correlation between level of resource allocation and shareholder returns. Given how impactful change can be on future performance, companies need to commit to change and do it in the right way when past the point of no return. A second article published by the London Business School entitled “The New Change Equation,” warns of the perils of the Big Bang approach to change:
“Considerable time and effort is placed on announcing the forthcoming strategic agenda…yet life remains the same. The illusion of change substitutes any reality.”
Once you’ve got the green light, don’t be afraid to put your foot on the gas. If companies are smart enough, there’ll be another set of traffic lights a short distance ahead with another “go/no go” decision to be made. Let’s just hope you’ve remembered to drive on the correct side of the road…
Recent research carried out by McKinsey Quarterly with 2,135 executives showed that most companies’ strategies are flawed and not ‘future-proofed’ to make sure that they are adaptable to changing market conditions. With 2012 ahead of us (and no doubt some globally challenging times ahead), we have detailed the main checklist that you should review to see where gaps lie in your company’s strategy and develop a future process for improving your strategy over the next 12 months:
1. Commit to following your strategy (but with some flexibility!)
As documented by Porter and his 5 forces, all companies operate in markets surrounded by customers, suppliers, competitors, substitutes, and potential entrants and all are seeking to advance their own positions. The problem is that most companies continue to do what they have always done and not think about diversifying to beat the market. Remember, if you always do what you have always done then you will always get what you have always got…if you are lucky!
Make sure that you do something different in 2012 to create value and improve your strategy development process.
For a full reading of the article by McKinsey please visit www.mckinseyquarterly.com ‘Have you tested your strategy lately?’
For further reading on strategy development and competitive intelligence click on the links below:
“I want to grow my business – what should I do?” It’s a challenge practically every business faces but, of course, there’s no one simple answer. Yet, there are many practical steps that can be taken, and what better place to start than this year’s Growing Business Handbook?
This annual handbook – now in its 13th edition – is a fantastic source of information, advice and reference for companies with dynamic growth potential, and is available to read online now, as a free e-book, on our website. It’s just the latest in a long line of e-books, white papers and articles which inspire and enlighten our clients.
Why not check out all our publications?
In his first Thursday Night Insight, Dan Attivissimo this week discusses the merits of playing to your strengths.
Early in life we are conditioned to improve our weaknesses rather than enhance our strengths. As an example, as students (at least when I was a student) it’s all too common that parents and teachers spend more time and extra effort on subjects that are below our higher subject averages. (A subject with a B- will receive more attention than a subject with an A.)
Now, I am not making an argument for letting grades slip below average or even suggesting how parents and teachers educate children. I will ask this though – what if more time was spent enhancing the skills in the subject receiving a higher grade? What if the student who is excellent with percentages and decimals was now taught how to apply that knowledge to basic financial concepts? What if the student who has a gift for writing spent extra time learning how to develop stories? One may become a future all-star accountant and the other an industry-renowned journalist!
What does all this have to do with the B2B industry?
I also think that companies can apply these truths to their business. Companies, like people, also have a set of strengths, but typically they are drawn up before the company becomes operational (through a brilliant idea, business plan, mission statement, goals, objectives, experience, and refinement over time, etc.). After all, it’s what distinguishes a company from its competitors. Unfortunately, just like some students, businesses sometimes allocate more resources toward improving their weaknesses as opposed to enhancing their strengths. How many times have companies invested in product lines or services so far-removed from their core business that it becomes a failure before it even takes off? Or worse, continue to invest money and human capital into a division that isn’t competitive or profitable!
My hypothesis is, those who truly excel in certain activities, whether professional, personal, or sport, are those who have developed and perfected what they are naturally good at. So why can’t the same idea apply to businesses operating in the B2B industry?
What if companies focused more on developing their core strengths rather than expanding into a variety of unchartered territory, eventually reaching death by diversification? What if companies focused on being the best in a particular industry as opposed to having a small market presence in many industries?
Jim Collins’ book, Good to Great, makes a great point that companies with long-term, sustainable growth achieved their greatness by being experts at understanding and investing into what they are strong in, what they are known for, and being the best at it. If certain opportunities didn’t fit within a company’s strong area it simply wasn’t pursued, saving the company from possible disastrous debacles.
What I have found in my recent experience is that people and companies are not all that different when it comes to exploring, developing, and exploiting strengths. Both can find their strengths through a systematic way of asking the proper questions and analyzing the answers (market research). Once a set of strengths has been established, both people and companies seem to perform better when they operate within relative distance of their core strengths.
I say don’t just play the cards you’re dealt, but play your best cards!!!
The Chinese Year of the Rabbit begins on February 3rd. So what will this year have in store for China? Much the same as 2010? Or will there be some surprises on the cards?
Scott Kronick and Jamie Moeller of Ogilvy Public Relations Worldwide gave their views to AdAgeChina recently. Here are the top five issues that they expect will impact China and the way it does business this year:
1. Manage price inflation
Inflation, currently at its highest level in two years, is a major economic concern and soaring food prices could lead to instability. China will wish to avoid this at all costs. The challenge lies in managing China’s ambitions on several fronts: achieve economic growth, create jobs, stimulate domestic consumption and assume greater international responsibilities, all while keeping inflation under control and maintaining stability. Many of these are incompatible with tightening measures.
2. Encourage domestic consumption
Chinese people are estimated to save up to 50% of their income. As the country is projected to enter a new phase of development, the government is anxious to transform the current growth model, largely driven by exports and inventory investment, to one that is more sustainable.
Spurring domestic consumption is the primary focus. The government has adopted measures to give subsidies and tax-breaks on numerous big-ticket items such as cars and appliances. However, online shopping could drive the next wave of China’s consumption growth. China has 450 million internet users and one-third already shop online regularly. Goldman Sachs predicts annual sales could grow 275% over the next five years to an estimated $300 billion in 2015.
3. Manage China’s labor force
Once a workshop to the world, China is finding it increasingly difficult to manage its workers. They have become noticeably more demanding in recent years, as evidenced by the decision to raise the minimum wage in ten provinces by up to 20%.
Meanwhile, as China pushes forward with its urbanization, the rural-to-urban flight will continue. In the next five years, China’s urban population will reach 700 million and, for the first time, surpass the number of rural residents. What’s more, the migrant workforce is expected to hit 350 million by 2050, larger than the entire U.S. population today. With such a vast migrant labor force, the government’s policies to manage this group will remain pertinent.
4. Reform education, environment and healthcare
China’s recent education boom parallels its status as the world’s second-largest economy. Between 1999 and 2008, the annual enrollment of undergraduate students increased by more than 500%. Yet critics worry that the breakneck expansion of universities in China has negatively impacted the quality of education, made the job market artificially more competitive, and kept salaries stagnant.
New and more stringent efficiency measures are anticipated to address environmental challenges. China is expected to introduce a carbon tax in the near future as an incentive to reduce greenhouse gas emissions. Also, China is willing to share more responsibility globally. At the Cancun climate talks China offered to adopt a binding UN resolution on carbon emissions. These events all suggest that China is making steady progress in environmental reform.
China’s rapidly aging population creates urgency around healthcare. In 2009, Beijing unveiled an aggressive healthcare reform plan as part of the stimulus package. The goal was to improve people’s lives, regulate the pharmaceutical industry, and spur domestic consumption.
5. Build brand China
Developing China’s international reputation continues to be a key component of China’s greater integration into the international community. But the country sometimes seems to send mixed messages.
In the Year of the Rabbit, we expect a resetting of expectations, and a renewed push for soft power in several arenas, engaging a larger host of business and government voices. Central government support will be both in front of and behind the scenes, sharing platforms, offering advice and backstopping the finances.
Find out more about the opportunities China has to offer by visiting our – China website