Book Pic: Managing for the Long Run

by Gale Martin, Director of Marketing & Member Relations at the S. Dale High Center for Family Business

In most of the literature reviewing best business practices, researchers agree that family businesses have been long ignored. If not for the egregrious practices of publicly held corporations headlining the nightly news of late--massaging numbers to earn annual bonuses, allowing core competencies and competitive advantage to atrophy in favor of short term gains--family businesses might've continued to be discounted. Not surprising that they would be overlooked, until you look closely at other data such as:

• Family-held businesses account for half the employment in the United States
• Family-held businesses account for 78% of new jobs created
• Family-held businesses make up 35-40 percent of Fortune 500 and S&P 500 companies

In a 2005 publication called Managing in the Long Run, Danny Miller and Isabelle Le Breton-Miller, both affiliated with the University of Alberta, looked to family businesses to illumine best business practices. That's right. Selected family businesses were exemplary in their business practices. Their carefully researched book reveals that  family-held businesses did a better job in the long run of sustaining success. Managing in the Long Run seeks to explore why this is so.

The family held firms analyzed in Managing for the Long Run all demonstrated what the authors called The Four C Qualities:  connection, command, continuity, and community.

Because this book offers real lesssons to family businesses such as 1) how to configure and shape your "C" qualities to support strategy; 2) how to troubleshoot problems; and 3) how every manager can build on these findings, the Gen Next Affinity Group at the S. Dale High Center has selected this book as their 2010 read and will report their exploration here on High Ground in several installments.

Look for the first detailed review of initial chapters of Managing in the Long Run in April.

Getting into your competitor's head...

by Mary Beth Matteo, Founding Director of the S. Dale High Center

Why is “getting into your competitor’s head” so difficult? When your competition is similar to you, it’s relatively simple—you just put yourself in his shoes. Not so easy when your competitor is very different: called an asymmetric competition. A recent survey of business executives showed that understanding competitors rarely influenced the introduction of a new product, or its pricing. How unfortunate!

Why bother with this kind of analysis? If your company spends a couple days a year doing strategic planning, it’s worth devoting several hours of that time to “get inside your competitor’s head.” It helps you anticipate your competitor’s next moves and design “what if?” scenarios. Interpreting the “soft signals” can give you a real edge. There are two areas to look at:

(1) understanding the organization (its assets, resources, market share, etc.)

(2) understanding the decision makers. (This second is quite tricky and often neglected.)

Two companies with the same resources, assets, and market position may create very different strategies because of the key decision makers. A good example is the competition between McDonald’s and Burger King. McDonald’s (in part because of litigation) has chosen a path of “more healthy” fare. Burger King, on the other hand, is selling comfort food with an “in-your-face” and politically incorrect marketing campaign.

When looking at decision makers, here’s a check list:

• The Owners/Shareholders: who are they? What is their mission? What are their attitudes toward risk, investment, profits etc.?
• Senior management: who are they? Do they necessarily express the commitments of the owners? Or, do they bring their own agenda? What might that be?
• Frontline employees: who else might play a strong role in key decisions? What are their biases and hot buttons?

Doing intelligence on your competitor’s decision makers requires informed and imaginative guesswork. It’s never as quantifiable or simple as market data. But it will give you a clearer view of the complex and shifting playing field.

Forbes' excellent article on the topic is available here.

 Sum & Substance: When talking about your own competitive strategy, don't forget to consider your competitors' strategy. Whether we like it or not, interdependence characterizes today's business world.

 

Quote of the week

“In bleak times and fair, the success of a company’s strategy often depends greatly on the strategies of its competitors.”

--Hugh Courtney, John T. Horn and Jayenti Kar, "Getting into your competitor’s head," The McKinsey Quarterly, February 2009

What is a competitive advantage and how do you build one?

by Michael W. Van Belle, Senior Vice President and Chief Financial Officer of The High Companies

A competitive advantage is the result of distinct competencies that allows an organization to be successful. These competencies allow the company to better serve the end customer and thus make the company the preferred choice of the market. In order for these competencies to be sustainable, they must be unique (not possessed my many), not obvious, and difficult to reproduce. Competitive advantages are based on a combination of resources (such as patents, proprietary knowledge, reputation, etc.) and capabilities (the internal processes and informal ways-of-working)-- provided these resources and capabilities allow a company to better serve the customer.

To build a competitive advantage, you must first fully understand your marketplace and customer requirements. No matter how well your internal processes perform or how many patents you hold, if the end result is not something desired by the customer you will not have a competitive advantage. The following article is a great example of understand what is important to the customer and using it to make a competitive advantage: "Great Service: The Ultimate Competitive Advantage."

Second, a company must fully understand its own abilities and opportunities to combine their efforts and effects in a way that is not a common practice. Lastly, there must be a way to protect the competencies developed. Often this is done through building relationships, patents, and trade secrets. A review of competitive advantage as defined by Michael Porter is available at this site.

Quote of the week

“When companies do make talent a priority, they often fall into another trap: focusing narrowly on HR systems and processes, which divert attention from the place where most of the obstacles lie: people’s heads. ‘Habits of mind are the real barriers to talent management,’ one financial-services executive confided.”

--Matthew Guthridge, Asmus B. Komm, and Emily Lawson, "Making Talent a Strategic Priority," The McKinsey Quarterly 2008, Number 1

Continuous improvement – How does it work as a strategy?

by Michael W. Van Belle, Senior Vice President and Chief Financial Officer of The High Companies 

Continuous improvement (CI) is not a strategy within itself, but a means to improve results regardless of strategy. The improvement can be in products, services, or processes and various methods in CI exist depending on the results needed. The magnitude of improvement gained also varies greatly…for example, Policy Deployment focuses on ‘breakthrough’ improvements over a single or multiple years while the MDI (Managing for Daily Improvement) process will focus on ‘incremental’ improvements on fundamental processes on a daily basis.

At High Industries, we focus our CI activities on business strategies using Policy Deployment. Policy Deployment lets us align our capital and human resources with the larger scale projects and activities needed to achieve our goals. We use MDI to help functions and CI measure their results on a near real-time basis, understand opportunities for improvement, and determine the impact of improvement activities.

Strategy implementation – From the shelf to the shop floor

by Michael W. Van Belle, Senior Vice President and Chief Financial Officer of The High Companies


At The High Companies, our strategic implementation involves many activities as described above; however, there are three processes that have significant impact:

1. Capital Budgeting Process

2. Cascading Objectives / Performance Planning Process

3. Policy Deployment

The capital budgeting and performance planning processes both specify how the company will utilize its two most valuable resources to accomplish its goals. They also help the management teams understand how much can be accomplished in a specific time period.

Policy Deployment (PD) gets into the tactics and operational plans of the strategy implementation. (PD) Initiatives are developed that will yield the financial and market results in a 3-5 year time period and support the strategy. These initiatives are assigned goals on an annual and monthly basis. Regular assessment of results against goals is a means that helps us understand the success of our strategy implementation. The budgeting process and performance planning process aligns the resources with the specific activities developed in Policy Deployment.

The implementation and execution of strategy is just as difficult and just as important as making the strategy. More information on strategy implementation and execution is available:

Business Strategy: Execution Is the Key by Lawrence B. Hrebiniak at the Wharton School of Publishing

What Is Strategy Acceleration and How Can It Help My Organization? by Gayla Hodges at Fast Company

Planning an Effective Policy Deployment Process by Jill Jusko at Industry Week

Strategy: Driving Organizational Change

by Nevin D. Cooley, President and Chief Executive Officer, High Real Estate Group, LLC

Based on the volume of unsuccessful attempts at organizational change, many leaders conclude such change is not possible without significant carnage. Nevertheless, given all the external forces driving organizations to be responsive and flexible, a process for constructive organizational change must be found. In his book “Leading Change,” John P. Kotter notes eight common errors in organizational change efforts. They are:

1. Allowing too much complacency

2. Failing to create a sufficiently powerful guiding coalition

3. Underestimating the power of vision

4. Undercommunicating the vision by a factor of 10 (or 100 or even 1,000)

5. Permitting obstacles to block the new vision

6. Failing to create short-term wins

7. Declaring victory too soon

8. Neglecting to anchor changes firmly in the corporate culture

How do you start strategic planning?

by Michael W. Van Belle, Senior Vice President and CFO of The High Companies

Our strategic planning process started with visioning sessions and scenario planning. This was an involved process that over several months helped the management teams in each of our operating companies develop a vision for their future. The mission, which describes the vision of the future, was then developed to ‘set a path’ for the company. We spent significant time in these activities as we have started to develop strategy further into the future.
The remainer of the activities followed the typical strategic planning process. Environmental scans of the company and their industry were completed to develop a SWOT (strength-weaknesses-opportunities-threats) analysis. The strategy formulation phase focused on improving our competitive advantages based one the internal and external influences determined by the SWOT analysis. Implementation and control of the results is an involved process that includes critical discussion at the board level, forecasting, the capital budgeting process, communication with all co-workers, Policy Deployment, cascading objectives in our human resource and performance planning processes, as well as many other activities.
Addition information on the strategic planning process is available at QuickMBA.com and the Free Management Library.