Don't Fight the Competition

Don’t Fight The Competition!

“Don’t fight the competition! ” I may regret saying this one day, but hear me out. Competition keeps you successful and can lower your rate of failure. They are actually a critical part of your marketing ecosystem. Pay attention to them, but don’t let them steer your business.

In a recent client strategy and balanced scorecard workshop the client started to talk about how the competition was coming into the territory. The energy in the room increased significantly as they talked about the competitor and how they were starting to eat away at work or at least put high risk on the current and future customer base. I asked them if the purpose of their strategy was to beat the competition or to serve the customers. This led to an “Ah-ha” moment.  They realized that they become obsessed with the competition. They had become diverted in their thinking about their strategy from focusing on meeting the needs of the customer to focusing on beating the competition.

If you let the competition set the agenda, you’re doomed to follow and never lead in your market.

What then is the role of competition in the execution of your strategy? Competitors are the “canary in the coal mine” of strategy execution. You should watch them closely. The early warning signals the strategy is not being completely successful in delivering your desired results. The competitors are as driven as you are to meet the customer needs. They are like flashlights, searching in the dark, showing you areas of customer needs that you are not being the most effective at the meeting, or that you may not have seen. If competitors illuminate customer needs that you have targeted, then they have provided you with market Intel on the effectiveness of your strategy. A customer focused initiative may be required to strengthen your strategy execution. However, if the competition is meeting customer needs outside your current strategy, the intel should simply be noted for consideration in your annual strategic planning and strategy review. There is likely no current response needed other than to reaffirm with your customers that you are truly meeting their high priority needs, and if so, stay the course.

Think about this: if you design your strategy to meet selected customer needs, you leave the other customer needs open to the competition. If you selected a strategy of meeting customer needs where you can excel (SWOT) the other customer needs that are left for competitors to fill are not in your “sweet spot”. In fact, a smart competitor will see those needs and will take their strengths and meet them … taking the path of least resistance, focusing where they can excel, and staying off your identified and targeted market. Remember, you can’t do it all. Do what you do best and leave the rest of the competitors. (I might wonder here if you would really call them competitors since you’re actually beating complementary customer needs.)

So how do you keep your organization from fighting the competition?

Know your strategy and execute it well.

1.       Identify your targeted market – the customers you want to serve and the needs that you will meet. In this action you’ll consider your internal strengths and the external environment

2.       Identify which of the customer needs you will meet – consider your own capabilities in the areas of: product, costs, and service.

3.       Align the organization with a clear strategy to meet those needs – clarifying and communicate the strategy and put metrics in place that proactively measure/manage your effectiveness and executing the strategy (e.g. balanced scorecard)

4.       Execute, evaluate, and continue focused execution of the strategy.

I am reminded of the old joke about the two hikers who encountered an angry bear. The bear started chasing them. One of the hikers stopped to re-tie his sneakers. The other hiker asked “why are you tying your sneakers? You know you can’t out run a bear”. The first hiker responded, “I don’t have to out run the bear, I just have to run faster than you”.

So keep an eye on the competitors – they will let you know if you’re moving fast enough. But don’t let them set your strategy or agenda.

Remember, it’s all about the customer, not the competition.

 

Transforming Industry - Performance Management and Innovation

Transforming industry  (DRAFT)

We talk a lot about the economy recently with the path to recovery some the key issues that we've talked about that have gotten a lot of press of the issues of job creation, driving high-performance, and getting business back on track. As I think about these points of discussion my concern arises that we were looking at is trying to focus on the symptoms with the indicators and cure the indicators, rather than solve the bigger issue when I look at the underlying factors that contribute to this State, I see a very different picture. The US is a country whose economy is built on it infrastructure and set of organizations that have grown and evolved, as they've done so, they have matured. One of the interesting perspectives on maturity is that it incorporates and adapts the organization, (always a look at the foundation of the analogy I'm using, the organism) to the environment that it has grown up in. Maturing involves taking the learnings and experiences that led to your survival and success and incorporating them into the fiber, the processes, policies, and practices of the business. In a sense, maturity involves embedding the learnings of success into the fiber of the organization. With no change in environment the organizations that mature become more successful, larger, and dominant in their industry.

If we look at these which are businesses with it we see that that maturity is embedded in the structure, their formality of operations and in their infrastructure. The structure tends to be more hierarchical, or if not hierarchical at least well defined and relatively rigid. Procedures, practices and processes tend to be well documented, and distributed and understood throughout the the organization. They formally operational and social foundation which enable work to be done efficiently. They are enforced both implicitly and explicitly on all employees and organizational units. The organizational infrastructure, including technology inculcates these implicit and explicit rules supporting behavior that is aligned with the lessons that have been achieved through the maturing of the organization and, in counterpoint, making more difficult those behaviors which do not follow the behaviors the organization has incorporated from its past successes. In some sense, one could almost say that the organization has taken on a life of its own, and the preservation of the organization becomes more important than actually "doing the business" or serving the customers and markets. An indicator of the state is the coining of the phrase "these companies are too big to fail".

But the environment changes, and sometimes dramatically. When there is a shift in the tectonic plates of the business world, extreme adaptation, transformation, and innovation are required. In this new environment organizations find themselves required to serve stakeholders in ways that their past growth and path to maturity has not prepared them. The future is seen as having to come from new companies. Society jumps on bandwagons as point solutions appear. Often those solutions are solving social and cultural hotspots, rather than addressing the broader issue of building an economy that will support new environment.

So what can organizations do? I have three answers: be your own competition, do what you couldn't do, and create the energy of a startup. Each of these solutions require that the organization take a step back and look at its mission, refine (or develop a new) strategy, align the organization's resources and capabilities to the strategy, and aggressively execute that strategy.

Be your own competition. Identify the sweet spot of your business: the most valuable areas of your business, your stakeholders, or your markets. Clarify why they are valuable to you, and why you are valuable to them. Focus on your sweet spot and serve it like no other, i.e. as if you are trying to steal it from the incumbent organization. Conducting grow this "sweet business" like someone else would do it. Take advantage of and cannibalize any existing organizational capabilities and resources from the current organization as you carry this out.

Do what you couldn't do. Break the rules, practices and policies that govern organizational behavior if they inhibit the ability to do what's right for the market and the customer. Question everything. Often procedures are put in place to respond to environmental requirements that no longer exist. Experiment by pushing behaviors beyond the limits that were normally appropriate. And this includes both upper and lower limits while perfection is a lofty goal, often 80% solution adequately meets the requirement. And innovate if the current organizations practices don't get you there. Innovation is key to creating the transformation of an organization that has matured in a different environment. Innovation can be achieved through many paths, internal, external (e.g. acquisition or investment), or through partnerships.

Create the energy of a startup. Just do it. Created an environment of openness where differing opinions, challenges, and open questioning is supported and reinforced. Listen to both the supporters and the dissidents to distill the common thread of opportunity and then act on it. Be it organization we work it what you enjoy and you enjoy the work you do. Measure and calibrate successes and failures, grab the lessons from them and execute on those lessons aggressively. Share successes collectively rather than individually, and celebrate the successes.

That's it.

Mitchell Weisberg

June 3, 2012

Use Business Analytics and Aligned Metrics to Drive Higher Performance

Use Business Analytics and Aligned Metrics to Drive Higher Performance 120219

Mitchell Weisberg  February 19, 2012

Organization leaders and business leaders who are adopting data driven management and metrics driven performance management are achieving significant gains over those organizations that are remaining with traditional methods of management. 

The anecdotal evidence has been mounting since Michael Lewis published the book Moneyball in 2003, and followed by the recent release of the movie starring Brad Pitt.  Now additional hard data from academic sources are now available to verify that these achievements are real and lasting. These academic studies looked at business performance in large samples of industries over a period of time and found statistically significant gains in productivity in those companies using data-driven decision making over traditional management methods.  This mounting evidence makes a compelling argument for all management to migrate in this direction. 

In my practice of Metrics Driven Performance Management I have seen increased performance results in companies as a result of their adopting metrics aligned with strategy, using the balanced scorecard tools and approach over the past 10 years.

Two recent studies provide evidence of the benefits of data driven management, each from a different perspective.  A study by Aaron Crabtree (University of Nebraska) and Gerald DeBusk (University of Tennessee) demonstrated the business value of using performance metrics aligned with the business strategy, and a study by Erik Brynjolfsson, Lorin Hitt, and Heekyung Kim (Massachusetts Institute of Technology) demonstrated the benefits of business decisions based results from mining large databases of organizational information.

The study by Crabtree and DeBusk examined 160 public companies, analyzing measures of organizational value delivered including share price.  They compared balanced scorecard users and nonusers, matched by industry and organization size. Over a three-year period the balanced scorecard users outperformed the nonusers across three key performance measures by an average of 28%.  They concluded that "the balanced scorecard is an effective strategic management tool that leads to improved shareholder returns." 

 The study by Brynjolfsson, Hitt, and Kim examined 179 large publicly traded firms over a period of 3 years and concluded that the firms that adopted data driven decision-making had output and productivity that was 5-6% higher than what would be expected given their other investments and information technology usage. The data these firms used to support the decision-making was from large data sets of their own marketing, operations and processes. The firms using data driven decision-making  also had greater performance as measured by other performance measures such as asset utilization, return on equity and market value.

These studies support my statement that management should increase their use of data driven decisions in driving their organization’s performance.  They should be using metrics that align with their strategy to ensure that these data-driven decisions are delivering the increase in performance in support of the organization’s goals, rather than just increased performance across the operations.  

Sources:

1.      Erik Brynjolfsson, Lorin Hitt, Heekyung Kim, "Strength in Numbers: How Does Data-Driven Decision Making Affect Firm Performance?", April, 2011

2.      Steve Lohr, “The Age of Big Data”, New York Times, Sunday Review, February 11, 2012.  http://www.nytimes.com/2012/02/12/sunday-review/big-datas-impact-in-the-world.html 

3.      Crabtree and G. DeBusk, “The Effects of Adopting the Balanced Scorecard on Shareholder Returns,” Advances in Accounting, incorporating Advances in International Accounting 24(2008):8-15
     
       Jacques Bughin, John Livingston, and Sam Marwah, "Seizing the potential of ‘big data’" McKinsey Quarterly, OCTOBER 2011,  http://www.mckinseyquarterly.com/Seizing_the_potential_of_big_data_2870

The Question

IF you could know anything about your business (operations, market, etc.) that you don't confidently know now, what would you want to know?
2. IF you knew that information what would you do differently?
3. What impact would that action/decision have (value)

Now we can make a business case to put that information in your hands.

Performance Management and BI

One can look at BI as having 2 dimensions - horizontal dimension of using BI "to do the business" and a vertical dimension of using BI "to run/manage the business".

Doing the business is capturing and making accessible the internal and external information to make decisions and take actions relative to the external environment - hence actually increasing the value delivered to the market and the value received in return as revenue/profit, etc.

Running the business relates to operating the business. It includes decisions/actions on processes, supply chain, organization, production rates, and investments.

Performance Management is easiest explained as if it relates more to the vertical dimension. This is where most companies see it. However, truely, a balanced view of performance management is the 45-degree line, balancing internal and external information for balanced (internal/external, long/short term) decisions and actions.

What this is about

In this blog I will put random thoughts on Business Performance Management (BPM) and how it relates to other areas of business, technology and life.