Should We Stay or Should We Go (part 2)
In the first installment (https://www.dhirubhai.net/pulse/should-we-stay-go-part-1-paul-wiefels) we looked at three environmental questions as part of a framework to inform whether a change in strategic course is warranted. Now, we examine the internal contexts for strategy change, with a particular view to the inertial factors that can hinder or prevent success.
First, ask where and what are the sources of organizational inertia. At the risk of generalizing a bit, most businesses lean to being either customer-centric or operations-centric. Each model is the basic source of how the business creates and conveys value. They are fit for purpose. One is not inherently “better” than the other. The customer-centric organization is optimized for pursuing and managing relatively low-volume, high-complexity systems linked for example to B2B software applications, biotech solutions, outsourced or professional services, and so on. The operation-centric organization, by contrast, operates best where products or services are delivered at significant scale through high-volume transactions, e.g., consumables, B2C apps, supply chain services and the like. Think of these as businesses with lots of moving parts. This does not imply that you are one thing and thus not the other. Rather, think “handedness.” We learn to favor one hand over another. Once this is imprinted, it becomes how we approach a task. A given task using one hand feels natural, but awkward using the other hand.
It follows that if we change strategy, is that change complementary to and compatible with our organizing model? Or does it require new skill sets, new centers of excellence, new metrics, new comp plans, new power relationships, etcetera for the new strategy to work? If an “off-hand” model is introduced, it will likely be quite unfamiliar to the organization accustomed to using the other hand. To work as intended, it must be embraced throughout the organization. This is a big ask.
Next, can you overcome the inertia inherent in allocating resources—any and all? A useful construct here is understanding and segmenting core processes from context processes. Core processes increase competitive advantage and investor value. In contrast, context processes are those that that do not differentiate the business but are nonetheless important to its operations—“keeping the trains running on time.” Core processes when done well add differentiating value. For the most part, context processes when done well do not. But if they’re done poorly, they detract from value. It stands to reason that we should allocate a majority of our resources to core processes. Do core very well. Do context well enough. Except we don’t.
Over time, core tends to morph into context. And over time, we build organizations, infrastructure, management processes, and budgets to support both. If only core adds meaningful, differentiable value, what do you do with all the context that you’re now resourcing as if it was still core? One answer is to investigate where your context is someone else’s core. The trick here is to segment core and context further into mission-critical core and context; and supporting core and context. Strategy consultancies, marketing and branding agencies, UI/UX design firms are all examples of professional service firms that specialize in supporting their clients’ core. They’re pros at this for it is their source of differentiating value i.e., their mission-critical core. In the office (a concept many of us are refamiliarizing ourselves with), food and janitorial service companies are supporting context. But for the companies that provide these services, it’s their core.
The key takeaway is that for a change in strategy, you must make new, asymmetrical resourcing bets on core and more likely, new core, for that’s what will be required. It’s what the exercise is all about. (My long-time colleague and friend, Geoffrey Moore, details these choices extensively in his book, Living on the Fault Line.)
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Finally, we look at the source of inertia that is us—measured in our ability and proclivity to change—and leadership’s ability to inspire, motivate, resource, and reward the changes asked for. As well you must reach “tipping points” such that the changes asked for will persist. This is often spoken of as needing to “change the culture.” But just as often what we lack is a coherent, aligned view of just what that culture is really is. The default is we ask individuals to change their behaviors in support of the change needed. New rewards and sanctions are set accordingly. All well-intended until the requested behavioral changes run counter to long-standing cultural norms. This is significant because human beings while adaptive, tend to initially resist adaptation.?
The topic of cultural change is one that is oft-studied. In our experience, two potential roadblocks are notable. The first is that while companies may demonstrate a dominant or “preferred” culture, sub-cultures while not as palpable nonetheless co-exist within groups, locales, departments, or individual leaders. Asking for change in one may clash with the local norms of the other.
The second is the recruitment of so-called “change agents” that have personal cultures that are different from that of the organization. Initially, this may be very attractive to executives and boards—the point in fact—but the attraction becomes “fatal” when the change agent is met with institutional resistance (even obstinance) to a new set of cultural imperatives imported by the change agent. Repeatedly stumbling here, organizations risk getting tagged as those who profess to want change so long as it doesn't involve actually changing.
We close with these thoughts. Whatever framework you choose to guide your strategy assessment efforts, the exercise should not be one that is only understood by heads of “strategy.” Changing strategy is much more difficult than operating it, so doing so requires the buy-in and participation of all that will be affected. Keeping it simple, but not too simple such as to duck or ignore the tough questions, keeps the process timely, clear, and logically sequential. One answer follows another.