Many people do not typically think of metrics and accounting as roadblocks to innovation, yet you call these out as potential problem areas. Why?
Many conventional metrics we use to estimate value are based on faulty assumptions. Net present value [NPV] is a case in point. The logic of NPV is to project cash flows into the future and then discount those flows back into today’s dollars at a given cost of capital.
Given that money today is always worth more than money in the future, you are trying to establish what the future value of the investment will be in terms of that money’s value today. If it is positive, it’s thumbs up, if it’s negative, it’s thumbs down.
One problem is that NPV calculations tend to compare today with some future state. What they should be used for is to compare today with two different future states: one in which we do nothing and one in which we do something. Doing otherwise biases the business against innovation because what you are projecting may look unattractive relative to your business today.
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Rita McGrath, a Professor at Columbia Business School in New York, is one of the world’s leading experts on strategy in highly uncertain and volatile environments. She works with both Global 1,000 icons and smaller, but fast-growing organizations. Some current clients include F-Secure, Nokia, Microsoft, (and its CEO Summit), AXA Equitable, General Electric, Novartis, PPG Industries, the Stena Group and the World Economic Forum. She is a popular speaker and consults to senior leadership teams. In 2009, she was inducted as a Fellow of the Strategic Management Society, an honor accorded to those who have had a significant impact on the field. To read Rita’s complete biography, click here.
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As a recent special issue in the Harvard Business Review points out, failing well is a critical skill that differentiates organizations that can learn and even benefit from failures. But most companies I work with fall victim to one or more of these barriers to making the most of the failures they have.
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Rita McGrath, a Professor at Columbia Business School in New York, is one of the world’s leading experts on strategy in highly uncertain and volatile environments. She works with both Global 1,000 icons and smaller, but fast-growing organizations. Some current clients include F-Secure, Nokia, Microsoft, (and its CEO Summit), AXA Equitable, General Electric, Novartis, PPG Industries, the Stena Group and the World Economic Forum. She is a popular speaker and consults to senior leadership teams. In 2009, she was inducted as a Fellow of the Strategic Management Society, an honor accorded to those who have had a significant impact on the field. To read Rita’s complete biography, click here.
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Results start with a strong strategic principle – a shared objective about what the organization wants to accomplish. The strategic principle guides the company’s allocation of scarce resources – money, time, and talent.
The strategic principle doesn’t merely aggregate a collection of objectives.
Rather, this simple statement captures the thinking required to build a sustainable competitive advantage that forces trade-offs among competing resources, tests the soundness of particular initiatives, and sets clear boundaries within which decision makers must operate.
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For more than 30 years, Linda Henman has helped leaders in Fortune 500 Companies, small businesses, and military organizations define their direction and select the best people to put their strategies in motion. Linda holds a Ph.D. in organizational systems, two Master of Arts degrees in interpersonal communication and organizational development, and a Bachelor of Science degree in communication. By combining her experience as an organizational consultant with her education in business, she offers her clients selection, coaching, and consulting solutions that are pragmatic in their approach and sound in their foundation.
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The biggest problem with business, in a one-sentence capsule, is:
People exhibit misplaced priorities and impatience… seeking profit and power, possessing unrealistic views of purpose, and not fully willing to do the things necessary to sustain orderly growth and long-term success.
What organizations and individuals started out to become and what we’ve evolved into being are decidedly different things. The path toward progress takes many turns, expected and unexpected. How we evolve reflects the teachings, experiences and instincts which are not part of formal education.
Pressures continue and accelerate for companies to stay in operation, become competitive, keep ahead of the marketplace and perform quality work. Businesses of all sizes are besieged with opportunities, competing information sources and large amounts of uncertainty.
Executives are not fully prepared to handle challenges of the moment, much less to begin developing Big Picture thinking. Seasoned executives face burnout daily. Much of the workforce is in transition, with unclear anchoring of where they’ve been and where they could head. Young and mid-level workers do not really know what it takes to succeed long-term and are, for the most part, impaired from optimum achievement.
Failure to prepare for the future spells certain death for businesses and industries in which they function. The same analogies apply to personal lives. Greater business awareness and heightened self awareness are compatible and part of a holistic journey of growth.
I mentor business principals on all their options and the big ideas. I lay the groundwork so they can best utilize the niche consultants. I support all of the others and educate business owners on the best contexts to make consultants most effective.
There are seven levels of strategy retreats and processes in which companies can engage, with #1 being a starting point and #7 being the ultimate outcome:
Information Sharing. What’s new in the marketplace. What the competition is doing. New ways of looking at the core business.
Reacting to a Crisis or Emergency. Responding to crises is a good way to get in the research-planning habit. Preparing for crises helps avert 85% of them.
Niche Review. Some phase of the business requires re-evaluation.
Growth Strategies. How and where to grow. Concepts of orderly growth. Dynamics of growth, in relation to other organizational factors.
Planning for the Future. Planning, vision and strategic direction account for 15% of an organization’s full picture…constituting the trunk and roots of The Business Tree™. The company that does not plan will not achieve staying power.
Visioning. Determining what the organization will become.
Change, Growth. Determine how the organization will get where it needs to go. Creative thinking about new approaches. Develop a true corporate culture.
7 Levels of What Companies Do with Think Tanks:
Don’t understand the concept (confuse it with selling or training).
Hold when the company is at a crossroads.
Realize value and merit.
Want to know and learn more. Eager to hold, assess and apply.
Do something with it. Put findings to good use.
Want to do more and evolve the business to higher plateaus.
Change-Growth. Achieve advantages via knowledge. Make impacts on company future.
What Is a Think Tank:
Source of new ideas from outside speaker-presenter (as opposed to a training facilitator).
Common sense reminders of things people already know.
Inspiration to try new things and be successful.
Injecting Big Picture thinking into each part of the organization, macro over the micro.
Inspires the development of organizational Vision.
Realistic views or company strengths, weaknesses, opportunities and threats.
Study of external forces that can hamper your ability to do business.
Mentorship and leadership development.
Outside-the-box approaches to old problems.
Creative learning that helps executives think new ways.
Ways to understand the organization’s people (its best resource) better.
Common sense updating of old principles, with Futuristic viewpoints.
Puts the demands of the moment into perspective.
Takes Futurism out of the esoteric and into cohesive applicability.
Converts learning to knowledge…and knowledge to wisdom.
What a Think Tank is NOT… and Should Not Be Confused with Being:
Training. Political fund raising.
Sales or marketing support. Facilitated gripe session.
Bean counter approaches to processes. Ivory Tower academic exercise.
Brokering of ideologies and hidden agendas. Research.
This program will accomplish the following:
Help small businesses of any size focus more clearly on their niche, strengths, weaknesses, opportunities and threats.
Apply Big Picture thinking toward all facets of the organization… to reduce costs of companies responding to problems with small-picture treatments.
Reduce costly organizational problems with planning on the front end.
Provide business owners with a totally different perspective on how they can operate and be more successful.
Visioning is the process where good ideas become something more. Visioning is a catalyst toward long-term evaluation, planning and implementation. Visioning is a jump-off point by which forward-thinking organizations ask: What will we look like in the future? What do we want to become? How will we evolve? Vision is a realistic picture of what is possible.
Organizations will succeed by having, communicating and garnering support for a Shared Vision. Visioning sets the stage for necessary processes, such as growth strategies, re-engineering, training, enhancing shareholder value and organizational development. Without visioning, other functions (marketing, human resources, financial, production, quality control, public relations, etc.) are simply performing band-aid surgery.
The Strategic Plan comes off the shelf and alive into action by being relative to all levels of the organization:
Philosophy. Organizational purpose, vision, quality of life, ethics, longterm growth.
Organizational and Business Planning
Questions to ask the organization… basis for budgeting.
Guidelines for re-examing the business position…criteria and benchmarks.
The 10 most common benchmarking mistakes.
Guidelines for conducting Strategic Planning.
Steps, processes and methodologies encompassed in long-term Strategic Planning.
Benefits of Strategic Planning.
Big Picture Visioning issues and dynamics.
How to make the process productive in the long-run.
About the Author
Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.
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There are two ways to compete in existing markets – gaining brand preference and making competitors irrelevant.
Brand Relevance
The first and most commonly used route to winning customers and sales focuses on generating brand preference among the brand choices considered by customers, on beating the competition. Most marketing strategists perceive themselves to be engaged in a brand preference battle. A consumer decides to buy an established product category or subcategory, such as SUVs. Several brands have the visibility and credibility to be considered – perhaps Lexus, BMW, and Cadillac. A brand, perhaps Cadillac, is then selected. Winning involves making sure the customer prefers Cadillac to Lexus and BMW. This means that Cadillac has to be more visible, credible, and attractive in the SUV space than are Lexus and BMW.
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David Aaker, author of Brand Relevance: Making Competitors Irrelevant, is Vice-Chairman of Prophet, a marketing consultancy that helps senior executives balance their organization’s short-term business needs against their long-term growth goals, and Professor Emeritus of Marketing Strategy at UC Berkeley’s Haas School of Business. One of the world’s leading experts on branding and the winner of three awards for lifetime contributions to the science of marketing, David has published over 100 articles and fourteen books; including Strategic Market Management that has been translated into eighteen languages. To read David’s complete biography, click here.
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