The best practices are the ones you already have
On one hand organisations must look outward to ensure they're providing the right products and services. But on the other hand they must look to their internal best practices to ensure they’re delivering those products and services in the most effective and efficient way possible. How to resolve this conundrum asks contributor Dan Lock.
"We engage our colleagues globally to identify innovative ideas to exploit and develop."
That’s Walgreens Tim Theriault’s, talking to Forbes contributor Peter High about how they approach change and innovation. It’s a popular notion that strategy is about a strong vision for the future and that what is getting in the way of reaching this strategy is poor implementation. It’s common to cite the statistic that 70 per cent of change initiatives fail, as if the chief executives have the ability to forecast the future. The idea that success will go to those who see it first.
Always looking externally for best practice?
But as IBM found with PCs, and GM with small cars, that sometimes the future is already here and you missed it. The reality is no one has the ability to forecast the future, and so business success generally is not about strategy.
Success goes to those change leaders who first look to the internal best practices, and distinctive capabilities and then marry them with outside technology, capital, assets and external best practices.
On the one hand organisations must look outward to ensure they're providing the right products and services. But on the other hand they must look to their internal best practices to ensure they’re delivering those products and services in the most effective and efficient way possible. How to resolve this conundrum?
Ask 10 consultants the definition of strategy and you’ll get 23 responses. As I define it, strategy is the framework within which you make decisions. Thinking about strategy this way is less about forecasting the future than understanding the skills and assets that a company has and the markets and industries, which they serve.
As Google demonstrates, the market goes to those who have distinctive capabilities, which can be applied to particular markets. Google started out with the expertise and notion that they were a search engine company. But later realized this capability could be then be applied in a different way. The "we want to know everything" notion, which sparked projects such as Google Earth, Google Book Search, and Google Labs, along with further improvements to their renowned search engine.
Consider the ancient Japanese art of painting miniature box pictures on trinket boxes. This was a cultural internal best practice for the Japanese centred on a dedication to craftsmanship. It seems natural then that the Japanese became leaders in microchip design and production. This is what it means to join strengths with best practices and market needs.
Strength in relationships
This of course is easier said than done, and herein is the art of change management. Sometimes skills and behaviours must reorient to newer markets and in new ways, just as Google was able to apply its search skills to that of maps and books.
Successful companies are rarely successful because of prescient insight and superior skills. Instead they look at the skills and capabilities that make them successful now and apply them outwards to markets and clients. This kind of insight leads to the kind of programs that Walgreen’s has embarked on. Theriault set up a three-stage program where they begin at ideation incubating ideas and marrying them to existing capabilities. Second, they test these in the real world seeing if customers are responding. If they are they then develop them further. Third, they implement where they aggressively leverage their existing capabilities to bring it into the market.
No amount of visioning will bring about a strategy that the organisation cannot deliver on. Take Benetton, an Italian clothing retailer, which in 1987 hired a finance director from Citibank and announced that it would pursue financial services markets. Bennetton, not surprisingly, failed at this endeavour and why this would be counted in the statistics of failed change endeavours of course makes no sense.
More recently Microsoft’s current foray into hardware manufacturing of tablets and computers shows just how much they’ve misunderstood their strategic skills and assets which is software development and business services. A cursory look at their financials shows (25%) for PCs; server and tools division (25%); online services (4%); business (30%); and entertainment and devices, including the Xbox games console (14%).
It’s easy to see that while the PC business is declining, their future lies in extending Microsoft’s already formidable competitive advantage into server tools, and big business markets where, like IBM, switching costs are huge.
It’s a nuance of business to understand that change leaders must be outward looking, always viewing the world through their customer eyes, but that doesn’t mean ignoring the internal best practices that are driving delivery of that vision.
To bring about change and reach strategic goals, first look at the skills, distinctive capabilities and the relationships that tie them together and apply them outwards.