Change Implementation Techniques for Creating a Sense of Urgency

Technique 2.13 Stress-Test Your Strategy

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Introduction

. This technique allows you to identify weak points in your strategy by using a stress test (an assessment of how a system functions under severe or unexpected pressure)

"...By asking the tough questions about your business, you can identify confusion, inefficiency and weaknesses in your strategy and its implementation..."

Robert Simons, 2010

. The first 3 questions compel you to set priorities; the next 2 assess your ability to focus on those priorities by highlighting critical performance variables and constraints; questions 6 & 7 investigate whether you are using techniques that will enhance creative tension and commitment. The final question deals with your ability to adapt your strategy over time.

. Need to think of these questions as a means to an end, ie to inspire decisions and action.

Some Key Questions

1. Who is your primary customer?

(The first priority for resource allocation is to meet and exceed your primary customer's needs. Concentrate on everything that provides value for your primary customer. For example, McDonald's focus in 1980s and 1990s was on multi-site real estate development and franchise owners via centralised real estate development, franchising and procurement functions. After its growth rate faltered in early 2000s, it changed its focus to customers and allowed regional managers to satisfy local preferences, eg porridge for breakfast in UK; soup in Portugal; burgers with French cheese in France, etc)

Need to be careful of having a multiple customer focus. For example, in 2000 Home Depot decided to change its focus from just a home improvement business (high margin business, well-serviced by providing specialist in-store advice, etc) to professional contractors (high volume, low margin, no in-store advice, etc). Initially there were considerable savings. Then results became disastrous as neither group was satisfied. In 2007, Home Depot changed back to a home improvement focus.)

2. How many products/services do you sell?

Focus on a minimal range of products/services. Steve Jobs (Apple) reduced the number of products that Apple focuses on to 12 and 4 - all of them are iPods; they are ruthless about selecting the right products.

"...people think that focus means saying yes to the thing you're got to focus on......But that's not what it means at all. It means saying no to the hundred other good ideas..."

Steve Jobs as quoted by Robert Simons, 2010

3. How do your core values prioritise shareholders, staff and customers (who is first amongst your stakeholders)?

(need to choose which one stakeholder is most important. There is no right or wrong choice. For example, Southwest Airlines puts staff first, ie

"...If employees are treated well, they'll treat the customers well. If the customers are treated well, they'll come back and the shareholders will be happy..."

Herb Kelleher as quoted by Robert Simons, 2010)

4. What few critical performance variables do you need to track?

(most organisations try to follow and measure too many variables in the mistaken belief that the more you follow, the better it is. Remember that management attention is a scarce resource and you want management to focus on what really matters. For example, convenience is a key parameter for customers of Amazon; thus attention is focused on making purchases, delivery, etc as easy as possible by following revenue per click and revenue per page turned. At Marriott, they focus on associate satisfaction, guest satisfaction, revenue and revenue per available room.

NB With too many variables you encourage standardising and compliance. This discourages innovation.)

5. What strategic boundaries have you set?

This revolves around risk, especially as managers are under pressure to hit growth and profit targets. There are 2 ways to handle, ie

"...You can tell people what to do, or you can tell them what not to do..."

Robert Simons, 2010

Telling people what to do is prudent when safety and quality issues are paramount, eg operating a nuclear power plant. However, if innovation and entrepreneurial thinking are important, you tell them what not to do, ie exercise creativity within defined limits.

Remember:

"...Boundaries are powered by punishment, not rewards. You must be willing to discipline ‐ and fire, if necessary ‐ anyone caught stepping over the line..."

Robert Simons, 2010

6. How are you generating creative tension?

How to shake staff out of becoming complacent. The bigger and more successful an organisation, the more complacent staff can become. Some techniques for this include

- assign stretch goals (business as usual not an option; have to do something differently to meet stretch goals)

- ranking according to performance (ranking of individuals, teams, units, etc generates competition and innovation ‐ as long as it does not become negative and/or destructive)

- setting spans of accountability that are greater than spans of control (hold people accountable for measures that are broader than the resources they control. For example, in Siebel Systems, all managers' bonuses are based on customer satisfaction measures, even though no one manager controls all the resources needed to make a customer happy.)

- allocating costs (allocate corporate overheads to business units based on use or make the corporate office a profit unit)

- create cross-unit teams and matrix accountability (new perspectives emerge when people are forced out of routines, ie part of cross-functional teams or has 2 bosses like in a matrix structure

"...you will generate creative tension as people present and negotiate multiple points of view. On the other hand, you risk having the added bureaucracy slow down decision making..."

Robert Simons, 2010))

7. How committed are your staff to helping each other (do you promote co-ordination among staff)? (staff need to work together to achieve shared goals; the following 4 attributes are important:

i) pride in purpose (staff are proud of their organisation and share responsibility for its success)

ii) group identification (belonging to a group with a sense of responsibility to others in the group)

iii) trust (is important for people to work together; involves being willing to make yourself vulnerable)

iv) fairness (need to iron out inequities, especially in rewards and recognition; group performance is more important than individuals', ie putting fairness and equity above self-interest)

8. What strategic uncertainties keep you awake at night, ie thinking about how the future will change your business?

"...At the root of every failed strategy is a set of assumptions about the future that eventually proved false......only 3 things in life are certain: death, taxes and the fact that today's strategy won't work tomorrow......today's success will be tomorrow's old news. The question is not if, but when......To adapt successfully, you must constantly monitor the uncertainties that could invalidate the assumption underpinning your current strategy..."

Robert Simons, 2010

Need to develop a performance measurement that is

- user-friendly, ie easy to understand

- requires face-to-face interaction

- focuses dialogues on strategic uncertainties

- generates new action plans

Some ways to help maximise the benefits of asking these 7 questions

. Must pose the questions face-to-face (don't use email, etc)

. Discussions must cascade down the organisation, not stay stuck at the top.

. Your operating managers are key to the process as they can commit to actions and are responsible for results

. The debate must be about what is right, not who is right or wrong?

. The basis for every discussion is "What are we going to do about it"?

(source: Robert Simons, 2010)


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