As I have led or been involved with dozens of business changes, I get asked often, “What makes you so successful?” I might offer up a different perspective, “What can stop a business transformation in its tracks?” In my experience it boils down to four things:
- Spotting the Need to Change
There’s an old line, “Watch out for the truck…behind the bus.” If we’re looking the wrong way, it’s easy to miss the change bearing down on us from a trigger event somewhere else.
Most of us in most of our firms are experts in our small little space in the universe, and we focus all of our energies on understanding and mastering the rules of the game in that space. Those fancy terms, dominant logic and market myopia are our real adversaries here.
They blind us to the truck behind the bus.
They keep us from seeing the impending systemic disruption. And our own biases and experiences keep us falsely optimistic in the face of big changes in our arena.
- Extreme Organizational Pride
Marshall Goldsmith famously suggested in business, “What brought you here won’t take you there.” Proverbs more famously suggested, “Pride goeth before destruction and a haughty spirit before a fall.”
Sometimes, culture is the problem. There’s truth but not a foregone conclusion that culture eats strategy for lunch. (I push back in my article, Sometimes Strategy Must Eat Culture.)
In my travels, I’ve encountered more than a few organizations and the people in them predictably and proudly holding on to a past that was indeed glorious but is no longer relevant.
My friend mentioned above suggests this is the natural sequence of events for all businesses and those that have outlived their utility must pass.
Good, maybe great for awhile, and then as conditions change, gone. C’est la vie.
Alternatively, sometimes culture can be disrupted as well. (More in the next post in this series on knocking down the obstacles.)
Know that the passion and emotion surrounding resistance to radical change in your organization may very well be the last thrashing of a dying business.
- Incorrect or Incomplete Diagnosis
We all understand the importance of an accurate diagnosis for our health maladies. The same goes for business. Much like the organizational culture change issue described above, human biases, emotions, experiences deadly sins and failings all get in the way of cultivating and agreeing on the answer to the question, “What the hell is really going on here?”
Fail to answer that question properly, and the succeeding events move organizations down the path to decay and demise.
- Lack of Leadership Courage
Transformation requires asymmetrical bets on new strategies, markets, technologies, and investments. Our management systems are set up to optimize in the short-term, and throwing sand in the gears of the management system requires leadership courage that many lack. (Young child to Mom, “Mommy, what are gears?”)
We might understand what we should do, but putting oneself on the line for a hard change and an asymmetrical bet is a commitment many will not make, and a risk most won’t take.
Why I Don’t Blame the Management System?
I debated throwing the present management system in as the fifth big obstacle to organizational change. Indeed, it is a factor. Nonetheless, I believe it is leadership’s responsibility to drive the changes needed in a system leading the firm down to the path of destruction. A management system is a tool of leadership, and as a tool, it can be changed or adapted to fit the situation. The fact that we often fail to adapt our management systems is a failure of leadership.
The Bottom-Line for Now:
Walt Kelly, the illustrator of the famous and long retired comic strip, Pogo, once suggested (drawing upon a quote from the War of 1812), “We have met the enemy, and he is us.”
It’s always true. What’s not guaranteed is your organization’s failure in the face of existential threats. In my next post, we blow up these big obstacles. And remember, all it takes is courage.
Did you know?
- Approximately 50% of businesses fail within five years
- Over 70% of businesses are owned by Baby Boomers who are nearing retirement and most will never find a buyer
- Over 80% of these Baby Boomer Businesses are not “transaction ready”.
- Only 4-5% of businesses listed are actually sold in any one quarter (BizBuySell.com).
- Over 70% of businesses sold fail to meet the expectations of the buyer.
We all are in business to make money unless you are a non-profit organization, but profit is not a manageable activity, it’s a “Result”.
Certain activities are directly linked to profitability like Sales and Expenses. Performing these activities more effectively leads to greater profit.
The accounting system is the historical “System of Record” that captures all physical transactions. Geared primarily around financial criteria, profit, cash flow, assets & liabilities. Measuring profits only is imperfect and influenced by many variables like inventory, sales cycles, timing issues and more. It is historical and therefore purely retrospective.
There is a better way, switching from past tense management to current and future-facing management. Here are the three Stages of Management:
- What happened (Accounting View – Financial KPI)
- What is happening (Real Time KPI)
- What’s going to happen (Future Facing Management – Leading KPI)
Weather forecasters are using radar to predict the short-term weather changes (we all knew when and where the hurricane would make landfall and could prepare in time). Leading KPI’s are like a Radar for your business. You can see the changes coming and prepare in time.
What leading indicators are critical in your business? Share your experience.
When the buck stops with you, people tend to share selectively. Here are some tips to avoid blind spots…