The number one reason why clever executives fail
Continuing my mini-series based on Stephen Bungay’s “The Art of Action.” I’ve just reached the point where Bungay is talking about the Center of Gravity (of an opposing army) or the Competitive Advantage (of a market). The point that Bungay (following von Molkte) makes is that although many things go into making a successful product, markets tend to have a core dynamic which defines the essence of competition. The market for household boilers, for instance, is driven by the purchasing decisions of installers. Win the installers over (through outrageously good supplier service, for instance), and you win the market.
What does it have to do with clever executives? Perhaps nothing, but in my various careers over the last 20 years I have seen a recurrent issue. I’ve observed that there is a strong tendency to crave complexity through establishing competing objectives. To increase product quality, and cut costs. To have great customer service and be highly scalable. To be relationship-driven and to meet short term targets. Pursuing multiple, and even conflicting, objectives appears to be a good thing, apparently. It seems that complexity and expecting the impossible is a valued trait among a subset of senior managers nowadays. I’m not sure where these people learned this, but I have my suspicions.
I recently came across a point in case. The stated, top priority mission was to create a highly scalable service offering. This service would comprise of professional consultations, some hardware devices, and several interfaces with complex and disparate third-party software. There was another, ‘number one’ objective though – and that was to capture, short-term sales opportunities that were considered ‘perishable’ – if we didn’t sell to them, then a competitor would, and we would lose the sale opportunity completely. The dual objectives were therefore “to build a long-term, scalable service but also to capture short term market opportunities”. To pull of this miracle of ‘having ones cake and eating it’, the ‘clever’ strategy was to follow Lean Startup principles. They would develop the system by being customer-focused, and to ‘stay close to the customer’ by selling to these ‘perishable’ opportunities, incrementally building out the service as they learned from the customers’ needs. However, this ‘clever’ idea is a bad one. The two objectives are not compatible, and the one is not simply a path to the other. It’s not that you can’t build a highly scalable service by producing a series of customer-driven increments, its just that it is incredibly difficult. It’s certainly not the optimum way of doing so. Rather than being ‘customer-focused’, this is I suggest, being Sales driven. That is not the same thing. Not the same thing at all. Highly scalable services are created by Product driven companies, not Sales-driven ones.
So what went wrong, and what should the strategy be? This is where Bungay and von Molkte come to the rescue. My reading of the chapter I am now on suggests that they would ask what the driver of competitive advantage in this market really is. Finding the answer to the question “what defines service that people would be prepared to switch from a competitor for?” would identify the center of gravity for the market, and go a long way to defining a single, simple objective for the organization. The competitive advantage is very rarely time-to-market, and is certainly unlikely to be what these initial customers think that they want/need. Instead we try to find a way to turn those ‘perishable’ sales opportunities to perpetual ones…by creating a scalable service that people will prefer. Once identified, this is a simple, open-ended goal that can be mapped onto the capabilities of the organization to create a strategy.
So, back to Bungay – this time a sentiment from Clausewitz: “Friction” (resistance to any plan of action) is caused by the random nature of chance and the uncertain actions of the opponent, in combination with the independent thoughts and actions of individuals (the employee stands above the principle of obedience). Friction makes “simple things difficult, and difficult things impossible”. Multiple objectives, let alone contradictory ones, can only increase this friction. We don’t want clever, incompatible, objectives from our executives. Instead we need a simple goal, and to have simple rules to detect opportunities and exploit capabilities to reach that goal. This is the opposite of being clever, and you don’t need an MBA to figure that out.