Platt Perspective on Business and Technology

Rethinking exit and entrance strategies 17: keeping an effective innovative focus while approaching and going through significant business transitions 7

Posted in strategy and planning by Timothy Platt on March 7, 2017

This is my 17th installment to a series that offers a general discussion of business transitions, where an organization exits one developmental stage or period of relative strategic and operational stability, to enter a fundamentally different next one (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 559 and loosely following for Parts 1-16.)

I began successively addressing a set of issues in Part 15 that began with consideration of innovation as a response to sudden fundamental change in a business’ context and/or needs, and the alternative possibilities of drifting out of competitive effectiveness with that compelling an innovative response. And I continued from there, starting in Part 15 and continuing into Part 16, to consider the following as a third point of discussion:

• How both of these possibilities: both sudden change and cumulative gradual change and their consequences can serve as drivers for entering into business transitions.

I discussed this in terms of business systems friction, and the challenge of restrictions to the actionable availability of necessary information, when and where it is needed. And in the course of that, I offered the following business analysis observation, which I now see need to expand upon and clarify, if not explicitly explain:

• Managers and executives as a routinely followed practice, focus on three sets of details in their ongoing business performance evaluations – and regardless of whether they carry out these analyses in a carefully considered and even formally structured manner, or as more spur of the moment and ad hoc assessments.
• They look at the goals that the business activities under consideration were intended to achieve.
• They look at the actual results achieved from carrying out those activities.
• And they look at the costs required in practice in achieving them, where “costs” as a whole include expenditure of resources of all types that have just entered into this. That of course means material goods such as disposables with their per-item costs, but it also means employee time required for this effort and costs related to that. And it can prominently include consideration of cost of impact on other activities and other goal-directed effort that might have had to be pushed to a lower priority in order to do this now.

What of benefits? I would argue that any reasonable manager would consider them too – when performing this type of analytical review of processes and activities that take place in an explicitly profit center area of a business. But if they are looking into what they and their colleagues see as a cost center area of the business, their focus is going to be more entirely centered in costs and on at least limiting them, while retaining or even improving business performance there as measured on a goals-achieved basis. So rightly or wrongly, I couched Part 16 and its line of discussion in more general profit or cost center terms and with a goal of only including the key areas of consideration that would be applied to essentially any functional area of a business, and regardless of whether a positive return on investments as a directly profit creating element would even be considered possible. I only assume that desired goals or steps toward them are in some way reached. If you would find it more meaningful to do so in the context of your specific business, consider overall costs here as cost net of all positive benefits that can in some way be specifically assigned to the particular processes or activities under consideration – which might or might not be possible to isolate out and measure for this.

And with that point of clarification offered, my narrative up to here leads me to the last three topics points of my Parts 15 and 16 list, which I renumber from Point 1 here for discussion in this posting:

1. It can be vitally important to make explicit strategic effort to more deeply understand where your business is now and where that business is headed if it seeks to simply follow a straight-forward more predictively linear path, rather than making a more profound shift and going through a genuine transition.
2. And it is equally important to be aware of the possibilities, at the very least of what types of transitions could be possible, and their implications and consequences.
3. This leads me to the question of what would be planned for in a strategically considered, intentionally entered into business transition, and how such a transition plays out.

And I begin addressing the now Points 1 and 2 of this list here, by noting what some might see as a catch 22, implicit in it. Knowing where your business is now, and in ways and levels of detail that would offer explicit value when innovatively mapping your way through a transition, or a possible transition where a simple continuation would be best, would call for an understanding of what type of change you might need to pursue. Point 1, as offered above, would offer the greatest value if this analysis could be made at least in part proactively, and before anything like a crisis or other breakdown can arise that would force the issue as a reactive and remediating measure. But if your intent is to both arrive at and carry through on the right change, and to do so as efficiently and as non-disruptively as possible, how can you do that and certainly when the issue is one of true business transitions, where a simple and more predictable linear path change cannot suffice?

I would address this question by offering two suggestions:

• The more routinely and effectively a business and its strategic leadership are in performing ongoing, dispassionately open minded reviews and of essentially the entire business and its operations and their outcomes, the more smoothly and quickly it will be able to turn to consider and understanding the emergently unexpected and unplanned for. And the less likely it will be that this business and its leadership will be blindsided by a slowly developing challenge that simply remains unaccounted for until a tipping point of negative consequences have been reached from it – creating what should have been a preventable crisis.
• And the more routinely and effectively this type of review is carried out, the more tested and effectively responsive any corrective measures and course correcting changes will be, that would have to be called on in response to warning or red flag results of these analytical review exercises.

I am writing here of making a business more effective in recognizing and understanding emerging challenges, and making it faster and more flexibly effective in responding to them, and regardless of whether a best change pursued would be more business as usual, or transformationally disruptive. And this brings me to a point that essentially any manager in essentially any long-standing business should be aware of, and at least in principle:

• Things that have seemingly been done, and in just one way, forever, tend to be taken for granted. They become invisible givens.
• And when a true transition is needed – when a simple linear same path forward approach breaks down, forcing more fundamental change, it is all but certain that this will arise in functional areas of a business that fit that “ongoing but invisibly so” pattern.

I am in fact at least touching upon all three of the above numbered points here as they all fit together seamlessly in any effective strategic due diligence effort – and certainly when that is maintained as an ongoing, recurring exercise that brings in all immediately relevant stakeholders – or representatives thereof.

Know where you are now in your business, and actively, proactively look for drift or overt shift from the expected. And where, possible game-out possible realistically predictable dislocations and disruptions that could arise, so you can be more prepared for them if they do so.

Let me take that out of the abstract with a real-world example:

• Your business is critically dependant on the ongoing reliability of a single available supplier for some part that you need when manufacturing and doing final assembly for a product that you produce that accounts for a significant percentage of your overall incoming revenue generated.
• If you are explicitly aware of this, and proactively so with respect to any possible drop-offs or delays in availability there, you can at the very least begin thinking through and planning alternative contingencies for meeting this need.
• And on a more business transitions level you can look to see if this situation simply represents an example of a more pervasive problem, where in this case you might want to reconsider what you produce in-house and how you source what you still have to bring in from outside suppliers, and how you plan for and carry that out when outside sourcing is still going to be needed.

This brings me to the third and final point of my numbered list, and the question of what would be planned for in a strategically considered, intentionally entered into business transition, and how such a transition plays out. I will turn in my next series installment to explicitly consider at least some basic due diligence questions and issues that arise in planning and carrying out specific transitions, when it is realized that a simple linear path forward change cannot suffice.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory.

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