Platt Perspective on Business and Technology

Rethinking exit and entrance strategies 28: keeping an effective innovative focus while approaching and going through significant business transitions 18

Posted in strategy and planning by Timothy Platt on July 25, 2018

This is my 28th 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 1-27.)

I have been focusing in this series since Part 25 on realized and possible work scheduling conflicts, and on business process and task completion delays and breakdowns as can arise from them, resulting from resource limitations. And I have used “resources” in its most general sense there, including necessary parts and raw materials, equipment, personnel with essential but limited-availability skills and experience, and time availability as schedules have to be worked towards and met.

And as part of that line of discussion, I have at least briefly addressed the issues of building for fall-backs and building for a capacity to “fail gracefully”: here in a scheduling and work coordination context, when need for that becomes necessary – as it inevitably does for any business for at least some of its work processes and tasks if it persists long enough. I began focusing on this last point and its issues in Part 26. And I continued addressing that while expanding on my discussion of the here-repeated set of issues in Part 27 too, there focusing on the risk and finance management side to scheduling coordination and related matters, and how the two: risk and finances are inextricably connected.

I concluded that posting by offering the following to-address topics list which I reorganize here into bullet point format as I prepare to more systematically delve into its issues:

• Reserves as a cost because they represent assets and in fact liquid assets that cannot be turned to and used, except in what might be more emergency situations – and the need for larger reserves as risk increases: a situation that arises when facing the novelty and the unknowns that that entails as can be found in true transitions.
• Changes in goals and scope of action, and in the level of detail of processes under consideration that have to be monitored, and how that overall form of course correction can be intentionally proactively sought out and developed, and how it can be reactively forced upon a business and its leadership.
• And in a more strictly project context, or at least in more strictly project-oriented terms: consider scope creep and scope expansion in general, and its opposite with scope compression and simplification where details are dropped and goals reduced …
• With and without organized, strategically aware planning and forethought to back such decisions.
• I added that I would discuss these issues at least in part in terms of goals and priorities collisions, where more strictly cash flow and financial considerations, and risk and benefits considerations, and overall business goals can all come into conflict and even direct collision with each other. And my goal there is to at least begin to offer some approaches for both better understanding these scenarios and their dynamics, and better addressing and resolving them. And then after addressing all of that, at least for purposes of this series, I will proceed to reconsider exit and entrance strategies per se again, this time from the perspective of this developing narrative.

And towards the top of this outline of discussion to come, as offered in Part 27, I stated that while a more abstractly stated orienting presentation on these types of issues can offer conceptual organizing value, I would also address these issues at least in part in specific real-world business scenario terms too, to more fully ground this developing narrative in more practical, real world terms.

I am in fact going to reframe the approach that I offer here in such terms too. But with further reflection, I have decided to more fully complete developing my more abstractly stated foundation for thinking through specific business examples first, and then add the perspective of a specific case study example for how this approach offers value in a specific business context. In anticipation of that more focused discussion and analysis to come, I will at least briefly and selectively delve into a tech sector business example that illustrates how some of the core issues under consideration here, play out. And I will focus in that on trade-offs and prioritization, and on developing buy-in and consensus there as the above-stated bullet pointed issues arise for it.

But I begin all of this with a more abstractly oriented background discussion that will lead into that case in point example, and with the first bullet point from my above topics list which I will address as a direct continuation of what I offered in Parts 26 and 27. And I begin that line of discussion by more fully addressing the question of what reserves actually are – or rather what they should be as business-held contingency funding resources:

• The most obvious answer to the question of what reserve funds are, is generally expressed along the lines of “rainy day funds”. In that, these funds are resources that are set aside as proactively maintained capability for addressing unexpected challenges, whether they arise from within the business or from its surrounding context.

Unexpected problems and challenges can of course arise from within a business and just as easily and just as unexpectedly as they can from outside of it, and in at least as many ways. Consider for example the sudden discovery of a single point of failure challenge where a key individual who is essential to the completion of a key task or project, suddenly becomes unavailable when most critically needed, due to a sudden health crisis. But for purposes of this posting, I will focus on externally sourced challenges, beginning with one that I have written about in earlier postings and series.

I have at least briefly discussed the issues and challenges that businesses suddenly faced when the terrorist attacks of September 11, 2001 took place in the United States, and certainly for their impact upon the nonprofit sector, where monies that would have normally been expended by members of the public in support of their missions and visions, were suddenly going towards victims of those attacks and agencies that were serving them. And a number of small nonprofits with societally important missions and visions for helping address healthcare and other ongoing goals were suddenly facing essentially a complete loss of funding because of this reallocation in where their more usual donor bases were now sending their support. And a significant number of these nonprofits went under as their financial resources ran out and with no realistically possible replenishment for them in sight.

I cite these sudden challenges again here as a source of examples of how outside challenges can and do arise and in ways that genuinely could not be expected or planned for in any specific detail in advance. And sudden and unpredictable outside-sourced challenges can arise in essentially any type of business, and in any industry or sector, and both directly and through ripple effect challenges as businesses and marketplaces interact and influence each other. (Yes, outside challenges can and do arise that should have been predictable and even expected, at least with time. Businesses can find themselves blindsided by events or circumstances that they should have been able to foresee and the results can be the same or even worse than would arise from the genuinely unpredictable, for the essential lack of foresight and resiliency that would lead to this in affected enterprises. But I discuss that particular type of contingency in other series and simply make note of it here in passing to round out this posting’s more categorical listing of outside sourced challenges and how they have to be prepared for at least in the most general terms through maintenance of reserve funds.)

Consider a sudden loss of reliable supply of essential raw materials, or of expected and required third party provided parts for a manufacturer as one more source of outside problems, and one that might or might not be realistically predictable. For an arguably unpredictable example of that, or at least one that could not be predicted or expected in any long-term sense, consider the impact that president Trump’s unreasoned, self-inflicted trade wars of 2018 have had on both international trade, and on supply chain and resource sourcing and pricing, and for many types of businesses, and globally now. I cite, by way of example, a recent news piece that came out in the New York Times regarding the impact of all of this on one major US based fortune 500 company:

G.M. Says New Wave of Trump Tariffs Could Force U.S. Job Cuts.

Reserves are built up and maintained as a risk management initiative, in anticipation of adverse events and circumstances that are anticipated, and in anticipation of those that are not and whether or not post hoc analysis and review would indicate there had been warning signs that those possibilities might have been picked up upon and anticipated in advance too, and at least to some degree.

In the Trump trade wars example that we are all going through as I write this, it might be argued – using 20:20 hindsight, that Donald Trump has been pursuing a purblind isolationism since he first began running for office, so something of this sort might have been predictable. As far as reserves maintenance is concerned, it is not as important that any and all realistically possible adverse events be understood for their precise likelihood or impact in advance, as it is that an overall sense of the level of uncertainty and risk be arrived at and agreed to, that would be scaled according to how conservatively the business would prepare for that type of challenge – with more conservative there translating directly into larger and more cushioning reserves.

• Larger reserves directly equate to smaller immediately available levels of liquidity, and certainly where incoming revenue and outgoing expense payouts remain stable in the face of decision making as to how to set appropriate reserve levels.
• If reserve levels become large enough in comparison to ongoing operations and project work-driven cash flow requirements, skewing their being met, then that business probably needs to tap into its reserves to course correct as an at least short-term here and now remediation. And they almost certainly need to consider change management and more fundamental change, and probably with a true strategically planned and agreed to business transition too as a longer-term remediation.

I am going to continue this discussion in a next series installment where I will turn to and consider the second to-address topics point from my above list:

• Changes in goals and scope of action, and in the level of detail of processes under consideration that have to be monitored, and how that overall form of course correction can be intentionally proactively sought out and developed, and how it can be reactively forced upon a business and its leadership.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 5, and also at Page 1, Page 2, Page 3 and Page 4 of that directory.

2 Responses

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  1. Alan J. Singer said, on July 25, 2018 at 8:17 am

    Send this to Theresa May

    Sent from my Verizon, Samsung Galaxy smartphone

    • Timothy Platt said, on July 26, 2018 at 6:59 pm

      Thank you for your comment, which I have to assume from prior conversations with you is based at least in part on your view as to how politicians such as the current British Prime Minister make and then follow through on even the most long-term consequential decisions on the basis of ideology and political pressures. For Theresa May and the United Kingdom, that means an unwillingness and perhaps even an inability to in any way confront Brexit now, and even as it begins to unravel for many from its emerging down sides, and even when it has become clear that Russia interfered in the referendum vote that led to its being adapted.

      The most important issue here, is not so much one of who politicians read or listen to, as it is that they look outside of their own particularly room of mirrors epistemic bubbles, for wider ranging reality checks. And one of the keys to actually making that work is that they take a more genuinely big picture perspective so they can at least in outline, see more of where challenges and problems might arise for them and for their country, that would blindside them if they do not look up from their own easy and automatic ideologically driven perspective. As a side benefit that type of increased openness to divergent opinions and perspectives might even help them arrive at better consensus answers to the problems they face – and perhaps even lead to easier political consensus and agreement with political rivals.

      OK, I tend to take a more inclusive and interconnected approach to discussing, and to dealing with business and I add political issues, and both in an individual business context and larger, where both can and do arise. That noted, it is not important whether politicians and those who make political decisions pay attention to what I in particular write. But it is important that they look beyond the scope of their own ideological blinders for wider sources of information and insight. That can mean really listening to a wider range of people who are expert on consequential issues at hand, and thinking through what outsiders to their own particular cliques among them, have to offer that might more fully inform their own policy decisions. At the very least, thinking through competing arguments can help you bring your own ideas into clearer and more actionable focus and even if you ultimately come to disagree with all of the “outside experts” who you at least listened to as part of your own due diligence.

      This can, of course, mean reaching out more widely and in any of a lot of different directions. Here, and certainly in anything like a Brexit context, that should mean listing to a wider range of economists and business professionals than just some small coterie pre-selected for their political party affiliations, and their ideological purity, and their a priori opinions on Brexit and its merits.

      The Donald: US president Trump, I have to add is worse than anyone in Britain or its government on this type of matter, so this is not just a British or even just a European problem that I am writing about here. People who carry the responsibility to others of holding power and authority over them, need to be able to set their own personal egos and their own cherished preconceptions aside, or at least off to one side to allow in a wider perspective – and even if that means they might risk having to change their minds occasionally and publically so.

      So if by some freakish occurrence, Theresa May were to see this, or at least hear of it as a quick-aside detail in some briefing, I would ask her “have you considered really listening to the people who disagree with you on Brexit and on other really significant decisions and challenges that your country now faces? And when will you start to do so, and publically openly show that you are doing this?” We all see the consequences of Donald Trump’s inability to step back from any decision, or even just any half considered statement that he has offered: late night tweets and all. Listen and think more widely; don’t assume you have to, or even that you can know everything, or that your clique holds a monopoly on truth. And grow enough spine to challenge your party faithful and their power politics so that you can act upon what you learn from this and regardless of short-term challenges that that might engender.

      Yes, that is a lot to squeeze out of (or push into) such a short posting comment. Thank you Alan, for offering me a soap box opportunity to share these thoughts from, on this messy complex of issues.

      Tim Platt

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