Platt Perspective on Business and Technology

Rethinking exit and entrance strategies 29: keeping an effective innovative focus while approaching and going through significant business transitions 19

Posted in strategy and planning by Timothy Platt on October 5, 2018

This is my 29th 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 and Page 5 continuations, postings 559 and loosely following for Parts 1-28.)

I began working my way through a brief to-address list of topics points in Part 28, to complete a more abstractly organized line of discussion of costs and liquid reserves, and of goals and priorities as they all interrelate in this context. And I will make use of that still developing narrative when considering a specific case in point business example, as I will offer in a soon to come installment.

In anticipation of what is to come, the case study example that I will turn to and at least briefly explore will involve a high-tech company that, as is common for my working examples here, seeks to reach and maintain innovative excellence as a core defining element of its business model and business vision. I make note of that here in early preview of what is to come, because I intentionally left out a crucially important point of uncertainty and risk and cost exposure in Part 28 when making a there-crucial point that I will build from in this posting. I made note of internally sourced and externally sourced risk factors and how they can arise. And I at least briefly and selectively made note of how they influence and shape business decisions and follow-through. But I left out what for the flow of discussion of this blog as a whole, has been one of the most important sources of such causally determining factors of them all, and one that I have delved into in some detail elsewhere as a general consideration. And it is one with both internally and externally initiating elements in it: the risk (and costs), versus benefits dynamics of innovation itself in a business such as the one that I will delve into in my case study to come. And it: innovation in general and more disruptively novel innovation in particular and their risk and benefits correlations, inform all of the to-address points that I am successively raising and discussing here in this phase of this series.

For smoother continuity of narrative here, the to-address topics list that I offered in Part 28 and that I began worked on there, is:

1. 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 as would be found in true transitions.
2. 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.
3. 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 …
4. With and without organized, strategically aware planning and forethought to back such decisions.
5. 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.

I primarily focused on the above repeated Point 1 in Part 28, and I continue addressing this overall progression of issues with a final, at least for now, comment that relates directly to that starting topic for this list. One of my key goals for Part 28 was to offer a more or less complete response to that topics point, at least for purposes of this series. But I add a further related element to that response here for bridging purposes as I continue on in this intended narrative progression.

• Unknowns and uncertainties, and the potential for more disruptively disconnected change bring with them increased potential for at least short-term cost and risk increases. This can be considered to hold true even if those shorter-term liabilities are considered as representing costs of entry for achieving greater long-term reliable value, as measurable in terms of market share and profitability, or whatever other overall business performance metrics that would be employed.
• I have cited business transitions here: more fundamental change in how a business is run and even in how it might be organized to run, as a source of such disruptive impact. But innovation, and a move towards disruptive innovation can be equally disruptive. And these two guiding disruptors in costs and in emerging value creating opportunity: a need for entering into a genuine business transition and an ongoing drive toward innovation and the New, can play out together and synergistically so, and certainly for any business that is growing into the type of overall change that would call for an intentionally planned out transition, while doing so as an overtly intentionally innovative enterprise.
• And most importantly, and certainly for this narrative thread, both the potential for increased long-term value and the at least shorter-term potential for increased risk and cost in this, can and do show such scaling synergies too. The overall scales of what might arise with any given degree of certainty and from both the risk/costs and from the benefits side of this: the stakes in these games (in game theory terms), rise at a faster rate together than would be expected if simply considering the separate cost/benefits parts of that dynamic as if they were arising in vacuo, with a simple summing up of their respective contributions to arrive at an expected overall whole.

That noted as an orienting starting point for this posting and its discussion, I begin here with a more focused consideration of Point 2 and its issues, and I add some correlated thoughts concerning Point 3 as well. I begin here with both of these points at least significantly acknowledged, by noting how inseparably interconnected their issues and challenges are in practice. Put somewhat simplistically, Point 2 addresses our understanding what would be done and in sufficient detail and with an awareness of the crucial issues involved so as to be able to make effective, informed strategic and operational decisions and in ways that can lead to stakeholder consensus (as that detail will be separately addressed in a Point 4 context.) And the distinction of proactive versus reactive is crucial through all of this, as raised in Point 2. Point 3 addresses the issues of what is actually done, and certainly as it might deviate from prior strategic planning (N.B. a set of issues that a Point 4 discussion will in turn address for developing an effective implementation and follow-through.) I parenthetically raise Point 4 of this list here too, in order to put this posting and the next ones to follow it in single more organized context. I will of necessity raise and address Point 5 issues throughout this short posting progression to come too, of course.

I will primarily focus on Point 2 here while at least significantly starting a line of discussion of Point 3 as well, and will proceed “as above” from there. And with that (dis?)orienting preview in place to clarify how and why I might seem to be cutting ahead of myself here in all of this, let’s begin actually addressing that “all of this” with an at least organizing analysis of Point 2 and its issues, as briefly set in the wider context of the immediately preceding paragraph. And I begin doing so with the fundamentals and with strategy and tactics, and operations as they remain as-is or as they change in the face of emerging New.

I begin with a perhaps cartoonish, but nevertheless useful scenario: a business is facing a need for fundamental change – change and pressures that would compel it to change, that cannot simply be managed through more business as usual evolutionary shifts and accommodations. And it is facing this as a synergy of converging forces and factors that in this case is probably going to be significantly growth-driven where more established operational processes and approaches that have been pursued up to now have stopped being able to scale up effectively for meeting its current and emerging needs. And at the same time, the demands of innovative change in what this business does and in what it offers, have factored in to that here too, and particularly as their underlying support systems in place for realizing innovative value (e.g. their new offering development and production pipelines) have to be fundamentally upgraded if they are to keep pace with emerging business need and opportunity.

I offered the above as an explicit cartoon representation. Point 2, as framed above, specifically addresses the gaps that actually underlie and cartoonize its more detailless presentation. Actually organizing and running a business and analyzing and understanding how it is and is not performing from that, and moving forward from there and at either a same or an expanding scale, calls for effective information and information availability and use. And all of that hinges on what is measured and in what levels of detail and depth that could be applied to answering very specific, and very specifically considered and arrived at business planning questions – including questions that might highlight and challenge some of the basic and even axiomatic assumptions held.

The types of change that I write of here as facing a business, and the types of change that that business would enter into when addressing all of this, have to be data-driven. And crucially importantly here:

• The types of innovation-driven, business transition-shaping and other changes that this enterprise might simultaneously be facing, all demand changes in what types of data are needed, and what volumes and levels and depths of detail of it that would be needed,
• For ongoing effective strategic and tactical, and operational planning and execution, and certainly if anything like effective performance and consequences reviews are to be carried out post hoc for taking better next-steps forward in the next round of planning and execution.

When you do new things, you need new types and forms of information if you are to do them well. And when you look back to review the outcomes: realized and still unfolding, of change that you might have instituted, this can call for an even more expanded effectively available information base too. And some of the older data types and metrics that you have relied upon up to now, might come to take on lesser value and relevance for moving forward too, as no longer holding the same relevance to your new New and Next as they did to what is now your old and even former.

And this is specifically where Point 3 enters this narrative, and it is where it has been already been holding impact in all of this, as the changes that I write of here play out. And I will at least begin to explicitly add this complex of considerations into this narrative thread here with a second cartoon representation that I will at least in part demolish and replace in my next series installment:

• Scope creep, as I use the term here, can arise in many ways, and certainly when a business faces the types and levels of change that I address here. Increased scale can and does correlate fairly directly with increased overall systems complexity and even when that business is assiduously scaled up according to a same-type modular expansion model and with a goal of replicating an already-is, in what amounts to a more linearly expanded number of instances (e.g. increasing the number of customer-facing offices or storefronts in a more cookie-cutter manner, and with a goal of maintaining an ongoing “small and locally yours” flavor to them.) There and for that example, this business is still going to have to add at least some scaled complexity for simply coordinately managing all of these additional market-facing resources. And if this expansion means moving into new geographic areas that might culturally differ from what the business and its executives would expect in their older and more established markets, that would add a second source of increased complexity for them too, and certainly if they seek to effectively connect to this now expanded business-to-consumer context. And that example-based digression only raised two of many possible sources of increased required business systems complexity, and even for this simplified, complexity minimizing example.
• But scope creep can also arise from a business and its strategic and operational planners adding in new while holding onto all of the old as well and even ALL of it, and by less than fully considered default if for no other reason.

I will explicitly discuss scope compression and simplification as first noted here in Point 3, in my next series installment too, while more fully exploring that set of issues as whole. And as briefly discussed here, Point 2 issues will arise of necessity in that line of discussion, even as Point 3 issues have at least hovered in the background for all that I have written about here. I have, by way of example, noted but essentially ignores the issues and complexities of reactive and proactive approaches and their consequences here. And I will address that complex of issues, at least as it specifically relates to this narrative, there. And then I will proceed from there to more fully discuss Point 4 and its issues, and Point 5 and its perspectives too. And with that in place, I will finally turn to and discuss my case study example as has by now been long-promised.

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.

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