You and your team have worked hard for weeks to tee up a proposal for something very new, and you know it’s solid. Customer interest has been validated, you have identified a path to the market, and you have worked through how you might get a production team in place.
Yet, somehow when the senior team looks at it, they find more risk at every turn of the page. In their evaluation, the risk adjusted rate of return doesn’t make the hurdle rate and they back away.
You are not alone in your frustration. This “deal fatigue” hits the corporate development team, their advisors and their shareholders and sets up a contentious cycle that can result in the call for changes in leadership, even though it’s not the core issue.
It’s a conversation I have frequently, and in fact just this week, with leaders in great firms. What they all have in common is that they are superb operational leaders, have enjoyed good in-market success and built solid balance sheets. They know in their bones it’s past time to invest in growth outside the core, yet the ambiguity involved in exploration has them cornered.
What then is the answer?
We’re going to take this in three parts: Strategy (or the Right Project) in today’s post, Team in the next post and finally a solid Plan that honors your assets and manages risk in the third piece.
Developing a Strong Strategy
Too many MBA papers have taught us that strategy is formed by insightful internal war room sessions, followed by communications meetings to the team and implemented with strict alignment and controls. This leaves us with fuzzy sketches and four box models, and when it is time to answer the CFO’s questions, we come up short.
While none of the elements are wrong, the order is completely reversed.
The firm falls in love with describing the destination, when it really needs to understand the journey between two key points.
There are only two points on the strategy curve that really matter: the intrinsic current strategy of your firm and actual specific use case of your customer of your product and service, and its speed and direction of change.
Point One: Your Current Strategy
By intrinsic strategy, I mean not what has been said, talked about, or put on charts, but what is actually being done by your team every day. Said another way, every one of your employees, contractors, suppliers and partners has a very clear picture of what they came in to do today, how they will make decisions about it, and what the acceptable boundaries of practice are. This is hard coded into your firm by the way you hire, do performance reviews, negotiate contracts, talk about your results and a myriad of other subtle control points.
The intrinsic strategy is always different than the stated strategy.
If you have wondered why you have people on the front lines roll their eyes at communications meetings, this is usually the culprit. If the new direction you are proposing does not take into account the reality of what it’s really like on the front lines, you have lost credibility at the outset.
Let me provide an analogy for insight from my past life as an HVAC engineer:
Every building has two sets of blueprints, those the architect developed at the outset that provided the boundaries and high-level specs for the tradesman and another set called the “as builts,” which reflect the final set of choices made on site by all parties. There is always a gap between the building as designed on the architects workstation and as it’s built in the field.
Strategic work is the same – management has laid out a plan for enterprise, however, once that design meets reality, the human factors kick in and very good people make subtle changes that are unreflected in management’s mental picture. As of this writing, the Wells Fargo incentive practices have just come to light, and I would suspect as this plays out the gap between “as designed” and “as implemented” will be key.
A seasoned advisor will start with the intrinsic strategy as the point of departure. This takes real effort and a third party viewpoint to develop.
Point Two: Customer Use Case
Just as you have a gap in your firm on the intrinsic vs actual strategy, your customer has the same gap between what the operations team is really doing, versus what the senior leadership and supplier facing portion of the firm has been led to understand.
The team usually falls short at this endpoint by not understanding what a complete solution looks like for the client or customer. Technology firms are the biggest offenders here, frequently bringing products and services that require high levels of customer insight and adaptation and are simply not sustainable for most users.
Best practice here is to be in the field with the target user where you can actually observe how they interact with your new product or service. This cannot be overstated: if you have not put your own eyes on a client as they use your wares, your strategy will not be clear and specific enough. Even if you have reams of consumer research and focus group background, there is no substitute for what Toyota calls “Go and See.”
Build a Path
Now that you have the two endpoints clearly and unambiguously identified, build a strategy that bridges them. This is an act of creativity, and the most important part is to get a first draft in place. Ed Catmull reminds us that even Pixar movies are not good at the outset, and need to be refined and improved through peer review.
There are many paths that can be used: organic in-house development, acquisition of key pieces of technology, or in some cases, whole firms. Don’t rest until you have mapped a path to assemble all of the pieces that take you all of the way along the journey. It’s good to start noting risks and alternate paths too, as we’ll need those in the planning stage of step three. But for now, concentrate on getting at least one path from the intrinsic strategy starting point to the complete, new product or service endpoint.
So there you have it, a well-developed strategy arc (hopefully arcs) from precisely where you are starting to exactly what the customer is expecting. Next time we’ll look at the next key piece.
In the meantime, if you are striving for clarity, I would be happy to talk with you about my service offerings to help you build the Right Project, Right Team and Right Plan. You can check them out here, drop me an email or call me at 847-651-1014.
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