Confronting Reality – Doing What Matters to Get Things Right
Lawrence Bossidy and Ram Charan
The strategic plans of most companies don’t work because little time, if any, is spent harmonizing the facts of the external environment, the financial targets that are set and the internal capabilities of the business so that these discrete activities work together.
External Environment: Customers and markets; traditional competitors and nontraditional competitors; policies of governments and regulators; expectations of capital markets; Opportunities and dangers presented by changes in economic, social, and technological structures
1. Cyclical change – part of business life’s ups and downs
2. Structural change – fundamental, long term alterations in the basics of making money
Internal Environment: Strategy, operating activities, selection and development of people, organizational processes and structure, Culture – mission, vision, core values, expected behaviors
Financial Targets: Meeting Expenses – Making a Profit
Confronting reality has to become a leadership priority of the highest order – a nonnegotiable behavior for everyone at all levels of an organization.
What business am I in?
Am I in a growth business?
Is the how of making money in my business changing?
What are the winners in my business doing?
What is happening that may change how I do business?
Do I need to change my business to stay in the game?
Is the organization so focused on processes and turf battles that it is almost oblivious to what the customers want?
Your customer base is your best asset. Every business must sharply define the set of customers it sells to regularly and how that base will be retained, improved and increased. Every business must also have an equally sharp and specific idea of why those customers prefer its products or services over the offerings of competitors: in other words, it must know them intimately. The quality of your analysis will depend a lot on how good you are at seeing your business through the eyes of your customer.
Creating a Business Plan: If the current model is not adequate for the future, what needs to change?
Habits that get in the way:
Open and inquisitive mind
Intellectual ability to sort out complexity
Ability to persuade others
Courage of inner strength
Linking and iterating the financial targets, external realities, and internal realities, and searching for the right mix in each of the three components of the business model is what determines the accuracy of the final product.
Establishing financial targets allows you to set the benchmarks that help you identify the opportunities and risks in the external environment The business model can not be mechanistic. Some factors are quantitative but many are qualitative. You have to distinguish facts from assumptions. You must continually test ideas and perceptions against the realities of factors in external and internal environments. You have to be savvy about the relationships of all the components to each other and identify their linkages and relationships in developing decisions and executing action plans. This requires: Qualitative and quantitative judgments; Pragmatism; Intellectual honesty; Confidence in information sources; Judgments about assumptions and risks
The model must be dynamic. You must complete a number of iterations to get the model appropriate for initial implementation. Then you must continue to test it regularly to keep it up to date.
Understand the environment as it has become and is likely to be – not as it was.
Thoroughly refresh your understanding of your customer base before you decide what actions you are going to take.
Ruthlessly assess your organization – does it have the talent and attitudes to drive required changes?
Communication is all about synchronization and harmony – understanding the benefits to the customer, and synchronizing processes, vision, mission and culture.
The various components of the business model have to be consistent with each other: the people suited to the new strategy, organizational structures and processes, and financial goals.
Do you understand the initiative well enough to develop metrics to evaluate how the implementation is going?
Are you willing to commit the necessary resources to education?
Do you have the focus and discipline to drive it through the organization?
Do you have the stamina to repeatedly convey the importance of the initiative through your actions as well as your words?
Have you picked the right people for the job – those who are functionally suited to the job and motivated to make things happen?
Do you have the courage to confront those who are standing in the way? Is cynicism changing to excitement?