On The Alchemy Of Growth

I recently finished reading the Alchemy of Growth – Practical Insights For Building The Enduring Enterprise – by Mehrdad Baghai, Stephen Coley and David White. This book was referenced during a recent CIO conference I attended.

Below are key excerpts from the book that I found particularly insightful:

1- “Growth’s transformative power is akin to the alchemy of old. Always a mystery, alchemy’s magical blend of science, philosophy, art, and spirituality held secrets that even its practitioners found difficult to penetrate. Still, they were all drawn to its alluring aim: to transform the everyday into the exalted. The pursuit of corporate growth has prompted a similar reaction in the field of management. Although excited by growth’s promise, executives are uncertain about how to capture it. Feeling ill equipped to lead a growth charge, many seek a approach that shows them how they can actually attain and sustain growth. This book is addressed to them. It attempts to arm business leaders for growth by laying out a proven practical framework for the holistic management of a growing enterprise. The ideas and approaches suggested here are applicable to businesses and business units of all sizes, in all locations. They are intended to provide guidance to all levels of business leadership.”

2- “Our research makes it clear that very few companies sustain above-average growth for their industry year after year. Indeed, some of the companies we studied have already suffered slowdowns, and we fully expect more to do so. But these setbacks do not detract ft-om the lessons to be learned from the sustained phases of growth; indeed, they serve to reinforce the need for new approaches to help executives keep growth going. Our own approach has been specifically developed to help companies grow throughout the business cycle – not only sailing through the upswings, but also maintaining growth during the downturns.”

3- “Horizon 1 encompasses the businesses that are at the heart of an organization – those that customers and stock analysts most readily identify with the corporate name. In successful companies, these businesses usually account for the lion’s share of profits and cash flow. Horizon 1 businesses are critical to near-term performance, and the cash they generate and the skills they nurture provide resources for growth. They usually have some growth potential left, but will eventually flatten out and decline. Without the support of a successful horizon 1, initiatives in horizons 2 and 3 are likely to stagnate and die. Management’s primary challenge in horizon 1 is to shore up competitive positions and capture what potential remains in the core businesses. Even when these are mature, continuing innovation can incrementally extend their growth and profitability. Traditional sales force stimulation programs, product extensions, and marketing changes can aim contribute. Restructuring, productivity enhancement, and cost reduction measures will also help maintain healthy performance for as long as possible.”

4- “Horizon 2 comprises businesses on the rise: fast-moving, entrepreneurial ventures in which a concept is taking root or growth is accelerating. The emerging stars of the company, these businesses are attracting investors’ attention. They could transform their company, but not without considerable investment. Though substantial profits may be four or five years away, they have customers and revenue, and may already generate some profit. More important, they are expected to become as profitable as horizon 1 businesses in time. Horizon 2 initiatives are usually characterized by a single-minded drive to increase revenue and market share. They need continuing investment to finance rollouts or otherwise accelerate the expansion of the business. In a few years, horizon 2 initiatives should complement or replace a company’s current core businesses. They may represent either extensions of these businesses or moves in new directions. Horizon 2 is about building new streams of revenue.That takes time and demands new skills. Without horizon 2 businesses, a company’s growth will slow and ultimately stall. A good growth company needs to have several of these emerging businesses “on the boil,” working to convert promising ideas into future earnings generators.

5- “Horizon 3 contains the seeds of tomorrow’s businesses – options on fiiture opportunities. Although embryonic, horizon 3 options are more than ideas; they are real activities and investments, however small. They are the research projects, test-market pilots, alliances, minority stakes, and memoranda of understanding that mark the first steps toward actual businesses, even though they may not produce profits for a decade, if ever. Should they prove successful, they will be expected to reach horizon 1 levels of profitability. A company that thinks it has a promising horizon 3 just because it compiles a long list of whiteboard ideas at a management retreat is fooling itself. Without deliberate initiatives to develop good ideas into horizon 3 opportunities, a company’s long-term growth prospects will fade. The options in horizon 3 are rarely proven opportunities, but they need to be promising and to have the support of management. Building successful businesses means seeding numerous options. Some will fail for internal reasons; others will fall victim to shifting industry winds. Most will never grow to become successful new businesses. Given these odds, a great deal of horizon 3 activity is needed to cover the multitude of possible futures. A company’s goal should be to keep he option to play without committing too much capital or other resources. The challenge is to nurture promising options while ruthlessly excising those with diminishing potential.”

6- “The three horizons can be used to promote growth in three ways. First, as a diagnostic tool, the three horizons can help managers assess the prospects for growth at any level in an organization and reveal possible gaps in the volume and consistency of new profit sources. Second, as a language, the three horizons approach offers a coherent way to communicate with employees and investors. Its simple terminology makes it easier for both groups to understand and discuss corporate priorities.”

7- “An excessive focus on growth can be just as much a problem as because they have failed to fill their business creation pipeline. others lose the right to grow when they become obsessed with new businesses. The novelty of these opportunities can be so exciting that managers take their eyes off horizon 1, forgetting that it must be maintained in order to provide the financial capacity to drive growth.”

8- “Another troublesome pattern occurs when companies have strong horizon 1 businesses and lots of ideas in horizon 3, but few people working to turn these ideas into real businesses. No matter how exciting the ideas may be, horizon 2 will remain empty until businesses are built. A company can find itself in an insidious situation as promising horizon 3 options lull it into a false sense of security. To complicate matters, these options can also inflate market expectations for growth far beyond the company’s capacity to meet them. As the gap between market expectations and the company’s actual growth widens, a steep fall in stock price becomes more likely.”

9- “If there are no hard and fast numbers to determine ideal balance across the three horizons, how should you define it? The standard is simple: balance means having the next engine of growth ready when it is needed. Applying the standard, however, is far from simple. The definition of balance varies from company to company. Consider the following factors: Pace of industry evolution…Degree of uncertainty…Managerial and financial capacity…Shareholder expectations.”

10- “Pruning the portfolio of businesses through divestment creates capacity for growth. Although a business unit may still be earning adequate profits, these must be weighed against the opportunity costs of management distraction and competition for resources. Management attention and other resources are often more productively focused on growth opportunities than on businesses with limited potential…Shedding unsatisfactory businesses has the added benefit of signaling strategic intent to both stock markets and employees. Conversely, not pruning increasingly irrelevant businesses can send mixed messages about a company’s direction and resolve to grow.”

11- “In our work, we have looked for ways to open managers’ eyes to hidden opportunities. To this end, we have developed a tool that we call the “seven degrees of freedom.” By systematically addressing each degree of freedom in turn. managers can learn to think more broadly about growth opportunities in their businesses.  1. How could we increase sales to the same customers with the same product mix? 2. How could we extend the business by selling existing products to new customers? 3. How could we grow by introducing new products and services? 4. How could we expand sales by developing better delivery systems for customers? 5. How and where could we expand into new geographies? 6. How much could we grow by changing the industry structure through acquisitions or alliances? 7. What opportunities are there outside existing Industry boundaries?”

12- “Companies are right to be cautious about pursuing growth initiatives. But to let due caution prevent them considering unusual ideas is foolish. Collins and Porras strike the right balance: “We’re not saying that evolutionary progress equals wanton diversification…. Nor are we laying that the concept of ‘stick to the knitting’ makes no sense. The real question is: What is the ‘knitting’ in a visionary company?””

13- “Whether the process is top-down or bottom-up is beside the point. It is not just the breadth of involvement that matters. but the breadth of the search. In the end, whatever the process used and resources deployed, finding attractive opportunities is always as much art as science.”

14- “Executives who want to develop horizon 3 options into core profit engines face two big problems: market uncertainty and gaps in their skills, assets, and relationships. We have found that successful growers typically address these problems by taking not bold leaps, but a series of measured steps. Each step takes them a little closer to their ultimate :es money in its own right, and adds capabilities that prepare them for further opportunities. When these growers look back on what they have achieved, they see not a chaotic zigzag but a distinctive staircase pattern.”

15- “No formula can substitute for managerial iudement. Even so analysis of more than 100 growth staircases reveals a consistent pattern. Virtually all successful staircases proceed in four phases: seeding the initial growth options; testing the the business model; replicating and extending the business; and managing for profitability.”

16- “Even when there is strong capability building at each step, migrating an idea from a horizon 3 option to an emerging horizon 2 enterprise and on to a horizon 1 core business is tricky. The advantage of taking many small steps rather than a few big leaps is that it helps companies manage the risks that arise on two fronts. First, market uncertainty makes it impossible to predict the success of a business: for every great idea, there are many that will fail. Second, new businesses call for capabilities that a company does not yet have; without them, the promise these businesses hold out will not be realized.”

17- “A broader definition of capability is required that includes all resources useful in gaining competitive advantage. In addition to operational skill, our definition of capability includes three other classes of resources: privileged assets, growth-enabling skills, and special relationships.”

18- “Only by differentiating their management systems across the three horizons can corporations avoid the barriers to growth that most systems inadvertently perpetuate.If all managers are evaluated purely on the profitability of their businesses – a good measure of horizon 1 performance – they will have little appetite for building horizon 2 enterprises. If some leadership time is not systematically reserved for building fledgling businesses, the needs of the core business will consume all managers’ days and nights, and they simply will not have a free moment to build horizons 2 and 3.”

19- “Horizon 1 operators: Deep functional and/or industry expertise Strong drive to hit targets and meet plans consistently, Discipline; Horizon 2 Business builders: Entrepreneurial desire to create, Comfort with ambiguity,  Top-line-focused, sharp decision makers ; Horizon 3 Visionaries: Champions, Unconventional thinkers”

20- “Our research indicates that about three-quarters of the companies that sustain high growth and high shareholder returns make acquisition a critical component of their growth strategies. They frequently acquire other companies – often up to five a year – to further the development of their growth staircases.”

Regards,

Omar Halabieh

The Alchemy of Growth

On Blue Ocean Strategy

I recently finished reading Blue Ocean Strategy – How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim and Renee Mauborgne.

Below are key excerpts that I found particularly insightful:

1- “Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. Although some blue oceans are created well beyond existing industry boundaries, most are created from within red oceans by expanding existing industry boundaries, as Cirque du Soleil did. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.”

2- “However, there is little practical guidance on how to create them. Without analytic frameworks to create blue oceans and principles to effectively manage risk, creating blue oceans has remained wishful thinking that is seen as too risky for managers to pursue as strategy. This book provides practical frameworks and analytics for the systematic pursuit and capture of blue oceans.”

3- “Consistent with this observation, our study shows that the strategic move, and not the company or the industry, is the right unit of analysis for explaining the creation of blue oceans and sustained high performance. A strategic move is the set of managerial actions and decisions involved in making a major market-creating business offering.”

4- “The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.”

5- “To fundamentally shift the strategy canvas of an industry, you must begin by reorienting your strategic focus from competitors to alternatives, and from customers to noncustomers of the industry.^ To pursue both value and cost, you should resist the old logic of benchmarking competitors in the existing field and choosing between differentiation and cost leadership.”

6- “To reconstruct buyer value elements in crafting a new value curve, we have developed the four actions framework…Which of the factors that the industry takes for granted should be eliminated! Which factors should be reduced well below the industry’s standard? Which factors should be raised well above the industry’s standard? Which factors should be created that the industry has never offered?”

7- “The first principle of blue ocean strategy is to reconstruct market boundaries to break from the competition and create blue oceans…Path 1: Look Across Alternative Industries…Path 2: Look Across Strategic Groups Within Industries…Path 3: Look Across the Chain of Buyers…Path 4: Look Across Complementary Product and Service Offerings…Path 5: Look Across Functional or Emotional Appeal to Buyers…Path 6: Look Across Time.”

8- “To maximize the size of their blue oceans, companies need to take a reverse course. Instead of concentrating on customers, they need to look to noncustomers. And instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. That allows companies to reach beyond existing demand to unlock a new mass of customers that did not exist before.”

9- “Companies need to build their blue ocean strategy in the sequence of buyer utility, price, cost, and adoption.”

10- “Companies, like individuals, often have a tough time translating thought into action whether in red or blue oceans. But compared with red ocean strategy, blue ocean strategy represents a significant departure from the status quo. It hinges on a shift from convergence to divergence in value curves at lower costs. That raises the execution bar. Managers have assured us that the challenge is steep. They face four hurdles. One is cognitive: waking employees up to the need for a strategic shift. Red oceans may not be the paths to future profitable growth, but they feel comfortable to people and may have even served an organization well until now, so why rock the boat? The second hurdle is limited resources. The greater the shift in strategy, the greater it is assumed are the resources needed to execute it. But resources were being cut, and not raised, in many of the organizations we studied. Third is motivation. How do you motivate key players to move fast and tenaciously to carry out a break from the status quo? That will take years, and managers don’t have that kind of time. The final hurdle is politics. As one manager put it, “In our organization you get shot down before you stand up.””

11- “Key to winning over your detractors or devils is knowing all their likely angles of attack and building up counterarguments backed by irrefutable facts and reason.”

12- “To change the mass it focuses on transforming the extremes: the people, acts, and activities that exercise a disproportionate influence on performance. By transforming the extremes, tipping point leaders are able to change the core fast and at low cost to execute their new strategy.”

13- “Because blue and red oceans have always coexisted however, practical reality demands that companies succeed in both oceans and master the strategies for both. But because companies already understand how to compete in red oceans, what they need to 1 learn is how to make the competition irrelevant. This book aims too help balance the scales so that formulating and executing blue ocean strategy can become as systematic and actionable as competing in the red oceans of known market space.”

Regards,

Omar Halabieh

Blue Ocean Strategy

On Who Says Elephants Can’t Dance

I recently read Who Says Elephants Can’t Dance? Inside IBM’s Historic Turnaround by Louis V. Gerstner, Jr.

Below are key excerpts that I found particularly insightful in this book, detailing the turnaround that Louis Gerstner engineered at IBM in the 1990s:

1- “Thus began a lifelong process of trying to build organizations that allows for hierarchy but at he same time bring people together for problem solving, regardless of where they are positioned within the organization.”

2- “I went on to summarize my management philosophy and practice: I manage by principle, not procedure. The marketplace dictates everything we should do. I’m a big believer in quality, strong competitive strategies and plans, teamwork, payoff for performance, and ethical responsibility. I look for people who work to solve problems and help colleagues. I sack politicians. I am heavily involved in strategy; the rest is yours to implement. Just keep me informed in an informal way. Don’t hide bad information—1 hate surprises. Don’t try to blow things by me. Solve problems laterally; don’t keep bringing them up the line. Move fast. If we make mistakes, let them be because we are too fast rather than too slow. Hierarchy means very little to me. Let’s put together in meetings the people who can help solve a problem, regardless of position. Reduce committees and meetings to a minimum. No committee decision making. Let’s have lots of candid, straightforward communications. I don’t completely understand the technology. I’ll need to learn it. but don’t expect me to master it. The unit leaders must be the translators into business terms for me.”

3- “After all the customer and employee and industry meetings, as well as weekend and air travel reflection, I was indeed ready to make four critical decisions: Keep the company together. Change our fundamental economic model. Reengineer how we did business. Sell underproductive assets in order to raise cash.”

4- “I’ve had a lot of experience turning around troubled companies, and one of the first things I learned was that whatever hard or painful things you have to do, do them quickly and make sure everyone knows what you are doing and why.”

5- “The sine qua non of any successful corporate transformation is public acknowledgment of the existence of a crisis. If e So there must be a crisis, and it is the job of the CEO to define and communicate that crisis, its magnitude, its severity, and its impact. Just as important, the CEO must also be able to communicate how to end the crisis—the new strategy, the new company model, the new culture. All of this takes enormous commitment from the CEO to communicate, communicate, and communicate some more.”

6- “What drives IBM’s unique complexity is twofold. First, every institution and almost every individual is an actual or potential customer of IBM. In The second complexity factor is the rate and pace of the underlying technology.”

7- “All of our efforts to save IBM—through right-sizing i and reengineering and creating strategy and boosting morale and all the rest—would have been for naught if, while we were hard at work on the other things, the IBM brand fell apart. I have always believed a successful company must have a customer/market•lace orientation and a strong marketing organization. That’s why my second step in creating a global enterprise had to be to fix and focus IBM’s marketing efforts.”

8- “We made four major changes to our compensation system…This was all about pay for performance, not loyalty or tenure. It was all about differentiation: Differentiate our overall pay based on the marketplace; differentiate our increases based on individual performance and pay in the marketplace; differentiate our bonuses based business performance and individual contributions; and differentiate our stock-option awards based on the critical skills of the individual and our risk of loss to competition.”

9- “I wanted IBMers to think and act like long-term shareholders to feel the pressure from the marketplace to deploy assets and forge strategies that create competitive advantage. The market, over time, represents a brutally honest evaluator of relative performance, and what I needed was a strong incentive for IBMers to look at their company from the outside in.”

10- “The skills required in managing services processes are very different from those that drive successful product companies. We had no experience building a labor-based business inside an asset-intensive company. We were expert at managing factories and developing technologies. We understood cost of goods and inventory turns and manufacturing. But a human-intensive services business is entirely different. In services you don’t make a product and then sell it. You sell a capability. You sell knowledge. You create it at the same time you deliver it. The business model is different. The economics are entirely different.”

11- “My point is that all of the assets that the company needed to succeed were in place. But in every case—hardware, technology, software, even services—all of these capabilities were part of a business model that had fallen wildly out of step with marketplace realities…The implications of this kind of leap to a company’s economic model can be devastating. In IBM’s case it meant the collapse of gross profit margins and the attendant changes we had to engineer to lower our cost structure without compromising our effectiveness. Yet the hardest part of these decisions was neither the technological nor economic transformations required. It was changing the culture—the mindset and instincts of hundreds of thousands of people who had grown up in an undeniably successful company, but one that had tor decades been immune to normal competitive and economic forces. The challenge was making that workforce live, compete, and win in the real world. It was like taking a lion raised for all of its life in captivity and suddenly teaching it to survive in the jungle.”

12- “You’ve probably found, as I have, that most companies say their cultures are about the same things—outstanding customer service. excellence, teamwork, shareholder value, responsible corporate behavior, and integrity. But, of course, these kinds of values don’t necessarily translate into the same kind of behavior in all companies—how people actually go about their work, how they interact with one another, what motivates them. That’s because, as with national cultures. most of the really important rules aren’t written down anywhere.”

13- “In comparison, changing the attitude and behavior of hundreds of thousands of people is very, very hard to accomplish. Business schools don’t teach you how to do it. You can’t lead the revolution from the splendid isolation of corporate headquarters. You can’t simply give a couple of speeches or write a new credo for the company and declare that the new culture has taken hold. You can’t mandate it, :an’t engineer it. What you can do is create the conditions for transformation. You can provide incentives. You can define the marketplace realities and goals. But then you have to trust. In fact, in the end, management doesn’t change culture. Management invites the workforce itself to change the culture.”

14- “Thee work-a-day world of business isn’t about fads or miracles. There are fundamentals that characterize successful enterprises anc successful executives. They are focused. They are superb at execution. They abound with personal leadership.”

15- “At the end of the day a successful, focused enterprise is one that has developed a deep understanding of its customers’ needs, its competitive environment, and its economic realities. This comprehensive analysis must then form the basis for specific strategies :hat are translated into day-to-day execution.”

16- “Earlier in this section I mentioned that in every industry it is possible to identify the five or six key success factors that drive leadership performance. The best companies in an industry build processes that allow them to outperform their competitors vis-a-vis these success factors.”

17- “This next generation of leaders—in both the public and private sectors—will have to expand its thinking around a set of economic, political, and social considerations. These leaders will be: Much more able to deal with the relentless, discontinuous change that this technology is creating. Much more global in outlook and practice. Much more able to strike an appropriate balance between the instinct for cultural preservation and the promise of regional or global cooperation. Much more able to embrace the fact that the world is moving to a model in which the “default” in every endeavor will be openness and integration, not isolation.”

Regards,

Omar Halabieh

Who Says Elephants Can’t Dance?

On The Halo Effect

I recently finished reading The Halo Effect…and the Eight Other Business Delusions That Deceive Managers by Phil Rosenzweig.

As best summarized by the author: “The central idea in this book is that our thinking about business is shaped by a number of delusions…More recently, cognitive psychologists have identified biases that affect the way individuals make decisions under uncertainty. this book is about a different set of delusions, the ones that distort our understanding of company performance, that make it difficult to know why one company succeeds and another fails. These errors of thinking pervade much that we read about business, whether in leading magazines or scholarly journals or management bestsellers. They cloud our ability to think clearly and critically about the nature of success in business.”

The book then goes on to present the nine delusions excerpted below:

“Delusion One: The Halo Effect – The tendency to look at a company’s overall performance and make attributions about its culture, leadership, values, and more. In fact, many things we commonly claim drive performance are simply attributions based on prior performance.

Delusion Two: The Delusion of Correlation and Causality – Two things may be correlated, but we may not know which one causes which. Does employee satisfaction lead to high performance? The evidence suggests it’s mainly the other way around – company success has a stronger impact on employee satisfaction.

Delusion Three: The Delusion of Single Explanation – Many studies show that a particular factor  – strong company culture of customer focus or great leadership – leads to improved performance. But since many of these factors are highly correlated, the effect of each one is usually less than suggested.

Delusion Four: The Delusion of Connecting the Winning Dots – If we pick a number of successful companies and search for what they have in common, we’ll never isolate the reasons for their success, because we have no way of comparing them with less successful companies.

Delusion Five: The Delusion of Rigorous Research – If the data aren’t good quality, it doesn’t matter how much we have gathered or how sophisticated our research methods appears to be.

Delusion Six: The Delusion of Lasting Success – Almost all high performing companies regress over time. The promise of a blueprint for lasting success is attractive but not realistic.

Delusion Seven: The Delusion of Absolute Performance – Company performance is relative, not absolute. A company can improve and fall further behind its rivals at the same time.

Delusion Eight: The Delusion of the Wrong End of the Stick – It may be true that successful companies often pursued a highly focused strategy, but that doesn’t mean highly focused strategies often lead to success.

Delusion Nine: The Delusion of Organizational Physics – Company performance doesn’t obey immutable laws of nature and can’t be predicted with the accuracy of science – despite our desire for certainty and order.”

Every now and then one comes across a book, that makes its reader take a step back and re-assess his views, experiences and readings. The Halo Effect is one of these books. It delivers both on account of the content and also of the numerous corporate examples and references to leading work in the leadership/management space to illustrate the concepts presented. A very refreshing and highly recommended read!

Below are excerpts from the book that I found particularly insightful:

1- “In fact, for all the secrets and formulas, for all the self-proclaimed thought leadership, success in business is as elusive as ever.”

2- “…There was talk, over and over, about customer orientation and leadership and organizational efficiency, but these things are hard to measure objectively, so we tend to make attributions about them based on things we do feel certain about – revenues and profits and share price. We may not really know what leads to high performance, so we reach for simple phrases to make sense of what happened.”

3- “If we start with the full data set and look objectively at many years of company performance, we find the dominant pattern is not one of enduring performance at all, but one of rise and fall, of growth and decline. Foster and Kaplan conclude: “…Managing for survival, even among the best and most revered corporations does not guarantee strong long term performance for shareholders. In fact, just the opposite is true. In the long run, the markets always win”.”

4- “March and Sutton explain: “In its efforts to satisfy these often conflicting demands, the organizational research community sometimes responds by saying that inferences about the causes of performance cannot be made from the data available, and simultaneously goes ahead to make such inference.””

5- “We can’t turn back the clock, change one variable, and then run the experiment again…It’s easy to blame one man for a company woe’s, but these sorts of attributions, while appealing for their simplicity, may not provide the best basis on which to manage a company.”

6- “…An organization isn’t a system of mechanical parts, interchangeable and replaceable. It’s better understood as a sociotechnical system, a combination of mean and machines, of people and things, of hardware and software, but also of ideas and attitudes. Some technical elements can often be copied and applied with predictable results…but when we begin to examine how those technical systems interact with social systems, with people and values and attitudes and expectations, the results are harder to predict.”

7- “Managers quite naturally find it easier to keep the attention on execution, which everyone will always agree can be done better.”

8- “What leads to high performance?…we’re left with two broad categories: strategic choice and execution…In spite of our desire for simple steps, the reality of management is much more uncertain that we would often like to admit – and much more so that our comforting stories would have us believe.”

9- “As Tom Peters observed: “To be excellent, you have to be consistent. When you’re consistent, you’re vulnerable to attach. Yes, it’s a paradox. Now deal with it.””

Regards,

Omar Halabieh

The Halo Effect

On CIO Wisdom

I just finished reading CIO Wisdom – Best Practices from Silicon Valley’s Leading IT expert by Dean Lane.

This book is a collection of articles on topics of concern and relevance for not only CIOs by IT leaders at large. These articles are written by various authors, which ensures varied perspectives – based on their experiences. Topics range to include the people, process and technology aspects of the profession. To mention a few: Communications, IT Organization, Governance, Architecture, Strategic Outsourcing,  IT Infrastructure Management and Execution etc.

What sets this book apart is the breadth of topics covered in terms of applicability and importance to overall success of the IT organizations. While at a first glance the articles may seem disparate, there are a number of key themes/messages that emerge. Each topic is discussed enough to give the reader a basic and clear understanding, but given the book’s breadth, once cannot expect each topic to be covered in full depth. The later would require many volumes.

CIO Wisdom is a recommended read for any IT leader seeking to gain a broader understanding of the IT organization it’s challenges and opportunities.

Below are excerpts from the book that I found particularly insightful:

1- “In each business and historical phase, the position of CIO can be seen as a mirror of the broader environment.”

2- “For many years, successful CIOs have been business strategists, capable of translating the value of technology in terms that can be understood by the business leaders of the institutions. Now that skill set is being externalized…The new CIO must be an entrepreneur, a matrix manager of teams that do not report to IT and may not even belong to the company, an architect and e-business visionary, an evangelist, a relentless recruiter, a mentor, and an expert in psychology as well as the implementation of (constant) change management.”

3- “The CIO is a mirror of the institutions…The CIO is a mirror of a global economy…The CIO is at the center of our cultural crossroads…The CIO is a change agent for business processes and cultural norms…The CIO is a mentor and a leader…The CIO is the gatekeeper of the company’s intellectual assets and operational resources.”

4- “The first 90 days is the most important period in your CIO career at a new company…Focus on three major projects: a tactical plan to address time-critical issues and decisions, an IT organizational analysis with recommendations, and an IT strategic plan for the next two years…Establish a strong rapport with management during this time-frame, as you will need management support to implement your recommendations.”

5- “I believe, however, that there are five especially important fundamentals that a CIO needs to be cognizant of, regardless of the current focus. If internalized by IT staff, these fundamentals can dramatically transform a technology-centric IT organization into a business-focused one, almost without effort: passion, humility, openness, clarity, agility.”

6- “Technology by itself can never make a business more agile, but the right IT people applying the right technology at the right time can.”

7- “How to make yourself a better communicator: assess yourself, know your audience, set and manage expectations, insist on accountability, be aware of the political environment.”

8- “You can have an immediate impact in the area of training by utilizing internal resources to increase an employee’s knowledge about the processes or issues facing a company. By reserving the first half-hour of staff meetings for training…you can enable the most knowledgeable person associated with a ggiven process to provide 30 minutes of useful instruction.”

9- “More than one book has made reference to the following four elements, which must be present for communication to be possible: Message – An idea, concept, or som other form of notification. Transmitter – Someone or something that originates and sends the message. Receiver – Someone or something that gets the message. Medium – The means or vehicle by which the message is sent.”

10- “…Although published plans and strategic roadmaps are useful, planning skills and the capability for strategic thinking have the most significant value to the CIO, both personally and within the IT organization.”

11- “It is important for a CIO to have a philosophy around budgeting…Some philosophies that you may see include: Budgeting is a necessary evil…The budget is the Bible…The budget is a guide…The budget is an opportunity to influence change and support overall corporate direction…this is the most effective in our opinion.”

12- “IT marketing is the art of appropriately setting expectations between customer and service provider such that both entities enjoy a mutually beneficial economic relationship.”

13- “Jim Hackett: “The popular notions of the last decade were for companies to become customer-centered. Theories abounded that if you paid attention to what your customer wanted, you couldn’t go wrong. But the truth is that customers often ask you to do wrong things, not because they’re difficult to deal with but because they just don’t know better. The distinction is moving from customer-focused to user-centered, and the ability to understand the users of their products is a cultural shift that corporations have to make.””

14- “Once IT’s marketing advocate is identified, the lifecycle…borrowed from sound CRM best practices should be applied. In short, the plan is to engage, transact, fulfill, service, and report.”

15- “Good metrics should be used to guide the development of strategic objectives, narrow investment opportunities to minimize wasted capital, and continually evaluate status to ensure that progress is being made.”

16- “Although it may sound trite, in all of our years combined, we have learned to never fear a negative result of discovery. Such a discovery represents the opportunity you were seeking in instituting this discipline by which you will make change for the better.”

17- “Facts are the fundamental entities that an organization deals with…Data is integrated, ordered facts…Information is ordered data…Knowledge is ordered information within the context of experience in similar situations…Understanding is organized knowledge…Enabled intuition.”

18- “Project success is a function of RS^2 and VEC^3,  RS^2 is {Resource, Scope, Schedule}. VEC^3 is {VxExC1xC2xC3}, where V=Vested interest (that is, aligning the vested interests of key stakeholders), E=Ego (that is, understanding the values and culture of stakeholders), C1=Communication and alignment with executive management, C2=Communication and alignment with your peers, C3=Communication and alignment with all doers (implementers).”

Regards,

Omar Halabieh

CIO Wisdom

On The Knowing-Doing Gap

I recently finished reading the book The Knowing-Doing Gap – How Smart Companies Turn Knowledge into Action by Jeffrey Pfeffer and Robert I. Sutton.

The main premise of this book as the authors best summarize it is: “Why knowledge of what needs to be done frequently fails to result in action or behavior consistent with that knowledge. We came to call this the knowing-doing problem – the challenge of turning knowledge about how to enhance organizational performance into actions consistent with that knowledge. This book presents what we learned about the factors that contribute to the knowledge doing gap and why and how some organizations are more successful than others in implementing their knowledge.”

The book then analyzes the reasons and causes of this gap through numerous examples and presents eight main recommendations: “Eight Guidelines for Action: 1) Why before How: Philosophy Is Important 2) Knowing Comes from Doing and Teaching Others How. 3) Action Counts More Than Elegant Plans and Concepts. 4) There Is No Doing without Mistakes. What Is the Company’s Response? 5) Fear Fosters Knowing-Doing Gaps, So Drive Out Fear. 6) Beware of False Analogies: Fight the Competition, Not Each Other. 7) Measure What Matters and What Can Help Turn Knowledge into Action. 8) What Leaders Do, How They Spend Their Time and How They Allocate Resources, Matters.”

A very applicable, educational and action oriented book. One that echoes the fundamentals of execution and its importance as the ultimate benchmark of success. A must read in the area of management!

Below are key excerpts from the book:

1- “…although knowledge creation, benchmarking, and knowledge management may be important, transforming knowledge into organization action is at least as important to organizational success.”

2- “Attempting to copy just what is done – the explicit practices and policies – without holding the underlying philosophies at once a more difficult task and an approach that is less likely to be successful.”

3- “Talk is also valued because, as noted earlier, the quantity and “quality” of talk can be assessed immediately, but the quality of leadership or management capability, the ability to get things done, can be assessed only with  greater time lag.”

4- “It is possible, albeit difficult, to build strong cultures founded on principles and philosophy that can also innovate and change. But doing so requires much thought and attention. Otherwise, firms are readily trapped by their history, even if, or particularly if, that history has many positive elements in it, as Saturn’s does.”

5- “Conversely, fear is an enemy of the abilitiy to question the past or break free from precedent.”

6- “It is clear to us that merely knowing what measurement practices should be used does not, by itself, cause leaders to implement measures that produce intelligent, mindful, learning behavior rather than the reverse.”

7- “In each of the instances in which effective measurement practices were used, knowing what to do, why it needed to be done, and having the persistence and courage to do it helped leaders turn knowledge about how to enhance performance into organizational action.”

8- “As Dean Tjosvold, a researcher and writer on the subject of competition and cooperation, noted, “Competition stimulates, excites, and is useful in some circumstance, but those situations do not occur frequently in organizations, and the widespread use of competition cannot be justified.””

9- “Harlow Cohen, the president of a Cleveland, Ohio, consulting firm, has called this gap between knowing and doing the performance paradox: “Managers know what to do to improve performance, but actually ignore or act in contradiction to either their strongest instincts or to the data available to them.””

10- “Knowing about the knowing-doing gap is different from doing something about it. Understanding causes is helpful because such understanding can guide action. But by itself, this knowing is insufficient – action must occur.”

Regards,

Omar Halabieh

The Knowing-Doing Gap

On The Magic of Thinking Big

I just finished reading The Magic of Thinking Big by David. J. Schwartz. Every now and then, one read a book that truly inspires. This is exactly what David has achieved with the Magic of Thinking Big. Not only does he inspire “big” thinking, but he also takes it one step further to inspire action to make it happen. The book is filled with ideas and techniques that can be applied in our everyday life whether at home or at work. These are illustrated by real-life examples that the author draws upon – in which these techniques have proven further success, happiness, and satisfaction to those who have implemented them. Many of the ideas presented, constitute the basis for true leadership.

A very enjoyable and educative read. It is structured in such a way as to allow the readers to read and implement specific ideas/techniques presented in one chapter without necessarily reading the entire book. This is in my opinion, the most effective way to take advantage of the wisdom presented. A highly recommended read!

Below are excerpts from the book that I found particularly insightful:

1- “The thinking that guides your intelligence is much more important than how much intelligence you may have.”

2- “Knowledge is power – when you use it constructively.”

3- “Action cures fear.”

4- “Look at things not as they are, but as they can be. Visualization adds value to everything. A big thinker always visualizes what can be done in the future. He isn’t stuck with the present.”

5- “Practice adding value to things… Practice adding value to people…Practice adding value to yourself.”

6- “…The successful person doesn’t ask, “Can I do it better?” He knows he can. So he phrases the question: How can I do it better?”

7- “Big success calls for persons who continually set higher standards for themselves and others, persons who are searching for ways to increase efficiency, to get more output at lower cost, do more with less effort. Top success is reserved for the I-can-do-it-better kind of person.”

8- “In summation, use these tools and think creatively…Believe it can be done…Don’t let tradition paralyze your mind. Be receptive to new ideas. Be experimental. Try new approaches. Be progressive in everything you do…Ask yourself daily, “How can I do better?”…Ask yourself, “How can I do more?” Capacity is a state of mind. Asking yourself this question puts your mind to work to find intelligent short-cuts. The success combination is business is: Do what you do better…and do more of what you do…Practice asking and listening…Stretch your mind. Get stimulated. Associate with people who can help you to think of new ideas, new ways of doing things.”

9- “How you think determines how you act. How you act in turn determines: How others react to you.”

10- “The way we think toward our jobs determines how our subordinates think toward their jobs.”

11- “The person who does the most talking and the person who is the most successful are rarely the same person. Almost without exception, the more successful the person, the more he practices conversation generosity, that is, he encourages the other person to talk about himself, his views, his accomplishments, his family, his job, his problems.”

12- “The test of a successful person is not an ability to eliminate all problems before they arise, but to meet and work out difficulties when they do arise. We must be willing to make an intelligent compromise with perfection lest we wait forever before taking action. It’s still good advice to cross bridges as we come to them.”

13- “Persisting in one way is not a guarantee of victory. But persistence blended with experimentation does guarantee success.”

14- “A second way to profit from the “Be-Human” rule is to let your action show you put people first. Show interest in you subordinates’ off-the-job accomplishments. Treat everyone with dignity. Remind yourself that the primary purpose in life is to enjoy it. As a general rule, the more interest you show in a person, the more he will produce for you. And his production is what carries you forward to greater and greater success.”

Regards,

Omar Halabieh

The Magic of Thinking Big

On The Strategy Paradox

I just finished reading The Strategy Paradox – Why Committing to Success Leads to Failure [And What to Do About It] by Michael E. Raynor. As the title indicates this is a book on corporate strategy that revolves around the concept of the strategy paradox. The author best defines it as “The strategy paradox is that the prerequisites of success are often the antecedents of failure. Faced with this painful trade-off between the returns to bold commitment and the risk of making the wrong commitment, most organizations forgo the possibility of gory for an existence bereft of greatness.” The book then goes on to describe the issues and limitations with current strategic thinking approaches and then presents the strategic flexibility approach/framework and its application. All these concepts are presented through case studies of various companies.

What sets this book apart is the critical analysis and dissection of the case studies (companies) selected. The companies are evaluated based on the givens and perspectives at the time, rather than through hindsight. In addition, Michael pragmatically realizes that companies themselves do not conquer the strategy paradox in its entirety – rather they succeed or fail to do so in particular products/services and associated time. Last but not least the book presents the importance of leveraging the hierarchical structure to address strategic uncertainty differently at each level.

An original and novel read in the field of corporate strategy, a must read!

Below are excerpt of the chapter summaries:

1- “The strategy paradox arises from the need to commit in the face of unavoidable uncertainty. The solution to the paradox is to separate the management of commitments from the management of uncertainty. Since uncertainty increases with the time horizon under consideration, the basis for the allocation of decision making is the time horizon for which different levels of the hierarchy are responsible: the corporate office, responsible for the longest time horizon, must focus on managing uncertainty, while operating managers must focus on delivering commitments. This is the principle of Requisite Uncertainty. A critically important tool in applying Requisite Uncertainty is Strategic Flexibility, a framework for identifying uncertainties and developing the options needed to mitigate risk and exploit opportunity.”

2- “Extreme positions in strategic space create the highest levels of profitability but also create the highest levels of strategic risk and hence failure. That is the strategy paradox. The trade-off between risk and return appears inescapable, and most firms deal with that trade-off by accepting lower returns for a better chance of survival.”

3- “Adaptation has its benefits and its place. We overestimate its applicability at our peril. Thanks to the pervasiveness of both slow and fast change, even the most highly adaptable organizations will require something more, and very different, if they are to cope with the demands of an unpredictable environment.”

4- “Since business success is relative, greater levels of commitment to the ultimately correct strategy will always prevail over approaches based on adaptation. However, meaningfully accurate forecasting is impossible because track records are meaningless, the accuracy of predictions is impossible to assess, and events are subject to inevitable randomness. Therefore, great success is only ever posssible if one accepts the risk of failure. The strategy paradox therefore afflicts all firms equally. But there is a way out.”

5- “Hierarchies should be structured around time, with higher levels focused on longer time horizons. Strategic uncertainty increases with time. Therefore, the higher the hierarchical level, the greater should be the emphasis on the management of uncertainty. Consequently, the board’s role is to determine the corporation’s overall exposure to strategic uncertainty. Senior management must then develop mechanisms for hedging the relevant strategic risks and ensuring that the relevant strategic opportunities remain viable. Operating division management must commit to a specific strategy but work to avoid catastrophic outcomes should key assumptions prove invalid. Functional management is charged with delivering short-term results.”

6- “For a company to take strategic uncertainty seriously, it must avoid making commitments in the face of uncertainty and instead create strategic options that can be exercised or abandoned depending on how those uncertainties are faced.  Only in this way can a firm hope to deal effectively with an environment that changes unpredictably. Implementing such an approach requires knowing which options to take, how much to invest in them, how to manage the options over time, and when and how to exercise or abandon them. Doing this successfully requires a corporate office that is able to direct and guide the actions of the operating divisions.”

7- “Johnson & Johnson’s corporate venture capital arm, JJDC, has transformed itself into a mechanism for managing strategic uncertainty. By creating and managing a portfolio of real options on alternative strategies, JJDC creates Strategic Flexibility for J&J’s OpCos. This allows focused divisions with high-risk, high-return strategies to change their strategic stance in ways they otherwise could not. The result is better overall corporate performance and lower overall corporate risk.”

8- “…The level of disagreement among TMT  (Top Management team) members about key environmental variables and strategic goals is positively related to firm performance…But the lower down one goes in the hierarchy, or the more one addresses operational issues, the more consensus and agreement is associated with superior results.”

9- “Scenarios capture the range of plausible future conditions within which an organization might have to operate. At the corporate level, the challenge is to build an optimal strategy for each of these possible outcomes and to analyze these strategies to determine the core and contingent elements. This creates the strategic foundation and strategic options necessary for operating divisions to have true Strategic Flexibility. Operating divisions should necessarily focus on choosing and implementing a particular strategy, one they created out of the core and contingent elements put in place by the corporate office. However, due to uncertainties that imagine over an intermediate time horizon, business unit management must seek to hedge downside risk, accepting that their ability to substantially change strategy is severely limited. Finally, functional managers have no strategic latitude but can seek to learn how to deliver on the commitments already in place as efficiently and effectively as possible.”

10- “The four phases of managing a portfolio of real options are create, preserve, exercise, and abandon. Valuing real options in the context of Strategic Flexibility is analogous to valuing financial options, but the same analytical tools cannot be used without significant accommodation of the idiosyncrasies of real options.  Ultimately, real options are valuable in the management of strategic uncertainty. Consequently, determining what real options are worth is a profoundly intuitive assessment based on the risk/return profile that the board and top management feel is appropriate for the company.”

Regards,

Omar Halabieh

The Strategy Paradox

On Getting Things Done

I just finished reading the book Getting Things Done by David Allen. As the title indicates this is a book about re-gaining control of one’s life through high-performance workflow management. There are two key objectives upon which this is based: “(1) capture all the things that need to get done – now, later, someday, big, little, or in between – into a logical and trusted system outside of your head and off your mind; and (2) disciplining yourself to make front-end decisions about all of the “inputs” you let into your life that you will always have a plan for “next actions” that you can implement or renegotiate at any moment.”

The author then goes one to describe the five stages of mastering workflow:

(1) “collect things that command our attention”

(2) “processs what they mean and what to do about them”

(3)”organize the results, which we”

(4)”review as options for what we choose to”

(5)”do”

The above seems rather straightforward and we all perform the above steps in some way shape or form. The key here is to perform all these steps consistently and with the same standard. After all the workflow is only as efficient as the weakest of the steps. David then goes on to describe each stage in detail to help the reader better understand it, and help her to implement techniques and tools to make her more efficient within it. Besides discussing individual tasks, the author spends significant time discussing projects – which require multiple tasks to be completed in order to bring them to close. He goes on to describe how these can be managed using the same framework. This enables handling tasks, regardless of size, scope and/or complexity in a standard manner. One thing that sets this book apart is it’s focus just as equally on the “not to do” than on the “to do” – which are fundamentally two sides of the same coin.

Below are some excerpts that I personally found to be very enlightening:

a) “You need no new skills to increase your productivity – just a new set of behaviors about when and where to apply them.”

b) “the sense of anxiety and guilt doesn’t come from having too much to do; it’s the automatic result of breaking agreements with yourself.”

c) “Organizations must create a culture in which it is acceptable that everyone has more to do than he or she can do, and in which it is sage to renegotiate agreements about what everyone is not doing.”

d) “Real “togetherness” of a group is reflected by the responsibility that all take for defining the real things to do and the specific people assigned to do them, so everyone is freed of the angst of still-undecided actions.”

e) “Getting things going of your own accord, before you’re forced to by external pressure and internal stress, builds a firm foundation of self-worth that will spread into every aspect of your life. You are the captain of your own ship; the more you act from that perspective, the better thing will go for you.”

A very highly recommended read in the area of personal productivity. The advice given in the book is very practical and pragmatic. I have personally adopted the workflow described and have already noticed significant improvement in my personal productivity.

Regards,

Omar Halabieh

Getting Things Done

On The Effective Executive

I just finished reading The Effective Executive by Peter F. Drucker. As the title indicates this book is about effectiveness, which is defined by the author as getting the right things done. The dogma presented in this book is that it is the executive’s job to be effective and that effectiveness can be developed. As Drucker best says: “There is, in other words, no reason why anyone with normal endowment should not acquire competence in any practice. Mastery might well elude him; for this one might need special talents. But what is needed in effectiveness is competence.” The author then goes on to present the five habits/practices that have to be acquired to be an effective executive:

1) Time management: “Effective executives know where their time goes. They work systematically at managing the little of their time that can be brought into their control.”

2) Results-Focused: “Effective executive focus on outward contribution. They gear their efforts to results rather than to work. They start out with the question, “What results are expected of me” rather than with the work to be done, let alone with its techniques and tools.

3) Focus on Strengths: “Effective executives build on strengths – their own strengths, the strengths of their superiors, colleagues, and subordinates; and on the strengths in the situation, that is, on what they can do. they do not build on weakness. They do not start out with the things they cannot do.”

4) Priorities: “Effective executives concentrate on the few major areas where superior performance will produce outstanding results They force themselves to set priorities and stay with their priority decisions. They know that they have no choice but to do first things first – and second things not at all The alternative is to get nothing done.”

5) Decision Making: “Effective executives, finally, make effective decisions. They know that this is, above all, a matter of system – of the right steps in the right sequence. They know that an effective decision is always a judgment based on “dissenting opinions” rather than on “consensus on the facts.” And they know that to make many decisions fast means to make the wrong decisions. What is needed are few, but fundamental, decisions. What is needed is the right strategy rather than razzle-dazzle tactics.”

Some of my favorite excerpts from the book include:

a) “Every knowledge worker in modern organization is an “executive” if, by virtue of his position or knowledge, he is responsible for a contribution that materially affects the capacity of the organization to perform and obtain results.”

b) “The man who focuses on efforts and who stresses his downward authority is a subordinate no matter how exalted his title and rank. But the man who focuses on contribution and who takes responsibility for results, no matter how junior, is in the most literal sense of the phrase, “top management.” He holds himself accountable for the performance of the whole.”

c) “The focus on contribution by itself supplies the four basic requirements of effective human relations: communication, teamwork, self-development; and, development of others.”

d) “A superior has responsibility for the work of others. He also has power over the careers of others. making strengths productive is therefore much more than an essential of effectiveness. It is a moral imperative, a responsibility of authority and position.”

e) “The effective executive, therefore, asks: “What can my boss do really well?” “What has he done really well?” “What does he need to know to use his strength?” “What does he need to get from me to perform?” He does not worry too much over what the boss cannot do.”

f) “In human affairs, the distance between the leaders and the average is a constant. If leadership performance is high, the average will go up. The effective executive know that it easier to raise the performance of one leader htan it is to raise the performance of the whole mass.”

g) “Act if on balance the benefits greatly outweigh cost and risk; and Act or do not act; but do not “hedge” or compromise.”

h) “Self-development of the executive toward effectiveness is the only available answer. It is the only way in which organization goals and individual needs can come together.”

This book is undoubtedly in a class of its own as far as management books are concerned. As you read it, you will inadvertently recognize the many other books you have read in the management area that have been heavily influenced by the concepts presented within it. A definite must read classic in this field, a book that not only inspires but prompts effective execution and success in one’s career and personal life.

Regards,

Omar Halabieh

The Effective Executive