Listening: A Strategy and Change Blog | Hosfeld & Associates

By Kathleen Hosfeld

At the heart of organizational meaning-making we find corporate vision and mission as definitions of the good or the change that we seek to create in the world. While this is absolutely essential to thriving organizations and engaging the passions of  stakeholders, this is not strategy.

Vision and mission are the “what.” Strategy is the “how.” Strategy is the distillation of opportunities and maneuvers that will make it possible to realize your vision and mission. In a recent article in Strategy + Business, Ken Favaro writes that many organizations mistake what he calls “The Corporate Five” for the “Strategic Five.” The Corporate Five are mission, vision, purpose, plan and goals. You can have all of those things and still be missing a strategy.

In order to develop strategy, a firm has to be able to answer what Favaro calls “The Strategic Five” :

1. What business or businesses should you be in?
2. How do you add value to your businesses?
3. Who are the target customers for your businesses?
4. What are your value propositions to those target customers?
5. What capabilities are essential to adding value to your businesses and differentiating their value
propositions?

Although most companies can articulate a vision (for instance, “to be the leading biotech company”), a mission (“to find and commercialize innovative drug therapies”), a purpose (“to improve patients’ lives”), a plan (“to develop molecule X, enter market Y, and partner with company Z”), or a goal (“to bring three innovative molecules to market by 2025”), few convincingly answer all five strategic questions, especially with one voice across their top teams and down their organizations.

They can’t answer those questions because often they haven’t asked them in a very long time, if at all.

Favaro says that companies that focus on the “Corporate Five” are mistaking execution for strategy. I’d counter that since there’s no strategy to start with there’s nothing to actually execute. The so-called “plan” is a checklist of technical to-dos, when in reality an adaptive challenge is at hand that requires new thinking. Strategy work is intrinsically adaptive change work.

Development of mission and vision and purpose are engaging exercises that tap the imagination of all stakeholders. If they are developed outside of a framework that addresses “The Strategic Five,” they are likely to lack substance and fail to achieve traction within the organization. An effective business transformation process will embed the Strategic Five into the entire process.

To read Favaro’s whole article go here.

Interested in finding your own answers to “The Strategic Five?” Read our article “Finding Time To Be Strategic.”

By Kathleen Hosfeld

The value of any competitive strategy is the extent to which it creates or deepens relationships with customers.  The faster you implement that strategy, the faster you see return on investment.  The way a team formulates the strategy can make all the difference between its seamless or tortured translation into new or more profitable relationships.  Integrating key market-focused questions into the strategy process will speed your strategy to market.

Take for example, Honda Corporation.  The firm has remained among the top five car manufacturers for many years with its solid strategy and execution. Honda’s core strategy has focused on high quality engine design.  This allowed the firm to grow from selling lawn mowers to motorcycles and then cars. Today, their website and sales collateral continue to emphasize various aspects of their engine expertise – from the combustion engines that drive their sponsored racecars to their market-leading hybrid engines. The promise of superior engine performance — a key aspect of customer satisfaction — is at the heart of all their messaging. This straight line between key elements of their corporate strategy and their markets means faster execution.

How can your firm learn from Honda’s example and accelerate the translation of your organization’s strategy into market impact? Examine your strategy process and ask the following questions:

In what way does planning identify and maximize your firm’s unique know how or what you do best?

Honda’s strategic intent leverages the firm’s knowledge of engine design and manufacturing. Honda built that knowledge systematically as its primary source of competitive advantage. What is the core knowledge in your firm that you could similarly develop?  Does your strategic plan call this out and identify how it will be nurtured and grown over time?

How does your planning seek to leverage the connection between your strengths and customers perceived value?

Many companies seek to create value for their customers. Yet, sometimes there’s a mismatch between what customers value and what the companies think they do or should value. It boils down to evidence. In the course of your strategic planning, this year or in recent years, have you conducted the research to know what customers’ really value about your product or service?

In what way does planning actively identify new potential markets or opportunities through existing strengths?

In the case of Honda’s commitment to engines, they’ve been able to evolve from lawnmowers, to motorcycles, to cars, and now to diversified types of cars including hybrid vehicles. What’s the equivalent strength in your company that creates a platform for new market development, innovation or product evolution?

How does it explore alternatives for positioning your firm or products in ways competitors can’t match?

High performing companies’ plans always address the strengths and weaknesses of competitors. Look deeper than what their advertisements say. Look to their ability to deliver consistently. Focus in areas where you have considerable head start on competitors or untapped opportunities.

In answering all of these questions, keep in mind the power of stakeholder listening and dialogue to tap new perspectives to create new insights and breakthrough thinking.  Employees, customers, value chain partners, community groups may all have unique perspectives that will give your firm an edge.

Streamlining the path to execution is the way to realize more value from your strategic planning process. Using a strategy process that answers these questions enables the firm to accelerate the translation of strategic plans into value propositions, messaging strategies, brand promises and other foundational elements of good marketing.

By Kathleen Hosfeld

Over a Christmas holiday in 2004, I was working on an article that describes the strategy framework we use at Hosfeld & Associates.  As I often did, I shared my draft with my dad, Bob Hosfeld, a retired Alcoa executive, whose perspective always expanded my awareness on any topic we discussed.

There were two key questions in the model at the time:

• What is the change we want to create in the world with our work?  This question spoke to the larger purpose and intention of the company.
• What are the means we will use to create this change? This question speaks to the particular strategy the company will employ to create this change. What is the work it is uniquely positioned to do?

So far so good, I thought.  Dad, however, replied to the effect: “This is all well and good, but it won’t matter at all to the rank and file.”

“What do you mean Dad?”

My father had worked his way up through the executive ranks at Alcoa by first working at smelting facilities in Washington state. Aluminum smelters take the ingredients of aluminum, melt them down and form the basic products that are sent off for further shaping or fabrication.  What came to his mind were the men and women who worked the “potlines,” doing hard physical labor, with the potential for injury, day-in, day-out.

“Your questions are for the white collar people at the top.  What the person on the potline cares about is relationships.  Can I go to the break room at lunchtime and sit with people I like and trust? If I’m injured, will the company care for me and help me get back to work?”

“So for them it’s about how we treat each other in the workplace?”

Dad agreed. This gave birth to the third question in the model :

• How do we want to be together as we do this work?

I published the article we worked on in 2005 just before Dad passed away. Much has changed since then in terms of the expectations that people have toward their work. Increasingly more employees expect their employer to have a purpose that transcends profit alone. They do care about the first two questions more than they once did.

Yet, lately I’ve been realizing the genius of Dad’s contribution to the model.  Too often an inspirational purpose is designed only for the benefit of customers “out there.”  While that’s important, it forgets that one of the largest impacts a company can have is on its employees. Translating our noble purpose into values that we intend to live out every day within the company does two things.  First, it gives us a way to “be” the change we seek to create in the world.  Second, it creates the authenticity that comes from “walking the talk.”   When employees see it, they believe it.  When it matters to them personally, they see how it can matter to the customers they serve.  They are then more compelled to live it themselves.

Brand, strategy or purpose. They all suggest values to which we aspire and seek to live out.  Claiming and institutionalizing these values is the way to make the change we seek here and now.

By Kathleen Hosfeld

You may call it the triple bottom line, sustainable, green, conscious, responsible or worthy business. Underlying the labels is a common commitment to maximizing value for multiple stakeholders including the community and the environment.  Research continues to show the approach pays off. Financially.

Many people find their motivation for “good” business in an instinctive or intuitive desire to “make a difference,” even if it risks lowering profitability. In the early days of so-called green business, most mainstream business owners and executives saw efforts to manage environmental and social concerns as expensive indulgences that would ultimately cost money and possibly competitiveness.  That perception has shifted as organizations realize meaningful cost savings and risk mitigation from entry level commitments to waste and energy reductions.

But the strategic upside potential of a values-based, stakeholder approach is growing increasingly clear thanks to books like Good Company: Business Success in the Worthiness Era by Laurie Bassi, Ed Frauenheim, and Dan McMurrrer  with Larry Costello.  The book travels many of the same paths of the book Firms of Endearment, by Rajendra S. Sisodia, and colleagues in 2007.  Firms of Endearment made the point that a positive relational approach to multiple stakeholders resulted in superior financial performance. The companies they profiled achieved a higher return on equity (10 year rate of 1025% compared with S&P 500 of 122.3% and Good to Great Companies 331%) in spite of spending considerably more on employees and other stakeholders than most companies.

Bassi et al have done two things to advance the conversation. First, they have compiled a boat load of more recent “hard-nosed” evidence that companies who do well do better and those who do not do poorly by comparison.   A sampling of their citations:

• In a recent study by consulting firm A.T. Kearney, firms that embraced sustainability outperformed industry averages by 15% from May through November of 2008.
• According to a study by Packaged Facts, in spite of the recession, sales of “ethical” consumer products have grown at a rate of high single and low double-digits to a projected $38 billion in 2009.
• Firms on Fortune’s 100 Best Companies to Work For outperform the stock market as a whole.

Bassi’s group has taken this analysis one giant step further. They created a quantitative index of what constitutes a “worthy” company, profiled all the Fortune 100 companies and compared them on three levels: as employers, as sellers and as stewards of society and the environment. They found that companies with a higher Good Company score outperformed their peers with a lower Good Company score by an average of 19.8 percentage points.

On the strength of their findings, the Bassi and her colleagues created Bassi Investments, a money management firm that invests according to the Good Company criteria. The funds were established in 2001 and results continue to support the finding that investing in employees is a best practice of wealth creation.

It may seem counter intuitive that in order to be more profitable a company has to invest more money in an area.  These business results point to the new insights that are emerging as the way we do business continues to change.

More about the Book:

Good Company

By Kathleen Hosfeld

Two of my “summer reads” are books that make the case that strong relationships with key stakeholders are driving financial performance and are central to how business is being reinvented. The first is Patricia Aburdene’s  book: “Megatrends 2010: The Rise of Conscious Capitalism.” The second is “Good Company, Business Success in the Worthiness Era,” By Laurie Bassi, Ed Frauenheim, and Dan McMurrrer with Larry Costello.

Aburdene’s book follows the framework of her hugely successful megatrends books written with John Naisbett, and cites seven interrelated trends that encompass corporate social responsibility, spirituality in business and so-called “conscious capitalism.” The term conscious capitalism, which Aburdene used in speaking engagements for several years prior to the publication of the book, has been picked up by both academics and business people alike.  A conscious business embraces three things:

• a strong sense of mission and purpose,
• a stakeholder perspective – which cultivates strong relationships with key stakeholders rather than prioritizing stockholders or profit as the sole directive, and
• conscious leadership.

“Conscious leadership” in this setting means leading holistically through the lens of relationship-oriented values.  Recently, practitioners have also begun to articulate the cultural dynamics of conscious business as having these key values: Trust, Authenticity, Caring, Transparency, Integrity and Learning.

(Note: This definition of conscious capitalism is complimentary to but not the same as the conscious business model developed by Fred Koffman. That model emphasizes self-knowledge and self-awareness as the basis of conscious behaviors and choices.)

Both Aburdene’s and Bassi’s books look at the question of “why” businesses are changing their practices. Aburdene, while citing multiple drivers of economic necessity and changing values, shines a spotlight on the spiritual values and practices from which the conscious capitalism arises. Bassi and colleagues, who also cite a spectrum of drivers, highlight the changing values and expectations of stakeholders and their influence on company behaviors.  They have created their own term – “worthiness”— which connotes the qualities that make a company worthy in the eyes of customers, employees and other stakeholders.

Good Company emphasizes the role of the employee in all three important “worthiness” areas:  being an employer, seller and steward.  I like the summary of one Amazon reviewer who said “Good Company shows how a strong leadership culture that’s serving all of its stakeholders and society pays off for everyone buying from, working for, investing in, and doing business with the company.”  A worthy company does not choose one stakeholder over another. Everybody – including the community and environment – wins.

Both books include stories of real businesses and executives doing well as a result of a broader stakeholder perspective. One of the things I appreciate about Good Company is that the authors also point out when companies who are doing well in some areas stub their toes in others.  This reads to me as imminently practical and realistic. The new paradigm is still emerging and all of us still in that transition will arrive at various degrees of consciousness – worthiness, goodness, sustainability, etc. — at different times.

(In another article, I will explore the  updated business case for a stakeholder view .)

More about the books:

Megatrends 2010

Good Company

By Kathleen M. Hosfeld

“We don’t have time to be strategic, Kathleen!”

That’s the tongue-in-cheek greeting I get whenever I touch base with one of our clients.  It’s a sentiment that many executives probably share.  Yet it always reminds me of Hall of Famer John Wooden’s quote: “If you don’t have time to do it right, when will you have time to do it over?”  If you have the chance to do it over.

According to a research by Chris Bradley and colleagues, reported by McKinsey, most companies fail to meet even three of ten standards for good strategy.  These standards include the following:

• Will your strategy beat the market?
• Does it tap a source of advantage?
• Does it put you ahead of trends?
• Is there conviction to act on the strategy?
• Is it translated into an action plan?

Their research suggests a strong case for companies’ need to spend more time on strategy formulation.   The challenge is “right-sizing” the strategy process for the time you have without sacrificing the quality of the thinking.

If time is short, then strategy processes have to be strategic themselves and focus on what is essential. Three of the insights from the Bradley article, “Managing the Strategy Journey” point to these essentials. First, strategy requires the engagement of a cross-functional team of executives across silos. Second, there’s typically an intensive effort at the beginning to clarify strategy followed by a disciplined ongoing process of refinement and implementation.  Third, the intensive process at the beginning needs to result in all members of the strategy counsel creating a shared understanding of 1) where they are, 2) what will happen if nothing changes, and the 3) compelling future state to which they aspire.

There are several ways to engage the intensive effort at the front end. Bradley describes a process of spending 2-4 hours each week or every other week engaged in a structured strategy conversation.  He and co-authors recommend spending as much time on strategy as is spent on operational issues.  The strategy process is then integrated into the annual process of forecasting tied to the budgeting.

A different approach to the intensive front-end piece is to structure a series of executive intensives, possibly 2 to 3 two-day meetings, with homework between sessions.  These then can also be integrated into forecasting and budgeting.

While the Bradley article describes a process appropriate for large corporate clients, the basic insights of the article captured above, and the two approaches to structuring the process can be tailored to work-teams and middle-market size organizations. Experiment with what works for your organization.

For additional inspiration, you can read the entire Strategy Journey article here.

It refers to an earlier article on classic tests of a strategy which was published last year.  That article along with links to a wealth of supporting resources is here.

There are signs that the social media bubble is preparing to burst. As with the dot com bubble, this does not signal that social media is going away – far from it. Yet a tempering of expectations seems to be looming, and this allows us to re-examine one of the foundations of competitive success: knowing and serving the customer.

Evidence of a social media “market correction”: General Motors recently announced that it was withdrawing its $10 million dollar paid advertising from Facebook.  According to the New York Times, GM continues to spend $30 million maintaining its “free” Facebook page (Hey GM, I know someone who’d do it for $1 million with a $10 million expense budget. Call me.) This budget is focused on creating user testimonial stories and clever graphics they hope will “go viral” – but probably also includes a margin for “we don’t know what we are doing so we’re going to try a lot of stuff and see what sticks.”

Recently, the clutter and chaos of social media has been depicted in graphic form: Graphic for social media  Here’s the equivalent graphic for mobile computing And the differences between different social media platforms have also been depicted through humor. I like this one, but you can enter “social media explained” into the image search of Google and find many more, with applications to specific industries.

In response to this cacophony, the venerable McKinsey & Co. consulting organization has created educational materials to orient C-Suite and senior managers.  McKinsey Social Media Videos  This collection of videos provides an initial orientation, a baseline description of how consumers engage with social media and some advice about the balance of traditional advertising relative to social media.

As writer David Court points out in another article, one of the biggest challenges facing organizations in communications and marketing is that they don’t know what influences their customers. GM has discovered that paid advertising on Facebook does not; as a result GM is turning its attention to  “earned media” – the reviews, the mentions, the articles that are user- or journalist-generated and considered more authentic and reliable by consumers. I expect to see other companies follow suit.

Effective use of social media requires a strategy based on a relational knowledge of the customer.  While some of this should be derived through formal research, it’s also a function of a heart-felt connection with those the company is trying to serve.  If you’re looking for a place to start with social media, start there.

“A path without heart is never enjoyable. You have to work hard even to take it. On the other hand, a path with heart is easy; it does not make you work at liking it.”
-    Carlos Castaneda, The Teachings of Don Juan

Employee loyalty and enthusiasm are two of the greatest strategic assets of any organization. Strategy design that reflects the path of the heart can build loyalty, engagement and commitment.

The following elements can help organizations bring out the best in their people as they go about strategy design.

• Collaborative Engagement – Creating opportunities for engagement, dialogue and input from all levels of the organization is essential to creating understanding of and support for strategic plans. It is also the primary way to tap the genius within the organization to find its own solutions.  While a consensus model is an unrealistic way to make decisions in most organizations, gathering broad input efficiently makes participants feel heard and valued and strengthens the outcome. Co-constructing strategy with those who must implement it builds the most powerful commitment.

• Build On What’s Already Working – Focusing the organization on what’s working creates hope and a foundation upon which to build new strengths. What do clients or customers already really appreciate about and want from the organization? What’s the opportunity to leverage existing strengths and capacities for further growth? What are the nascent initiatives that are working that can be amplified?

• Integrate Social and Environmental Values — Strategy processes that reflect higher values create companies that attract top talent. “Recruitment and retention consultancies like Kenexa, Hewitt Associates, Robert Half, and Towers Perrin have published figures demonstrating a link between environmentally friendly workplaces and engaged employees,” writes Andree Iffrig, author of Find Your Voice at Work: The Power of Storytelling in the Workplace (Limegrass 2007). Environmental and social values pave the path with heart that employees want to walk.

What are the best practices that make strategy work in an organization?

When the strategy is clear to everyone. The strategy needs to be simple enough for anyone in the company to understand. Fostering clarity involves the following:

• Avoid top-down approaches. Many organizations suffer from planning that goes on at the most senior level of the organization and doesn’t integrate wisdom from “the front lines.” Top-down planning also suffers as a result of a lack of understanding and buy-in. The most effective approach is one that combines top-down and bottom up approaches.

• Numbers aren’t the whole story. Strategies that are about hitting particular financial targets alone aren’t really strategies. Financial targets are goals that we want the strategies to deliver.  A strategy is the mobilization of company-wide efforts needed to create the desired outcomes. Financial targets are the “what.” Strategies are the “how.”

• Create shared language. The language of the executive office is often financial, but that doesn’t “translate” very well in other parts of the organization. Using planning tools that create shared language in all departments and levels of the organization helps make the strategy clear.

When the strategy is resilient. One common critique of strategy processes is that they create plans that are quickly obsolete. Resilient strategies are based on organizational strengths and assets that have long-term strategic potential. This involves the following:

• Avoid strategies that are “borrowed” from other companies. Some companies try to copy what they see working for their competitors or peers in their industry.  While great ideas can often be picked up from others, successful strategy is based on the unique assets and strengths of each organization.

• Base strategic plans on long-term opportunities, not short-term trends. A very common practice in organizations is to mistake tactical strategies for strategic planning. A short-term market opportunity then replaces organizational mission and strategy. Without balancing short-term and long-term, the organization short-changes itself on profitability and risks creating a culture driven from one crisis to another.

When the strategy is fully implemented. Many organizations create reasonable strategies that are not fully implemented. When this happens, one of the following may be occurring:

• Invite people into agreement with the strategy. If the strategy process has not sufficiently included the perspectives of those who will execute the strategy, the outcome will likely have opponents. Strategy processes that integrate differing views ultimately create stronger outcomes.

• Translate the strategy to day to day work. For many, the intuitive process of figuring out what strategy means for their work is fun and challenging. For others, it’s impossible.  Creating measurable action steps, and in some cases, metrics and financial targets is a critical step in strategy implementation.

• Role model at the executive level and follow through. In order to give the strategy a chance, there has to be managerial commitment and follow-through. If the strategy was developed without their buy-in or if the strategy is not robust enough, managers will become fearful that it doesn’t address the reality of today’s challenges.  If no one seems to get the strategy, they may become frustrated and conclude the strategy “doesn’t work.”

“Why does your company exist?” It’s a question every values-oriented brand or strategy consultant asks of clients when they begin work together.

If the answer comes back “to make money” we know that there’s a huge opportunity for unleashing the hidden potential of the firm. That opportunity lies in engaging the company with a purpose greater than money alone.

As I’ve said before, profit is important. It’s just generating profit is first level mastery. Once you’ve figured out that part of the game, the answer is “what’s next?” Service, gratitude and creating a better world — those present meatier and fulfilling challenges. They tap the potential producitivity of your best employees. Companies with a unique purpose out-perform
those who don’t according to Harvard Business Review blogger Bill Taylor, and the authors of “It’s not what you sell, it’s what you stand for.”

The book came out a while back, but Taylor provides a good update of what companies and organizations experience — and how they benefit — when they are “Different on purpose.” Check out the article here.

Looking for a resource to help you find that unique purpose and express it in your brand? Contact us.