Listening: A Strategy and Change Blog | Hosfeld & Associates

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

Looking to reap the many benefits of a stakeholder centric approach to business but wondering where to start?

First, recognize that you’re not starting from zero. You already have relationships with stakeholders. Many companies can benefit from taking an appreciative approach to identifying what they are already doing well. From there you can measure the gap between the current state and the desired future state of each relationship.

Second, accept that movement toward a stakeholder centric model represents both cultural and operational change and will take time.  This movement will take a combination of both “soft” skills and “hard skills.”  An effective change initiative will address individuals and teams, structures, behaviors and beliefs.

Third, get rid of the notion that this is just corporate social responsibility or good PR.  It’s actually a different approach to business altogether.   It means inviting stakeholders into the value creation process of your company.

While every company’s situation will differ, there are eight basic steps to implementing a stakeholder approach to a business:

1.  Determine the strategic context:  What are you trying to accomplish? Are you formulating business strategy or functional strategy?  Are you seeking the overall competitive advantage of the firm or are you working in service of a specific business unit, service or product’s performance?
2. Prioritize stakeholder influences in this strategic context:  Evaluate stakeholders using the criteria of power, legitimacy, urgency, interdependence, cooperation, and conflict. Consider all the stakeholders in your value chain. Note that research shows that investing in employees make the most significant contribution to overall financial performance. This is likely a good place to start.
3. Assess stakeholder interests and satisfaction: Many executives think they know what stakeholders want, but it’s rare when they actually do. Assessing stakeholder interests and the current state of their satisfaction can take many forms: discussion, surveys, group processes. What’s important is to make this determination based on data.
4. Harmonize stakeholder interests: Compare the interests of all key stakeholders to identify areas of commonality and difference. Look for the third way when needs or interests seem to compete.
5. Develop stakeholder strategies: Creating stakeholder strategies is an iterative process with the preceding step. Inherent in each stakeholder strategy is the best way to form a two-way exchange  that creates value for all parties. This step should include a determination of measurable outcomes.
6. Implement stakeholder strategies: Create a detailed action plan that defines accountability for full implementation of the stakeholder strategies, and support the plan with resources.
7. Evaluate: Using the measurable outcomes defined above, evaluate stakeholder efforts’ success in creating value for all.

Additional articles about the stakeholder model are available here.

By Kathleen Hosfeld

It was in the 1960s that management guru Peter Drucker first said that “Marketing is the whole company seen from the point of view of the customer.” Half a century later, we have another chance to catch on.

In a recent article released by McKinsey Quarterly, titled “We’re All Marketers Now” authors Tom French, Laura LaBerge and Paul Magill describe the growing realization that marketing is “everyone’s job.”

Drucker may have first published on the subject, but it has been reinforced recently in research on purpose-based businesses conducted by Raj Sisodia, who noticed that some companies outperformed others financially but seemed to spend less on marketing.  In an earlier article, I took issue with that statement, clarifying that they spent less money on advertising and promotion – not marketing per se. How do they outperform other companies if they don’t spend as much on push forms of marketing? Answer: Through living out a purpose that fosters good will from customers and other stakeholders. In these companies marketing didn’t go away. It became focused on relationship and the customer experience. As a result, it became everyone’s job.

Social Media is Not Driving Transformation

In a recent discussion forum, one of my contacts asserted that “social media is driving” significant changes in marketing. I disagree, social media is the enabler, not the cause.  Customers want engagement with the people and companies with which they do business. They want to trust the people with whom they work. A desire for, no, an expectation of engagement is driving the transformation of marketing.

Engagement is a word we have previously heard mainly in HR circles, centered on employees. Increasingly, however, engagement is the word used to describe successful marketing relationships that shape customer experiences. Delivering customer experiences requires the cross-functional coordination that previously was only used to service very large corporate business to business accounts.

Today, however, those who want to deliver world-class experiences are working across organizational silos to make sure customer touch-points deliver the experience and reinforce the brand.

As described in the McKinsey article, this approach requires a new level of organizational alignment and conflict resolution, including adaptive financial systems that can respond rapidly as needs arise.

The authors say that the major barrier to creating engagement is organizational rather than conceptual. Delivering superior customer experience means building processes to create internal engagement and alignment, cross-functional collaboration, and the ability to dialogue internally as well as externally with customers and other stakeholders. These capacities enable companies to design and execute superior customer experiences and, ultimately, value to all parties.

The McKinsey article: “We’re All Marketers Now”

We’re interested in your thoughts, and the customer experiences you’d like to deliver.

Executive and leaders interested in exploring the benefits of organizational purpose and purpose-informed strategy will find our workshop an inspiring introduction and orientation.

Building on the insights of such books as Firms of Endearment and It’s Not What You Sell, It’s What You Stand For, this retreat/worship explores the business case for purpose-based leadership and strategy as well as the key aspects of integrating purpose into organizational planning, operations and culture.

For additional information and details, please visit our workshop page.

A decade after Margaret Wheatley’s landmark book, what have we learned from biology, chemistry and physics about purpose and strategy

By Kathleen Hosfeld
As we approached the year 2000, Margaret Wheatley published an updated and revised edition of “Leadership and the New Science,” in which she explored themes from contemporary science and their implications for organizational life.

She wrote in a time when economic volatility seemed to be accelerating, and organizational life felt more and more chaotic and uncontrollable. How can we achieve a new sense of order in organizational life, she asked, without actual control over the infinite variables that threaten to upset the status quo every day?

Wheatley’s book never strayed into advice about management practice; but she suggested two things were essential for organizations to adapt to changing conditions and to thrive over time: a “clear center” and freely flowing communication.  My interpretation of her “clear center” is a clear and compelling purpose that draws and holds the parts of the organization together.

A decade later, our experience of economic reality continues to be volatile. Yet, the dynamics of the ordered universe continue to suggest forms and patterns that help organizations hold together in times of difficulty and thrive in times of abundance.

Purpose Has Changed
The idea of the clear center – a purpose – has continued to evolve. In 1999, if you’d asked about a company’s purpose the response would have been “to make a profit.” While that’s still often the case, an increasing number of firms see their purpose as a statement of how they would like to make the world a better place. They see their purpose as something that gives meaning to their work, and can actually drive better financial performance.

Purpose is also the foundation of strategy. Purpose and strategy working together are less a static plan than a framework of identity that allows a company to renew itself over time. Strategy adapts to changing conditions; purpose is what gives a firm internal continuity over time.  This is like what biologists called autopoiesis – the ability of a system to renew or regenerate over time.

Business Relationships Have Changed
While this sounds like a lot of self-focused organizational naval gazing, Wheatley also points out that organisms (and organizations) “survive only as we learn how to participate in a web of relationships.”  This points to two other patterns in the ordered universe, that of differentiation and of interconnection, visible in flora, fauna, and star systems. We understand ourselves in comparison with others, those we serve, those with whom we partner and those with whom we compete. This too, is an area where perceptions have changed. It is much more common today to hear executives speak about stakeholders and community partners as integral to their enterprise and its success.

Communication Has Changed
One of the things that has changed significantly since 1999 is the proliferation of different tools for two-way communication that foster evolution, adaptation and renewal.  Social media, crowd-sourcing, and other collaborative innovation technology platforms all have the potential to feed adaptive change. These interactive communication tools create the potential for significantly more communication inside the organization, as well as between the organization and its external partners.

Change Has Changed
Wheatley’s new science view focuses on organizational change resulting from external stimulus. Yet, another impetus of change comes from within. It is not the sun, rain and soil that force an acorn to become a tree.  The acorn is a system whose purpose is to become a tree. It works together with the sun, rain and soil to become a tree. So, too, in organizations, purpose serves as the platform for strategy to respond to and work with external stimulus to unleash organizational potential.  Strategy design is like mapping the organizational genome, discovering what the organization is designed to become.

Strategy Has Changed
Strategy has moved from a fixed set of decisions about specific responses to the market, to a self-organizing capacity to respond relatively quickly to market opportunities in service of purpose.  One of the fallacies of early thinking about so-called “self-organizing” in organizations was that it just happened.  Like anything else in organizational life, we’ve learned that it takes intention and attention.  In the case of strategy design this can be a fairly robust exercise in both right brain contemplation and left-brain analysis. The point is it’s not all SWOT Analyses and Action Steps.

Businesses and other organizations who are embracing these great patterns and lessons from the created world, are finding that they just simply work better. Not only do they represent a more sustainable model of enterprise, they offer more meaning and a greater sense of legacy as well.

Companies are moving beyond CSR to reinvent business models for business and social benefit

The current edition of Harvard Business Review features an article by Michael Porter and Mark R. Kramer describing the leading companies that are seeing opportunities for creating economic value by meeting social needs. Going beyond corporate social responsibility (CSR) approaches, which Porter describes as essentially public relations programs,  these companies are fundamentally reinventing business models as drivers of both economic and social value.

A BBC interview with Michael Porter concerning this article can be downloaded here.

The Harvard Business Review article is available here.

Alignment and coherence. Two words that convey a state within organizations where the strategy is fully supported by resources, structure, beliefs and intentions. It’s implementation. It’s the details of absolute follow-through.

Is your company aligned on its strategy? Does it have strategic coherence? Possibly not. The strategy might not be clear to everyone. If it’s clear to some, it might not seem achievable to others. Even if it is achievable, it may need resource allocation that hasn’t been explored fully.

According to an upcoming book, The Essential Advantage: How to Win with a Capabilities-Driven Strategy, by Paul Leinwand and Cesare Mainardi (Harvard Business Press, 2010), alignment (coherence) is achieved by focus on three interrelated aspects of strategy: market position, core capabilities and products and services that follow from both.

Market position is identifying the place where you can offer a product or service that’s clearly differentiated from others in a way that’s meaningful to customers. Core capabilities are the “know how” that you possess that sets you apart; they are the source of your differentiation. Products and services that align with the chosen market position and differentiation will, as a result, benefit from a clear brand identity.

The consulting firm Booz Allen has created an easy  (and free) self-diagnostic that allows organizations to assess their strategic coherence or alignment. It’s called the Coherence Profiler.   It takes about 5 minutes to complete and asks important questions about how strategically aligned or coherent your company is.

You can take the test here.

We’d love to hear from you after you do; let us know your experience with this profiler and how you might like to respond to its results.

By Kathleen Hosfeld and John Forman

Trust in business is starting to make a comeback from historic lows during the Recession, according to the 2010 Edelman Trust Barometer research.  It’s a fragile trust, the report tells us. Those surveyed say that after the economic pressure is off, they expect business to go back to unbridled self-interest. In other words, they don’t really trust business – not for the long-haul. At a Young Presidents Organization event last week, members said that “trust” was their number one concern, regardless of the specific business they were in. The gap is enormous.

The Business Case

The business case for trust is well established. A lack of trust can create a number of problems for a company. It can impact reputations as conversation in the market place is fueled by assumptions of ill-will (like BP), gossip and innuendo, slower decision-making processes, as well as loss of sales. And the misbehavior of one Bernie Madoff can sour public perception for organizations that have never been connected to him.  On the other hand, a company that has the trust of its customers or other stakeholders can count on better collaboration and decision-making, resilience in the face of a crisis (like Toyota), more word of mouth advertising from advocates, and fewer legal or regulatory costs.

Trust matters to a lot more companies than a skeptical public might imagine. While there are egregiously self-interested firms that can be said to not care about trust, the larger part of the business world cares deeply. Yet, in the current  environment, positive intent may not be enough to reclaim trust.

The Trust Formula

One model of trust in relationships offers some lessons for senior executives and marketing specialists for how to reclaim trust with customers, partners and other stakeholders. The trust “formula” has four factors: Credibility, Reliability, Openness, and Self/Other Orientation. This model is adapted from David Maister’s “Trusted Advisor,” a classic in the field. All four elements in the model play an important part, but the fourth — Self/Other Orientation — can either undermine or enhance the other three factors.

Credibility – The credibility of a firm is built on the truthfulness of its communications, its reputation, its experience base and credentials. If there’s a gap between what a firm says and the customer or partner’s experience, trust can break down. If the firm’s reputation or verifiable credentials or experience don’t line up with its claims or communication, trust can be lost. Marketing initiatives to build credibility center on brand alignment, certifications, client/customer testimonials, promotion and sales processes.

Reliability – The reliability of a firm is demonstrated in its actions. Does the firm follow through and keep its commitments? Does it create predictable experiences, does it set expectations that it can keep? Uneven quality, inconsistent experiences, poor performance, lack of follow up or follow through, all contribute to a loss of trust. Marketing initiatives to build reliability include product management and sales and customer service.

Openness – In interpersonal relationships, openness is often confused with sharing intimate information. That does not foster trust. Openness that fosters trust involves the risks taken  in the relationship, and  the discretion and empathy with which one treats other people’s risks. In business life, this translates to transparency, and sharing information with stakeholders, sometimes hard-to-admit information like “we made a mistake.” Marketing initiatives that demonstrate openness include stakeholder engagement, supply chain transparency, sustainability reporting and open design standards.

Self/Other Orientation – In individual relationships, we most deeply trust those people who we feel have our best interests in mind. So too with companies. We trust companies that  care for our benefit as much they care about profit.  Marketing initiatives that foster trust also include integrating social good into all aspects of mission, marketing and communication. Demonstrating this commitment amplifies the benefit of a firm’s efforts in regards to Credibility, Reliability and Openness. Marketing initiatives that “go first” involve making a stand for social and environmental responsibility in the communities and the environment where they operate. But efforts at these forms of conscious capitalism must be genuine, and seen as genuine, efforts to make a positive difference.

How are We Doing?

Each of these qualities shows up in organizations in slightly different ways, but all lend themselves to meaningful measurements. As a result, organizations can benchmark perceptions and behaviors, and objectively assess progress towards trust goals.  Companies can be comprehensively assessed on these four qualities to determine the greatest opportunities for reclaiming or enhancing trust with customers and other stakeholders.

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Kathleen Hosfeld is the principal of Hosfeld & Associates, a strategy and marketing firm.  John Forman is the principal of Integral Development, a teaching and consulting firm focused on leadership, performance, strategy and decision-making.

By Kathleen Hosfeld

It will seem oxymoronic to some to put the words spirituality and strategy in the same sentence. The mainstream world of strategy and marketing is transactional and fast-paced, rather than reflective. Or so it would seem.  Let me paraphrase the four-point test from the strategy model we use in order to make more clear how an organization’s strategy design process touches the spiritual aspects of business decisions:

• In what way do we create perceived value for our customers?
• What value do we create that reflects the best of our collective gifts and intentions?
• What is the unique value we can create in the market that no other company is as qualified to create?
• Which types of value creation in which we engage give us an opportunity for positive impact in a wide variety of markets or settings?

Some of you might recognize the pattern of the four-point test of the core competence model in the questions above. This model, developed by Gary Hamel and C.K. Prahalad years ago, is an enduring model for breakthrough strategy and strategic innovation.

The first question probes the extent to which we are serving the market by offering something of real value. The second question looks at who we are together as a work community; is there a cohesive sense of identity and purpose that we share?  The third question points to the unique capability that each company has distinct from any another company; what is it that we can do together that no one else can? The fourth question tackles the scope of the firm’s vision; how far does it reach, and how might it change our market, our community, our world?

Why are these spiritual questions? Spirituality taps the fullest experience of what it means to be alive, and for many of us this is expressed in relationships.   These questions help us examine the strength of our relationships with ourselves (are we deeply in touch with and expressing the essence of who we are as individuals and as a company?) and others (are we using our gifts and strengths to benefit others as ourselves through either support or challenge?).

Spiritual does not mean airy-fairy and impractical. All four of these questions can be used to advance key performance indicators and other benchmarks that measure organizational performance and outcomes.  The difference is hitching the practical, financial and quantitative aspects of business to something larger, engaging with meaningful action, and allowing the firm to be drawn upward as a result.

By Kathleen Hosfeld

Following a recent Special Report by the Wall Street Journal, commentators had a field day with columnist Dr. Aneel Karnani’s assertion that the concept of Corporate Social Responsibility is fundamentally flawed.  Many of the comments pointed out that not only was his analysis fundamentally flawed, it was the “same ole, same ole” whateverness we’ve been hearing from free market idealogs for the last 15-20 years.

Karnani, who is Professor of Strategy at the University of Michigan’s Stephen M Ross School of Business, asserts that all CSR initiatives have to “pencil out” financially before they are embraced by CEOs. “Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless.” See the article here.

Based on the interviews that Pat Hughes and I did for her study: “The Leadership of Sustainability,” and my work with clients, my perspective is that engagement with CSR or sustainability evolves.  Some leaders we spoke with started with a “because it’s the right thing to do” mentality. They kept their experiments small to see if they would hurt or help them financially. If it didn’t hurt, they kept going. In businesses where CSR or sustainability was not baked in from the beginning, it is developmental, occurring in stages.  As a result, early experiments have to be either revenue positive or at the least revenue neutral.

However, there are many firms who find that holding objectives for financial, social and environmental benefit simultaneously creates a crucible for innovation. They have broken away from the either/or thinking represented in Karnani’s article, and are now in the territory of Third Way thinking. Third Way thinking goes beyond hierarchical rankings of choices, one being the better “good” than another. Instead, it “holds the tension” between competing “goods” until a new solution appears that honors all of them. Harvard Business Review even published an entire special edition last summer about CSR and sustainability as drivers of innovation, citing breakthroughs of over 30 companies.

So, what is the Wall Street Journal’s problem? Commentators responding to the article repeatedly questioned the lack of balanced perspective, and a pattern of editorial bias against values-based management approaches. Companies every day are proving Karnani wrong with their actions. Is the Journal simply blind to the evidence? Or are the editors ignoring the firms who are doing well by  “doing good”  because they seem to be “outliers” rather than  mainstream. If they are intentionally disregarding outliers, then they do their readers a disservice because it’s in the outliers where the seeds of breakthrough innovations are sown.