Posts Tagged ‘strategy implementation’

The Perils of Hazy Horizons

Tuesday, March 8th, 2016

horizon

 

 

 

 

 

 

 

One of the senior politicians in the Brexit debate urged voters on British television last night to give serious thought to the type of country and life they want to have in 40 years time. Predicting what will happen in 3 years time, as anyone sitting in the executive office of a global bank in 2004 will attest to is fraught with huge inaccuracies and serious consequences! The pace of change has never been as dramatic (technology, capital, supply of talent, societal changes and so forth).

The art of management is to balance short and long-term profitable growth and make informed decisions about the health and well-being of the organisation. To effect change successfully and bring employees with them, mid-level managers in particular need to understand how they must adjust their own behaviours and actions in highly ambiguous situations.

To make serious predictions about the long-term and to put the risks and benefits and action in the appropriate context anything more than a 5-7 year horizon is really an intellectual not a commercial debate. Even in government funded infrastructure projects and macro inter-governmental policy initiatives (climate change, energy, healthcare, education and so forth). That is why I smile when I see organisations such as Lloyd’s of London’s (2026 Vision) and other global organisations expecting that their best laid plans will be taken seriously by their key constituents. It is a collection of predictions, which the forecasters will never be held accountable for and those asked to implement it struggle to grasp what it really means for them or their colleagues.  Fact.

Let’s get back to pragmatic outcomes, alternatives, assessment of benefits/risks, timing and action within the proposed investment parameters.

© James Berkeley 2016. All Rights Reserved.

Behind The First Meeting: The Activist Investor Within

Thursday, February 18th, 2016

I detest the way the debate about activist investors and their motives has descended into a force for good or evil. It is corporate pantomime. A round of boos please after the activist has said their lines. Cheers and name calling after the “innocent” CEO or Board Chair rebuttal. AIG, Sothebys, P&G, Yahoo, and the list goes on. The myth is that the activist investor has an agenda and management and the Board don’t. Sparks fly at the first meeting because that is what the activist wants to see happen. This is rubbish and not supported by hard evidence in many situations. In a lively debate on CFO.com this week, titled, When The Activists Attack  here is a perspective I shared from my first hand experiences with businesses and management brought to book by activist investors:

When the Activists Attack

Corporate Innovation Comedy

Thursday, February 4th, 2016

There are certain fashion or fad trends which when worn by 60 year old men, skinny jeans come to mind, are just plain wrong unless you are Mick Jagger. In all the buzz about innovation, reinvention and disruption it is comedic watching the attempts of some corporate organisations in finance, banking and insurance to embrace it effectively.

The CEO stands up and says

1. “Innovation is the new normal”: err, innovation is not a rheostat with an on/off switch in outstanding innovative companies such as 3M, Merck, Apple etc.

2. “When I was at Google….”: err, you met with a middle manager or silo function (risk management) that is not even situated in the Corporate HQ. Ssh, the guy is an ex employee of ours suffering a mid life crisis but it sounds cool?

3. “We are on the side of the disruptive businesses…”: really, where is the hard evidence? Ah you have put in an order for the Tesla when the lease on the Merc expires.

4. “Let me tell you about our work with [Uber, Airbnb]…..”: your “credentials” are killing me, how are a series of actions unique to one firm now a hot trend?

5. “We took our Leadership Team to Silicon Valley….”: so you flew into San Jose on the Gulfstream, spoke to a few random clients and friends and are now immersed with ground-breaking ideas, really? Ever tried the pilgrimage to Lourdes? Thought not.

6. “I was speaking at a Tech investors event in Silicon Valley…”: you are now on first name terms with Marc Andreesen and Fred Wilson. Keep that one for the next earnings call.

7. “We are passionate about the future. We are announcing a new corporate venturing team with a $100 million of capital”: wow, so third rate entrepreneurs line up outside our headquarters. After all why would a stack of cash and a conservative reputation not appeal to serious tech entrepreneurs? Oh, nevermind.

8. “I am really excited by the power of blockchain as a powerful asset”: half the audience look blankly. The venerable City reinsurance broker or Wall Street banker racks his brain “watch chain?”, as the CEO fumbles like an adolescent boy trying to unhook the girl’s bra, in explaining blockchain’s virtues and his excitement.

9. “I have asked our Divisional Heads to set up an offsite meeting on Innovation and Disruption….”: yay, a chance to invite Wired’s David Rowan to talk to us about 10 transformative technologies. Oh hell, which futurologist should we invite? No giggling or fumbling for the iPhone and that important email when he or she stands up.

10. “It is time for the results of our Annual Report on Megatrends, we spoke to our global community of risk managers…..”: ah, that is the fella situated down the end of the first floor corridor with an actuarial background and a handful of junior direct reports. I don’t remember seeing his face in the Corporate Strategy meeting, perhaps he was at his daughter’s soccer game.

I kid you not, these are all genuine one-liners. Sorry I am bent double admiring the CEO’s shiny white teeth and folksy humour. Nice touch.

© James Berkeley 2015. All Rights Reserved.

 

Resilient Growth

Monday, December 21st, 2015

Why do annual budget discussions reveal so little about the growth prospects of the business and so much about the fears of those running the business?

I have come to observe that more energy is exercised in the haggle and obfuscation between line managers and their direct reports than the value derived from the process.

Should we have objectives and goals? Absolutely.

Should we place greater emphasis on a set of tactical targets that in of itself are arbitrary (based on a “best guess”) or a set of broader strategic outcomes that more profoundly describe what we want the business to look like in 12 months time?

In many high growth, mid sized businesses, where the overriding imperative for the owners is to build equity or transition the business (divestment, IPO and so on) I think there is a compelling case for the latter. Yet that is very rarely the case. The business may have doubled or quadrupled in size but the management focus and discipline and rewards system is largely unchanged (tactical targets).

I come across a lot of strong and dynamic businesses who are in self-congratulatory mode.

Senior Manager: “We have met or exceeded our budget for the last 8 quarters.”

Me: “Great, what SHOULD you have achieved in the prevailing conditions?”

I am met typically by quiet silence or a “what do you mean” response.

My point here is are you really focused on what really matters to the Owners (building equity or preparing a transition)?

Here is a quick set of strategic outcomes, my best clients use to drive their business:

1. Sustained Sales and Profit Growth (over past 3 years).
2. Market-leading Sales & Marketing Processes (array of rainmakers, leverage high tech, increasing market gravity, abundant mindset, room to accelerate growth)
3. Compelling value proposition and market position. (impressive clarity internally and externally about how the firm’s ideal clients are better off or better supported after using the firm’s products and services)
4. High Quality Management & Employees (high level of familiarity, clarity and implementation skills, behaviour and expertise supporting these strategic outcomes)
5. Breakthrough Client Relationship Approaches (acquisition, innovation, retention, profitable growth)
6. Market-Dominating Fees & Value (zero aged debt, 50%+ fees “banked” next 6/12 months, balanced growth, low working capital needs)
7. Intellectual Property Institutionalised (proprietary IP copyrighted, constant creation, internal R&D “laboratory”, systematic approaches)
8. Tremendous Loyalty (seductive rapport with key people, impressive career growth, diverse and dynamic environment, aligned rewards and value creation)

Go back to your 2016 business plans and accountabilities for key managers.

Producing Results Are each of the requisite improvements in each area set in stone? Are there influential exemplars lined up to reinforce this behaviour daily (mid-management)? Is the frequency and quality of performance assessments appropriate?

Rewarding Results Does the rewards system appropriately support or hinder your future health and well-being (bonus, long term incentives, recognition, promotions and so forth)?

I strongly suspect many people will be shocked how loosely the wheels are bolted onto their bus and how susceptible their best laid growth plans are to unforeseen events. Waste no time, take action now if you want to increase your resilience.

© James Berkeley 2015. All Rights Reserved.

Agile Management

Wednesday, December 9th, 2015

So the CEO of Swiss Reinsurance Company faced with increasing amounts of uncertainty and rising competitive threat levels in 2016 trumpets this week an “agile capital” strategy. In simple terms, capital allocation will seek to keep pace with foreseen and unforeseen business opportunities. I make no value judgement about his firm’s future but shouldn’t that be something everyone should be doing already in his organisation?

Here is four outcomes that the Board and management in my very best clients rigorously apply, hold each other accountable for and align rewards around:

1. Performance in allocating capital.

2. Performance in people decision-making.

3. Performance in innovation.

4. Performance in implementing strategy.

It reminds me of those classic boxing fights of the 70s and 80s, when fighters such as Ali, Sugar Ray Leonard and so on prided themselves on their agility and their ability to outsmart a more fearsome opponent by constantly dancing around the ring. Some commentators hated the tactics, suggesting it lessened a great contest but the point was those fighters ended up winning the fight, not because they had more power but because they were smarter. Agility was but one of their strengths. Perhaps many insurance and financial services CEOs are waking up to the fact that standing flat footed in the ring is a bum idea in a tough fight, hooray.

© James Berkeley 2015. All Rights Reserved.

 

Interview With Me, Thinking Like An Entrepreneur

Thursday, November 12th, 2015

The global marketing and technology firm, IDG, known for its’ research and surveys on success practices,  has interviewed me for a piece on changing the self-talk and thinking amongst executives in large organisations and creating a meaningful environment for innovation to flourish in. Highly relevant for businesses  experiencing sluggish growth and needing help with strategic redirection (hit the growth accelerator) or strategic reinvention (soar to the next level of growth).

Beyond the flim-flam: “Thinking like an entrepreneur”

http://www.idgconnect.com/abstract/10596/beyond-flim-flam-thinking-entrepreneur

Time May Change Brokers But They Can’t Trace Time

Wednesday, October 7th, 2015

Ch-ch-ch-changes!” exclaimed David Bowie, “turn and face the strange“… Could a record be more apt for the top management in the reinsurance broking industry today? Faced with a surfeit of supply (capital) and insufficient demand (risk) their traditional broking operations are faced with unprecedented amounts of uncertainty and competitive threats.

But I’ve never caught a glimpse, Of how the others must see the broker“…. To listen to the self-talk and thinking of C-level executives in many large and boutique reinsurance brokers on both sides of the pond is to wonder whether they are willing to be intellectually honest about how others see their attempts to provide value to customers and clients in return for equitable remuneration. It is time to truly reconcile the symbolic (another cyber liability report or data research product) and focus on the truly meaningful and immediately useful (a cedent’s improved condition, solve the under-insurance problem, harness high tech to lower overheads).

Just gonna have to be a different man“…. To paraphrase Michael Palm, the wise Centre Re sage, they need to be great at more than “hitting a nice approach to 18 and mixing a fine dry martini”. They must properly define the skills, experience and behavioural traits that are critical to address existing market needs (matching wholesale capital with wholesale risk), anticipated market needs  (demographic and social changes) and the creation of new needs for reinsurance. When the industry bemoans the gap between insured and economic losses in South Carolina, a State where the world’s finest minds have repeatedly focused their energies and actuaries have modelled risks to death, quite why is it so? Have brokers overly relied on existing needs for reinsurance (another cat layer) and failed to create the “need” for appropriate risk transfer? Do they lack powerful language skills to control the discussion with the economic buyer and the ensuing relationships? Are their value propositions suitably attuned to the forward-looking needs of their key constituents (clients, shareholders, employees, business partners and so on)?

Are immune to your consultations, They’re quite aware of what they’re going through“…. is the thought leadership of most reinsurance brokers sufficiently provocative and informed to change their ideal prospects and clients’ behaviours and ultimately, their beliefs? When everyone is largely hanging out with and saying the exact same thing to mostly the exact same group of people (Monte Carlo, Baden Baden), it is high time reinsurance brokers became an increasing object of interest and a centre of expertise to a more diverse and impressive group of peers. How many brokers truly have “trusted adviser” relationships and create a seductive rapport (intellect, language, social) with key institutional shareholders, Board Members and top management in their ideal clients? I am reminded of the head of one large broker, who used his former consulting firm’s  ties with top management in a major financial institution to secure an exploratory meeting, and within five minutes, according to an eyewitness, the banking executive responded to the broking head, “I just don’t see how you are relevant to our firm’s future!”

Broking firms must hope that their top management possess the skills and volition to move in miles, not inches (reinvention) before their clients and customers state “Where’s your shame, You’ve left us up to our necks in it”….

© James Berkeley 2015. All Rights Reserved.

Bedtime Profitable Growth Lessons

Tuesday, September 22nd, 2015

When I read bedtime stories to my daughter, there are tales of witches flying on broomsticks, young children wandering into the forest alone dark at night and absentminded Fathers getting soaked trying to repair the garden hose. At certain points she might say “I am scared”. When I ask what she is scared of, she responds, “I am scared of what is going to happen to “X” on the next page”.

Likewise we accept challenges in profitably growing businesses, knowing that there are circumstances under our control (the quality of our management, employees and the level of uncertainty within the business) and there are others that are not (competitive threats). What we know is that if we are to develop we must increase our learning. We learn by applying our past (expertise and experience) to transform our clients’ future. Our future is a function of our resilience to events outside our control and continuing to be of value to our clients (reinvest the lessons learned in new, faster, more impressive approaches).

Lesson #1: The art of management is the ability to balance the demands of key constituents for short and long-term profitable growth.

Lesson #2: Not all constituents (shareholders, board, employees, business partners and so on) are equal. Not all demands are equal (EBITDA growth, higher pay, happier clients). Behind every demand is an emotional imperative (improved image, enhanced peer recognition, a promotion) and a logical objective (lower acquisition overheads, optimum size of business, attracting word class talent). Dig for both, orient your management approach around both.

Lesson #3: “Speed” (climbing to the next level) is as important as “quality” (existing revenue generation).

Lesson #4: Success arises in the implementation of a strategy (arriving at the desired future state), not the formulation. Credit may be given to the latter but the glory goes to those, who accomplish the former. Lee Kwan Y

Lesson #5: You start by determining what your vision is and what is “mission probable”. There are a great many visions that are possible in the conceptual world but missions that are improbable (capital, people, innovation, implementation) in the real world. There are a small number of visions that are possible in the conceptual world and mission that are probable in the real world. Don’t kid yourself because you can point to one exception, who got lucky!

Lesson #6: If you are not failing, you are not trying hard enough. It is always odds against (less than 50%) predicting the future. The best management teams are probably successful no better than 1:3 with new product innovations or international expansions. What you must believe is that when you have success, the rewards are sufficiently large to cover the losses plus the ongoing costs of profitably growing the business (payroll, pension, capex, new hires etc.).

Litmus Test: Is there someone I can point to (highly similar sector and recent scenario) who has visibly travelled the same profitable growth journey as I am seeking to pursue? Are there lessons I can apply to accelerate the speed towards our immediate profitable growth (reducing labour intensity)? Are these lessons I can apply to enhance the quality of our profitable growth (repeat business, unsolicited referrals) such that moving to the next and the levels beyond that is sustainable?

If you cannot point to a real world example, it may well be for a very good reason. The path you have chosen is improbable or the timing has never made sense previously.

Of course, there are environmental changes (technology, access to capital, demographic, social) that make the previously improbable, probable. That is where the “unicorns” (AirB&B, Xiaomi, Moneysupermarket.com) emerge from but they are the exception, not the rule.

© James Berkeley 2015. All Rights Reserved.

Five M&A Flashing Lights

Thursday, September 17th, 2015

With global M&A passing the US$3 trillion mark, as reported by the Wall Street Journal last week, and low growth sectors such as insurance and gaming incurring an unprecedented level of recent activity, commentators try to out do each other to explain the rationale – “insipid organic growth”, the dreaded “FOMO” (fear of missing out), “optimum scale” and “diversity of earnings”. Yet, are we in danger of trying to tie the “dots” together in cases that are highly situational and ignoring the more insightful indicators?

After all every business has a unique “past”, and a preferred way of applying their people’s talented to transform their “unique” set of clients’ futures. To put it simply, no two companies provide exactly the same value to their clients or are valued the same by external investors. Hence trying to extrapolate one set or executives’ reasoning to pursue M&A over organic growth or a strategic alliance is fraught with generalisations and danger. Yet markets routinely “mark up” listed companies and “talk up” others in the distinct belief that their situations are exactly the same, different management teams will act like lemmings to keep their shareholders happy and investors will “go shopping” at the same time for the same target. There is very little hard evidence or strong anecdotal evidence to show that this is true. Indeed in cases, where you might argue I am wrong, there is a body of evidence to show many of those deals were value dilutive AOL-TimeWarner, MySpace-News Corp and RBS-ABN Amro.

I would suggest investors and commentators would be better served applying the following logic:

1. Quality of Management (QoM): is there a discernible change (positive or negative) in the capability of management to achieve its’ strategic goals (capital allocation, make good people decisions, embrace innovation and implement business strategy), where a merger, acquisition or divestiture would demonstrably create enhanced value for the firm’s shareholders?

2. Quality of Employees (QoE): is there a discernible change (positive or negative) in the capability of the firm’s employees to achieve its’ strategic goals, where a merger, acquisition or divestiture would demonstrably create enhanced value for the firm’s shareholders?

3. Level of Uncertainty (LoU): is there a discernible change (positive or negative) in the the level of uncertainty around management and its’ employees capability to accomplish its’ strategic goals, where a merger, acquisition or divestiture would demonstrably create enhanced value for the firm’s shareholders?

4. Competition (C): is there a discernible change (positive or negative) in the competitive threat level and the probable impact on management and its’ employees accomplishing its’ strategic goals, where a merger, acquisition or divestiture would demonstrably create enhanced value for the firm’s shareholders?

5. Future Confidence (FC): combined, do the discernible changes in the quality of the firm’s management (QoM) and employees (QoE) today relative to the level of uncertainty within the business (LoU) and the external competitive threat level (C), indicate a merger, acquisition or divestiture would demonstrably create a more impressive future and provide greater peace of mind for the firm’s shareholders?

If you cannot categorically say “YES” to the above, in all likelihood you will be rushing to a judgement that is ill-informed or a deal that is carrying excessive risk.

© James Berkeley 2015. All Rights Reserved.

Uncommon Business Integration

Thursday, August 20th, 2015

So you are the proud owner and as CEO, guardian of the new combined business, the hard work now begins, turning the reasons why you bought the business (investment thesis) into an organisational reality.

You assemble the executives and managers in both firms with guidance on the strategic vision, financial synergies, operations, talent and culture. In all likelihood, they have interacted briefly to exchange information in the due diligence, negotiation and closing phases but they have rarely got to know each other on a personal basis.

How each party sees that you handle that first integration meeting in most cases creates an indelible impression for the ensuing relationships, the level of commitment to your objectives and your probable success.

Knowing “what to do” and “how to do it”, is largely a mixture of art and science for most leaders. “Art”, in the sense of gut feel and good judgement in creating a welcoming environment for the newly acquired executives and managers. “Science”, in the sense of knowing precisely like choreographing a play “what” business outcomes must be prioritised, “where” to devote time productively, “when” you must accelerate the conversation (agreed action points) or intervene to bring circular conversations to a close and “why” a chosen integration alternative is appropriate.

Here is seven “integration killers” you want to avoid in that first meeting of the “new” colleagues:

1. Ambiguous and Unclear Meeting Invite. The focus needs to be on performance-based priorities (crystal clear business outcomes) not tasks and activities (“getting acquainted with each other”).

2. Inviting Wallflowers. Peers want to meet, talk and reach agreement with peers or possibly employees who are one grade above. They don’t want to converse with subordinates, who cannot contribute meaningfully and do nothing more than to act as a “posse” or mute cheerleaders for an executive or senior manager.

3. Enabling People Who Arrive With An “Agenda”. Nothing kills an integration meeting like an HR person from the acquiring company, who arrives with an arbitrary alternative (“non-negotiable” policies and procedures) to force the newly acquired employees to comply to their process without first listening to and collectively examining whether it makes sense. The real crime is the facilitator who allows them to make a speech and enables their passive-aggressive behaviour.

4. Leaders Whose Behaviour Precisely Undermines The Meeting’s “Rules of Engagement”. If the understanding is that PDA’s and phones are to be switched off until the scheduled break, there is zero excuse for the leader, who blatantly ignores the rule. What the leader’s behaviour says to the other participants is “this discussion is not my priority”.

5. Kick off at the wrong starting point (integration alternative). Any discussion must start with “what is the desired business outcome?” (rapid reduction in business acquisition expenses), “what are the integration alternatives?” (adopt Company A or B’s sales approach or develop a new approach), “what is the risk and reward attached to each alternative?”, and ends with “what action is required to rapidly and effectively implement the preferred alternative” (next steps). Nothing else.

6. Priorities are given an arbitrary score (“7”) or (“High”). Organise and separate priorities into three headings (“GSI”): “Gravity”, what is the gravity of the issue? “Speed”, how fast does this need resolving or improving? “Impact”, what is the actual or potential impact on the firm’s future? Use actual descriptive sentences not scores.

7. Lack of definitive “next steps” with agreed action points (“I’ll discuss this with the COO when I next see him”). Every action point must have a time, date and accountability given to it with an understanding of the supplementary action to follow.

My observation is that most first integration meetings start with the very best of intentions. Where they go awry is that the meeting chair and participants overlook the importance of speed as well as quality. “Speed” in terms of, for example, identifying decision-making shortcuts that enhance the quality of the results (more impressive financial synergies, happier customers). “Quality” in terms of asking the right questions in the integration meeting to enhance the “speed” of accomplishing the desired business outcomes (ease of implementation, reduced risk).

© James Berkeley 2015. All Rights Reserved.