Wednesday, December 3, 2008

Analogy #225: Fewer Colors, More Contrast

As strange as this might sound, my wife prefers to watch television in black & white instead of color. She says that all of those colors can be distracting and take away from focusing on the plot.

In addition, when the picture is in black & white you can increase the contrast. This makes certain items on the TV pop out more. It is easier to see the individual elements on the screen when the contrast is greater.

Strategic planning has a strong visual component. In the process, we are trying to “see” many things:

1) What does the future look like?
2) Which elements of the business should I be focusing my visual attention on?
3) What does “good” look like? How do I know when I’ve achieved it?

In all of the complexity and speed of today’s business world, the picture we see can look a bit blurry and confusing. There is so much to be done and so little time. It’s hard to pick out the critical issues from the flurry of the daily crises and the constant buzz of the Blackberry. How do we keep from drowning in the mundane and locate where our eyes really need to be focused?

The answer is that I think we need to become more like my wife. To find what is really important, we need to set our sights on fewer colors and more contrast.

When I say “fewer colors” what I mean is that we need to focus on fewer issues. Of the millions of things we could be paying attention to, not all of are equal importance. By getting the critical few linchpin issues right, the rest will tend to fall into place. We need to put blinders on to all of those pretty bright colors that can distract us from the core.

When I say “more contrast” what I mean is that we need to become more extreme in our strategic responses...see things more as Black or White and less as various shades of gray. When everything looks about the same (gray) everything gets treated about the same (mediocre or average).

However, if we accentuate the extremes, we get more dramatic variability in what we do. Everything that is black gets pursued at full speed and high resource. Everything that is white gets cut and ignored. True success is based on finding the few things to do very, very well and knowing what to not waste any effort on at all. Being average across the board leads to failure. It is by spreading your resources and priorities unevenly (with high contrast) that you get the best outcome.

So the principle here is to develop your strategic plan in a manner that:

1) Does not get distracted by a bunch of pretty and colorful things that aren’t important; and
2) Helps increase the contrast in the issues which are important, so that it is easier to see how to disproportionately allocate resources.

To see this in action, I will use a teleconference that was put on today by the Corporate Executive Board. About 10,000 listeners were learning about what top companies do to win during an economic crisis. Although they did not use these terms, a lot of what they said seems to reinforce this idea of fewer colors and more contrast.

Over and over, the theme seemed to be that the best companies narrow their focus and then get more extreme in their approaches within that focus. This suggestion was repeated in five areas.

1. Projects
When deciding what projects to work on, fewer colors says that in an economic downturn I should be focusing on fewer total projects. More contrast means that individual projects need to be treated differently. For example, instead of cutting 20% out of the budget of every project, cut 100% out of a large number of projects (kill them off) and perhaps even increase the budgets for the few that remain so they have a better chance of succeeding.

In addition, selectively ensure that the entire development pipeline has at least one project in full black attention. Don’t cut out all of the long term and only do the near-term projects. Selectively spread the resources so that a few projects in near-term, mid-term and long-term remain. And for the few that remain, pursue them with the highest of effort and resource.

2. People
To make sure your business has the best employees during troubling times, the Corporate Executive Board suggested ideas that emphasize fewer colors and more contrast. First, they said to focus your efforts on your very best employees. Second, they recommended that there be greater contrast between how you treat you best and your worst employees. Be more generous in the way you compensate your very best (even at the expense of others). Also, be more willing to get rid of the weaker employees. By doing so, the Corporate Executive Board says that you will do a better job of retaining your best employees and increase the overall quality of your employee mix.

3. Cost Control
When looking for places to cut costs, the Corporate Executive Board says to focus on fewer colors and put the bulk of the attention on making cuts at the point where the products and services are produced. Cuts at this level tend to be larger and last longer. In terms of increasing contrast, they suggest that while cutting at the point of production you may actually want to increase spending on general and administrative (G&A) costs. This seems to be what the best in class do. The rationale is that the people at the G&A level:

a) Have a broader perspective and can better see what to focus on.
b) Can better leverage best practices across more areas.

4. Product Mix
There are lots of attributes one can emphasize when putting together the value bundles offered to the customer. The Corporate Executive Board suggests that you “limit the colors” by only focusing on the attributes most important to people in an economic downturn. Then you increase the contrast by actually investing more in these few attributes which are most relevant (often at the expense of other attributes, which get cut way back or eliminated). That way, your company can afford to stand out as being the very best at doing what is most important to people at this point in time.

5. Risk Management
The Corporate Executive Board does not recommend an approach to try to reduce all risks in the business. After all, risks often lead to rewards. Therefore, more contrast is needed in how risks are handled. Some risks should be reduced by trying to push them onto the rest of the supply chain (primarily by focusing on contracts). However, there may be other risks that your business can uniquely absorb better than the rest of the supply chain. In those cases, you may want to even increase the risk in those areas by using your strengths there as a lever to get increased business (or increased concessions) from others in the supply chain who want to reduce risk in that area by handing the problem over to you.

Great strategic action plans tend to have two characteristics;

1) They narrow the focus of what is worked on to only a small handful of issues, which we referred to as “fewer colors.”

2) They have more variability in how to handle individual elements within the areas of focus—more extremes in the effort required (all or nothing), which we referred to as “more contrast.”

Instead of across the board cuts of a similar percent (which leads to mediocrity), make bigger cuts in some areas so that one can actually increase spending at a few critical points.

By following this “fewer colors, more contrast” approach, one can afford to selectively and aggressively go on the offensive, even in tough times when resources are lean. Since tough economic times tend to cause customers to reassess their buying habits, this is the ideal time to pick up market share. This will not only create rewards during the current times of difficulty, but create a stronger platform for when the times are good again.

To keep the “number of colors” down, sometimes it helps to use a clever catch phase to help people understand what is truly important to focus on. When I was at Best Buy, we called them KRAs (Key Results Areas). You couldn’t get funding or staffing unless it was tied to the small handful of KRAs. At Limited Brands they use the term CFI (Critical Few Initiatives). Pick your own three-letter acronym and focus away.

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