Thursday, April 14, 2011

Strategic Planning Analogy #388: Bad Habits

Back around the late 1990s, J.M. McGinnis and other medical researchers looked onto the causes of illness and death in the United States. The results appeared in several places, including a 2004 edition of the Journal of the American Medical Association and the website of the Robert Wood Johnson Foundation.

The conclusion of the research? “Dietary patterns and sedentary lifestyles represent the most common source of unnecessary death and disease among Americans.”

They claim that between 40 and 47% of the deaths reported in 1996 were attributable to our behavior patterns, including behaviors such as:

a) Poor Diet
b) Sedentary Lifestyles
c) Use of Tobacco, Alcohol or Drug Abuse
d) Sexual Behavior.

If you look at the 90.6 million illnesses and injuries requiring medical treatment in 1996, the results are even more dramatic. About 33% of the medical treatments were due to poor diet and exercise. About another 57% were due to alcohol, tobacco, drugs, and sexual behavior. In fact, over 90% of the illnesses and injuries were caused by our poor behavior patterns.

Although this data is a bit dated, the research said that since our behavior patterns have been trending in the wrong direction, these percentages are probably getting even worse.

Therefore, next time we want to point fingers at who is causing high health care costs, we’d better save a few fingers to point at ourselves.

This story has some good news and some bad news. The good news is that we are in control of the key element behind illness, injuries and death. The bad news is that there is not a magical instant cure. We got into the problem through a lifetime of bad habits and it will take a major and lifelong change in lifestyle to fix it.

This same phenomenon also seems to apply to businesses. Businesses get sick or die for many reasons, but one major cause has to do with bad business habits and business lifestyles. As a result, there is some good news—we can fix the problem, because we control the cause. However, the bad news is that the fix requires a major overhaul in the way a company thinks and acts on a daily basis.

I have had the privilege of spending time both with companies having long periods of health/success and companies with long periods of sickness/failure. What I have noticed is that the successful companies act differently from the unsuccessful—they have different behavior patterns. These behavior patterns impact results. Therefore, if we want a strategy which provides great results, we need to address how a company behaves on a day-to-day basis.

In this blog, we will look at three types of behavior patterns which can seriously impact business success.

1. Malnutrition
If you starve a body of nutritious food over a long period of time, there will be long-term health problems. The same is true of businesses. If you starve of business of nutritious investments, there will be long-term health problems.

Nutritious investments nourish a business’ health in one of three ways.

a) They add the COMPETENCIES needed to succeed. Healthy companies have the appropriate knowledge and skills needed to execute a strategy. This requires regular investments in areas like data gathering, education, training, and research. These are not random investments, but targeted specifically at improving the company’s ability to know what to do and how to do what it takes to win at their strategy. Since the environment and technology continues to change, one needs to continually invest in this competency nutrition to remain relevant.

b) They add the CAPACITY needed to succeed. You cannot become a large, successful company without investing in what is needed to operate a large successful company. Investments are needed to create an organization and infrastructure large enough to do the task at hand. For example, Wal-Mart is a large, successful company because they first invested in the capacity needed for succeeding at such a large size. Not only did they invest in building the necessary store capacity, but they invested in building a huge, world-class distribution network as well as one of the largest computer installations in the world. All are essential to Wal-Mart achieving their strategy. If you are not achieving the scale and scope you desire, perhaps it is because you have not invested enough in what is needed to achieve scale and scope (people, factories, points of distribution, sales force, etc.).

c) They add the DIFFERENTIATION needed to succeed. Successful strategies have a point of differentiation…an area where the company has a superior advantage over the competition. This competitive edge can wither away over time unless regular investments are made to enhance this point of differentiation.

The healthy companies regularly and continually make investments focused in these three areas (competency, capacity, and differentiation). It is a natural part of their day-to-day operations.

Unhealthy companies starve themselves of these investments. Either they regularly refuse to make any meaningful investments (for the short-term benefit of putting more cash on the bottom line today) or they invest in non-nutritious “junk food” (business fads, executive perks, or items unrelated to the strategy). These bad habits might make you feel good for a very short period, but in the long run they will make your business very sick.

2. Obesity
Being overweight can contribute to a large number of illnesses, including high blood pressure, excessive cholesterol, diabetes, among many others. Just as excessive fat in a human damages a body, excessive fat in a business damages a company. Business fat includes the following:

a) Excessive Bureaucracy (rules, procedures, silos, power bases, approval processes, paperwork, etc.)
b) Excessive Complexity (too many product versions, too many decision points, too much operational inefficiency)

Nearly all the problems you see in a Dilbert cartoon come from these types of obesity.

Successful companies work diligently on a regular basis to help keep these excesses out of their organizations. They take away as much of the weight of bureaucracy and complexity as they can, so that the people on the front lines are empowered and free to do the right thing on a timely basis. By never letting the fat build up, they never have the trauma of trying to get rid of it.

Unhealthy companies, on the other hand, keep piling on more fat until (like clogged arteries) nothing can move anymore. And once the movement stops, it is hard to eliminate the fat and get it moving again.

It’s not that people intentionally want to be fat. They just live a lifestyle which makes fat happen. The same is true for businesses. Be on the lookout for fat-causing habits.

3. Sedentary Lifestyle
Long periods of inactivity can cause atrophy and other health problems. By contrast, healthy bodies tend to come from a lifestyle of regular exercise on a frequent basis. The same is true for business.

Healthy companies have a bias towards action. They like to experiment and try new things (focused in the direction of the strategy). When there is a problem, their first reaction is to figure out what to do to make things right.

Unhealthy companies have a bias towards inaction. They prefer to stick with the status quo and resist change. When there is a problem, the first reaction is to try to place blame on someone else (and get someone else to fix it).

A company used to action on a regular basis can be more easily mobilized to act when needed in the future. Its muscles have been trained to move together and handle the load via regular exercise. By contrast, a company used to inaction will have significant difficulties when it is time for a major strategic reinvention.

The goal of strategy is to create a stronger, more successful company. Strong, successful companies tend to behave differently from unsuccessful ones. Just as a person’s daily lifestyle and habits impact their health, the daily lifestyle and habits of a company impact long-term business health and success. Therefore, a strategic planning needs to address any of the bad habits which are hindering success. Examples of bad daily habits which can impede success are:

a) Insufficient Investments in Key Elements of the Business (starving the company).
b) Allowing Excessive Bureaucratic Fat and Complexity to Creep in (overburdening the company).
c) A bias Towards Inaction (unable to adapt and change when needed).

Most of the literature on strategic planning talks about the big picture issues, like Visions and Mission Statements. Although this type of activity is essential, it is a worthless endeavor if a company is not healthy enough to make the vision a reality.

We’ve all heard the complaints about the fact that most companies fail at ever achieving those big-picture goals and visions. If we want to stop the complaining, then we need to address those root causes of failure—the bad habits on a daily basis. Don’t just blame someone else for the poor implementation. Get involved.

Remember, at some point, all strategic activity is a waste of time if it is never achieved. If you personally do not want to be seen as a waste of time in your organization, then move beyond just setting the big picture and help bring it to reality by getting involved in how a company behaves on a day-to-day basis.

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