Culture vs Strategy

Strategy involves understanding your current position, deciding on a destination, and charting a course from here to there.

Culture is about who you are, and why you do things.

Culture is arguably more important than strategy because, if you look at it over the lifetime of a product or an organisation, the culture is the only thing that will really matter. The strategy and the products are today’s strategy and today’s products, but over time the strategies and the products will change while the culture will remain.

Creating a successful culture won’t happen accidentally, but the key to creating a winning culture is to understand that culture matters.

And in the long run, it may be the only thing that matters.

Do you have assets?

Do You Have Assets

(Source: Flickr)

When can you consider something that you have to be an asset?

This may sound like a funny question, but it is particularly important for the success of organisations and your success as an individual.

The answer turns out to be largely a matter of perspective.

If you are an accountant, then your goal is to categorise resources into groups: assets, liabilities, and equity.

From this perspective, assets will be resources that are owned or controlled by an organisation, and which can be used to better operate the business. These might include things like cash, inventory, property, plant and equipment.

If you are a financier, however, then your goal is a little bit different.  You are not trying to categorise resources into groups but rather to maximise your return on investment.

Looking at it this way, assets will be resources that increase in value or generate cash flow. This would include things like stocks (preferably dividend paying), interest bearing loans, bonds, and rental property. However, this perspective will tend to undervalue assets that don’t produce returns sufficiently quickly, and will basically ignore any value produced more than five years in the future.

If you are a strategist, then your goal is different again. You may have one eye on cash flows, but you are basically trying to ensure your organisation’s long term survival and prosperity.

With this in mind, assets will include resources that help the organisation maintain and strengthen its position over the longer term. This will include things like brand recognition, scale of operations and proprietary technology.

If you take the perspective of the financier, then you would rightly conclude that the paid subscriber base of media companies like The Australian, The New York Times and The New Yorker are assets since they undoubtedly generate a healthy stream of short term cash flows.

If you take the perspective of the strategist, however, then you may start to feel slightly uneasy.  In the world of digital media scale of operations is a critical strategic asset, and so steps that artificially limit subscriber numbers (by, for example, charging a subscription fee) are likely to inflict damage on the value of these organisations over time.

An asset may be an asset, but from whose perspective?

It may be a good time to take stock.

Sun Tzu on strategies for effective leadership (part 4)

THIS post, part 4, considers the principles developed by Sun Tzu on strategies for effective leadership. It is the 4th and final part in a series looking at how Sun Tzu’s military precepts provide a timeless guide to modern business leadership. Part one looked at the qualities of successful leaders. Part two considered principles for organising your business affairs. Finally, part three considered the principles for dealing with business rivals.

I have summarised Sun Tzu’s principles into four simple categories:

  1. Qualities of a successful leader;
  2. Organising your business affairs;
  3. Dealing with rivals; and
  4. Strategies for effective leadership.

4. Strategies for effective leadership

4.1 Create a common philosophy

Marc Benioff, CEO of salesforce.com says that “to be truly successful, companies need to have a corporate mission that is bigger than making a profit…By integrating philanthropy into [the] business model … employees feel that they do much more than just work at [the] company.

He will win whose army is animated by the same spirit throughout all its ranks.

4.2 Foster co-operation

In order to be successful in business it is important to have many experienced employees working together in co-operation.

Adam Smith was the earliest to report the merits of specialization and cooperation some 230 years ago. He compared the output of a Scottish farmer working alone to make pins for his wife with a French pin factory’s daily production. The factory employed experienced specialists, equipped them with the latest tools and organized them to work cooperatively to produce pins. The factory turned out hundreds of times more pins per specialist per day than the farmer working alone. Moreover, the factory-made pins surpassed the farmer’s pins in terms of quality and consistency.

If two armies will help each other in a time of common peril, how much more should two parts of the same army, bound together as they are by every tie of interest and fellow-feeling. Yet it is notorious that many a campaign has been ruined through lack of co-operation…

4.3 Maintain good communication

Being well informed is the only way to make good decisions. Make sure that you have access to the latest information on who is doing what in your organization.

…the commander whose communications are suddenly threatened finds himself in a false position, and he will be fortunate if he has not to change all his plans, to split up his force into more or less isolated detachments, and to fight with inferior numbers on ground which he has not had time to prepare…

4.4 Pick your men carefully

A leader must use the skills of his employees to best advantage by using the right man in the right place.

The skilful employer of men will employ the wise man, the brave man, the covetous man, and the stupid man. For the wise man delights in establishing his merit, the brave man likes to show his courage in action, the covetous man is quick at seizing advantages, and the stupid man has no fear of death.

4.5 Control your men with kindness and discipline

If [subordinates] are punished before they have grown attached to you, they will not prove submissive; and, unless submissive, they will be practically useless. If, when [your subordinates] have become attached to you, punishments are not enforced, they will still be useless. Therefore [subordinates] must be treated in the first instance with humanity, but kept under control by means of iron discipline.

Bestow rewards without regard to rule, issue orders without regard to previous arrangements; and you will be able to handle a whole army as though you had to deal with but a single man.

4.6 Set up a dependable systems of reward and punishment

People respond to incentives, this is one of the first lessons learnt in Microeconomics 101. As such, it is important to encourage good behaviour and discourage poor behaviour with an appropriate system of reward and punishment.

…that there may be advantage from defeating the enemy they must have their rewards.

4.7 Do not micro-manage your subordinates

The art of giving orders is not to try to rectify the minor blunders and not to be swayed by petty doubts. Vacillation and fussiness are the surest means of sapping the confidence of a [company].

4.8 Foster a spirit of enterprise

Encourage your employees to be industrious and hard working.

Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise for the result is waste of time and general stagnation.

Sun Tzu on dealing with rivals (part 3)

PART 3 of 4 considers the principles developed by Sun Tzu for dealing with business rivals and follows on from part one which looked at qualities of successful leaders, and part two considered the principles for organising your business affairs.

I have summarised Sun Tzu’s principles into four simple categories:

  1. Qualities of a successful leader;
  2. Organising your business affairs;
  3. Dealing with rivals; and
  4. Strategies for effective leadership.

3. Dealing with rivals

3.1 Employ experts and consultants

When operating in a foreign country it is important to seek the advice of local experts so that you can best take advantage of local laws and natural advantages. When operating in an unfamiliar industry, employ consultants to provide specialized knowledge on the industry and the competition.

Know your [competition], know yourself and you can fight a hundred battles without disaster…

3.2 Use spying, deception and bluff

Donald Krause, consultant and author of The Art of War for Executives, believes that people whose scruples do not include spying and appropriate levels of deception will not be very successful in business or politics.

Spies are a most important element in [business], because on them depends a [company]’s ability to [act].

Do not publicly release definite business plans.

The spot where we intend to fight must not be made known for then the enemy will have to prepare against a possible attack at several different points.

Release confusing, incorrect or contradictory reports to the media. Your competitors will not know what you are planning to do, and they will not be able to prepare accordingly.

All [business] is based on deception…when able to [release a new product], we must seem unable; when using [much energy], we must seem inactive…If your [competitor] is of choleric temper, seek to irritate him. Pretend to be weak, that he may grow arrogant.

3.3 Understand the motivation of your allies

We cannot enter into alliance with [other companies] until we are acquainted with their designs.

3.4 Attack your competitor’s reputation

Donald Krause, author of The Art of War for Executives, says “…personal attacks are frequently used in business situations when more logical methods might fail. The person using the personal attack tactic is usually the one operating from the weaker position. Personal attacks are particularly effective in environments where performance is subordinated to personality. … I have found that Sun Tzu’s description of the ideal circumstances for a personal attack, as I interpreted the fire attack section, work excellently in real life.”

3.5 Poach customers and employees

Poaching a highly trained senior employee from one of your competitors is equivalent to training twenty of your own. Some of your juniors will leave you, some will prove useless, and some will be unsuccessful for other reasons. You will need to train ten juniors in order to create one senior employee; your competitor must do the same.

…a wise general makes a point of foraging on the enemy. One cartload of the enemy’s provisions is equivalent to twenty of one’s own, and likewise a single picul of his provender is equivalent to twenty from one’s own store…Because twenty cartloads will be consumed in the process of transporting one cartload to the front.

Sun Tzu on organising your business affairs (part 2)

PART 2 considers the principles developed by Sun Tzu on organising your business affairs, and follows on from part one which looked at qualities of successful leaders,

I have summarised Sun Tzu’s principles into four simple categories:

  1. Qualities of a successful leader;
  2. Oranising your business affairs;
  3. Dealing with rivals; and
  4. Strategies for effective leadership.

2. Organising your business affairs

2.1 Management must be independent of owners

If you are the CEO of a company, you must not take directions from the owner or shareholders in how to run the day to day affairs of the company.

If fighting is sure to result in victory, then you must fight, even though the [owner] forbid it; if fighting will not result in victory, then you must not fight even at the [owner]’s bidding.

2.2 Make preparations

You must constantly plan, prepare and train your employees. If you do not, you will not be in a good position to take advantage of the next exciting business opportunity.

…the general who wins a battle makes many calculations in his temple ere the battle is fought. The general who loses a battle makes but few calculations beforehand.

He will win who, prepared himself, waits to take the [competitor] unprepared.

2.3 Make no mistakes

Making no mistakes is what establishes the certainty of victory, for it means conquering [a competitor] that is already defeated.

2.4 Prioritise tasks

Having limited capital and resources at his disposal, an experienced leader must prioritise tasks in order to achieve specific goals.

2.5 Choose your battles

He will win who knows when to fight and when not to fight.

2.6 Work swiftly in short bursts

The chief lesson is the paramount importance in business of rapid action and sudden rushes, “great results can thus be achieved with small forces.”

2.7 Adapt to the circumstances

In business, there are no constant conditions and you must adapt your strategies accordingly.

Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances.

2.8 Pay attention to changing market conditions

The rising of birds in their flight is the sign of an ambuscade. “When birds that are flying along in a straight line suddenly shoot upwards, it means that soldiers are in ambush at the spot beneath.

2.9 Adapt your strategy to the size of your organisation

You must adapt your business strategy to the size of the company and its competitors. For example, a large company may be suited to producing commodities; a small company may be better suited to producing highly specialised differentiated products.

He will win who knows how to handle both superior and inferior forces.

2.10 Seize opportunities

Look for gaps in the market.

You can be sure of succeeding in your attacks if you only attack places which are undefended.

Always be ready to seize the next big opportunity, especially when you are facing business difficulties.

If…in the midst of difficulties we are always ready to seize an advantage, we may extricate ourselves from misfortune.

Those who want to make sure of succeeding in their battles and assaults must seize the favourable moments… [w]hat they must not do, and what will prove fatal, is to sit still and simply hold on to the advantages they have got.

2.11 Avoid threats

If you can establish a business that has a natural monopoly, high barriers to entry or some other competitive advantage, this will greatly reduce the competition. For example, eBay has a natural monopoly in the online auction market. Buyers and sellers are naturally drawn to eBay because so many other people already use the site. This makes it easier for sellers to find a buyer and easier for buyers to find a product that takes their fancy.

You can ensure the safety of your defence if you only hold positions that cannot be attacked.

2.12 Obey the rules until the decisive moment arrives

Walk in the path defined by rule, and accommodate yourself to the enemy until you can fight a decisive battle [then] [d]iscard hard and fast rules. Victory is the only thing that matters, and this cannot be achieved by adhering to conventional cannons.

Sun Tzu on the art of leadership – qualities of a successful leader

Background to The Art of War

SUN TZU wrote The Art of War in approximately 490BC in the Kingdom of Wu, China, and became a general for the King of Wu in 512 BC. For the next 39 years his precepts were followed and the Kingdom of Wu was victorious. And then, they forgot … the armies of Wu were defeated and the Kingdom made extinct.

In 1782, The Art of War was first translated into French by a Jesuit, Father Amiot. There is a legend that it was Napoleon’s key to success and his secret weapon and the first English translation was produced by P.F. Calthrop in 1905.

In reading The Art of War I have tried to think about how Sun Tzu’s military principles provide a timeless guide to modern business leadership.

Dr. Foo Check Teck, Asia’s foremost expert on Sun Tzu, says, “I found many more CEO’s and entrepreneurs, especially those who had to compete at the edge, are unconsciously applying Sun Tzu’s ping-fa (Law of Soldiering).”

The essence of business, like war, is to pursue goals and achieve success (Dr. Raymond Yeh). Success, or even your proximity to success, can make you a target to those who oppose that success, however they might choose to fight you. That is why understanding Sun Tzu’s Art of War can prove advantageous to just about anyone (Robert L. Cantrell, consultant and author of Understanding Sun Tzu on the Art of War).

I have summarised Sun Tzu’s principles into four simple categories:

  1. Qualities of a successful leader;
  2. Oranising your business affairs;
  3. Dealing with rivals; and
  4. Strategies for effective leadership.

If you’re interested in The Art of War and want to read more, check out both Sonshi.com and Wikipedia.

1. Qualities of a successful leader

1.1 Discipline

A leader must be disciplined. Having discipline includes maintaining the hierarchy within the organisation; clearly defining the specific roles and responsibilities of members of management; maintaining systems to ensure delivery of services by suppliers and payment from customers; and controlling expenditure.

I fully believe he was a good soldier, but I had him beheaded because he acted without orders.

1.2 Presence of mind

Presence of mind is the ability to stay calm and act sensibly in a crisis. This is a leader’s most important asset.

1.3 Self respect

If you do not respect yourself, your men will not respect you. If your men do not respect you, they will be unresponsive to orders and will delight in undermining your authority and reputation.

1.4 Wisdom, sincerity and good faith

If your decisions are well thought out and you act honestly, your men will trust you. If you are trusted, people will speak their mind freely and openly, which means business problems can be solved more quickly and effectively.

1.5 Prompt decision making

In a competitive business environment time is always of the essence. As such, a successful leader needs to make quick decisions.

…though we have heard of stupid haste in [business], cleverness has never been seen associated with long delays.

SWOT Analysis

SWOT Analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats involved a business venture

SWOT Analysis

1. SWOT Analysis Explained

ALBERT Humphrey is credited with inventing the SWOT analysis technique.

SWOT analysis is a strategic planning tool used to evaluate the strengths (S), weaknesses (W), opportunities (O), and threats (T) involved a business venture. It involves specifying the objective of the business venture and identifying the internal and external environmental factors that are expected to help or hinder the achievement of that objective.

After a business clearly identifies an objective that it wants to achieve, SWOT analysis involves:

  1. examining the strengths and weaknesses of the business (internal factors); and
  2. considering the opportunities presented and threats posed by business conditions, for example, the strength of the competition (external factors).

By identifying its strengths, a company will be better able to think of strategies to take advantage of new opportunities. By identifying current weaknesses and threats, a company will be able to identify changes that need to be made to improve and protect the value of its current operations.

2. Criticisms

SWOT analysis has two clear weaknesses. Firstly, using SWOT may tend to persuade companies to write lists of Pros and Cons, rather than think about what needs to be done to achieve objectives. Secondly, there is the risk that the resulting lists will be used uncritically and without clear prioritisation. For example, weak opportunities may appear to balance strong threats.

3. Case example: drinks manufacturer

Let’s use SWOT analysis to consider the strategy of a hypothetical prominent soft drinks manufacturer called Coca-Cola. Coke is currently the market leader in the manufacture and sale of sugary carbonated drinks and has a strong brand image. Sugary carbonated drinks are currently an extremely profitable line of business. The company’s goal is to develop strategies to achieve sustained profit growth into the future.

3.1 Strengths

A firm’s strengths are its resources and capabilities that provide the firm with a competitive advantage in the market place, and help the firm achieve its strategic objective. Coke’s strengths might include:

  • strong product brand names,
  • large number of successful drink brands,
  • good reputation among customers,
  • low cost manufacturing, and
  • a large and efficient distribution network.

3.2 Weaknesses

Weaknesses include the attributes of a business that may prevent the business from achieving its strategic objective. Coke’s weaknesses might include:

  • lack of a large number of healthy beverage options, and
  • large manufacturing capacity makes it difficult to change production lines in order to respond to changes in the market.

3.3 Opportunities

Changing business conditions may reveal certain new opportunities for profit and growth. Coke’s opportunities might include:

  • new countries and markets that Coke might expand into, and
  • a lack of any strong global fruit juice or other healthy beverage manufacturer leaves a gap in the market.

3.4 Threats

Changing business conditions may present certain threats. Coke’s threats might include:

  • shifting consumer preferences away from Coke’s core products, and
  • new government competition regulations that prevent the acquisition of large competing soft drink companies.

3.5 Proposed strategy

The main opportunity for Coca-Cola is the rising popularity of healthy beverage alternatives, such as water and fruit juice. The dominance of Coca-Cola and the increasing number of competition regulations that prevent Coke’s acquisition of competing drink manufacturers presents a threat to Coke’s objective to obtain profit and growth. A proposed strategy may therefore be to find small healthy beverage manufacturers with quality products. Purchasing these small companies will not raise competition concerns. Coke might use its strong brand name, manufacturing capacity and distribution networks to obtain strong market penetration for its newly acquired healthy beverages.

[For more information on consulting concepts and frameworks, please download “The Little Blue Consulting Handbook“.]