7 Deadly Sins of Business Decision Making

7 DEADLY SINS OF BUSINESS DECISION-MAKING

As many of you who will have read my June Monday Motivation will know I have been going through some old files. What memories! However they also reminded me of how often the basics of business still remain unchanged. And one such area is in the way we make business decisions. Why is it that so many companies keep making costly mistakes?

The reasons business people make the wrong decisions, in fact, stems from a multiplicity of causes. A colleague of mine, Deborah Sawyer, a number of years ago identified seven deadly sins of business decision-making that alas are too familiar to us all.

Her list included:

1. We already have all the answers – the longer someone has worked in an industry the more inclined they are to believe they know all the answers about that industry. The same applies for someone who has worked with a particular company for a while and is immersed in that particular company’s viewpoint.

Symptoms include –
a) familiarity breeds contempt;
b) arrogance in that we would never go outside for information – we have it all in-house!
c) “old boy’s knowledge”.

REMEMBER: History does not always repeat itself!

2. Asking the wrong question – getting to the right decision means having the right information. And having the right information means asking the right questions. Here lies the kernel of another reason why many business people make the wrong decisions – they do not ask the right question.

REMEMBER: Asking the wrong quesiton is not such a sin if a company is willing to recognise the mistake, backtrack and then go forward.

3. Old Demon Ego– Decisions which companies should never take, and would never take if egos could be set aside, do get taken because decision-makers can’t give up their pet ideas. Whilst decision makers often know they should go and get some objective input to test their idea, they deliberately avoid doing so. That’s becuase they know an input of information will likely show up the flaws in the project. That would mean they would have to abandon the idea!

Symptoms include:
a) unwise acquisitions
b) diversification bites
c) failing overseas
d) entrepreneurial weakness

Have you hugged your pet idea today?

4. Flying by the Seat of your Pants Saves Money – Doesn’t It? – Executives often fall for this one! By not seeking out the information to support decision making, they “save” the company money.

Symptoms include:
a) winging it overseas
b) rushing with a product lauch/project
c) leaving it too late

It is important to remember here that most readily available information is generalised and intended to inform in a general way. Rarely is generalised information, which just about anyone can access, tailored enough to support business decision making, which has to occur in the context of a paritcular company’s situation.

5. If It Works for Them, It’ll Work for Us (All Aboard the Bandwagon)– Rather than undertake soul searching to find the right choices, a company instead looks around at what others in its industry have done and simply mimics them. By imitating what others do, there is no need to take an idea and test it in the context of your own company to see if there is a fit.

Some symptoms include:
a) following the fashions
b) safety in numbers
c) why is no-one else doing this?

This sin is most usually made in mature industries where there are a limited number of players and everyone knows everyone else.

6. Hear No Evil – Another way companies avoid making the right decision is by making sure they never hear anything unpleasant. We all know this one and some of the symptoms include:
a) don’t tell me what I ask to hear!
b) shoot the messenger

7. No Decision Can be the Same as a Bad Decision (Hurry Up and Wait) – Failure to make a deicison does not just mean a lost opportunity. It can also take away the chance to take corrective action to an existing business situation.

Symptoms include:
a) decision drag (also known as procrastination)
b) head in the sand
c) eye off the future

Do you recognise any of these in your business? Every company and every industry runs the risk of thinking that the current status quo will continue. Many decisions taken or not taken rest on this assumption.

So which sins are we committing today as we work to being a more profitable business?

Get in touch find out how MindShifts can assist you and your organisation to make better decisions. Take action today!

10 Essential Strategic Insights

I was recently going through some old files and realised that in some cases the more things change, the more they really stay the same. This is especially true in strategy and when you distil the writings of Michael Porter, a global authority on competition and strategy, there are essentially 10 key strategic insights. Not least among them is that most companies think they have strategy when they don’t.

Porter’s essential strategic insights are:

1. The granddaddy of all mistakes is competing to be the best, going down the same path as everybody else and thinking that somehow you can achieve better results.

2. Confusing marketing with strategy.

3. Overestimating strengths.

4. Getting the definition of the business wrong or getting the geographic scope wrong.

5. The Worst mistake: Not Having a Strategy at all.

6. Not addressing the hidden biases embedded in internal systems, organizational structures and decision-making processes.

7. Companies undermine their own strategies.

8. Strategy killers in the external environment.

9. If you listen to every customer and do what they want you to do, you can’t have a strategy.

10. Single minded pursuit of shareholder value, measured over the short term, has been enormously destructive for strategy and value creation.

Yes, some of these seem self-evident when you think about it, yet they run counter to the way most executives think and behave.

Clearly developing an effective strategy is a long-term process and not a short-term one, and having a strategy is even more important in these turbulent and uncertain times.

Remember we operate today in a VUCA World (Volatile, Uncertain, Complex, Ambiguous). There is nothing wrong in returning to basics – sometimes it’s important to step back and take an outsiders view of your business.

Need to see with a fresh set of eyes? Looking for someone to challenge your thinking? – Give me a call on 0403 346 322 or contact us via our website.

INTELLIGENT COMPETITION

The most critical strategic issue for any business is its competitiveness. No one would disagree with this yet few businesses really spend time and effort to deeply understand and manage their future competitiveness.

Most executives monitor their competitiveness through market share and as we all know that indicator is historical and is in no way predictive.  Neither is historical tracking of past revenue trends.

So how do you monitor your competitiveness, identify potential new entrants, understand your existing competitors, and manage as well as identify your potential competitiveness? How do you manage the risks involved in being in a competitive market?

 

While generally the CEO is the one responsible for the competitive ability of any business, they are often lacking the right insights to make the best decisions.  And while most businesses have plenty of information and plenty of know-how they have very little Competitive Insights or Intelligence (CI).  One reason — there is no tie between business strategy and future competitiveness, and business systems and processes.

CI is concerned with the methods, systems and processes that a business uses to monitor its competition, any potential industry disruption, its own competitive position, and to improve its competitiveness overall.

Although most managers intuitively carry out some form of CI – generally in an ad-hoc way – the overwhelming data that is available, rapidly changing technology, and increasing global competitive pressures mean that there is an increasing need to develop more systematic ways of doing CI.

 

There are a number of key steps that will ensure the success of a good CI process. These are:

 

  1. Ask the right question

 

Far too often, businesses make decisions too quickly and without a strategic context — it is a case of ‘ready, fire, aim’.  The internet and social media has not helped this mindset, as the speed to market has become a more critical factor. In the end, we are left with a smoking gun, but where did the bullet go?

 Experience has shown that ‘asking the right question’ is one of the hardest steps for senior management.  Here we need to define the decision objective or purpose and to put it simply to understand what really needs to be identified.

 

  1. Manage information effectively

 

Once you have identified your objective and possible key questions, the next driver for understanding what you have and don’t have within the business needs to come from studying the forces at work on your business. These forces could include competitors, technology, clients, consumers, new entrants, industry trends and so on.

Getting solid information on the decision at hand requires a number of information sources:

Human sources: for example, people in your organisation, business networks, experts, etc.

Economic and financial sources: for example industry reports, economic analyses specialist media.

Corporate sources:  for example, customers, suppliers.

Technical sources: for example technical reports, academic papers, and product manuals.

Remember all the information needs to be put into context and subjected to interpretation to derive some meaning and value.

 

  1. Analyse for insight and intelligence

 

The major focus in the CI process is the method of analysis used to turn the information collected into intelligence or insights for the decision maker. It is only through analysis that intelligence or insight is created.

The value of insight is early awareness, as it enables you to recognise and monitor the future as it unfolds, thereby reducing risk and minimising mistakes. Today, executives are faced with many pressures — they may sometimes seek only short-term gains — but costly mistakes from executives making uninformed decisions are no longer an option.  The risks are too high.

 

 It is important to note that the purpose of CI is not to predict the future, but to enable management to make better decisions about the future.

 

In a VUCA world, CI is becoming an integral part of making business decisions. The data and information gathering and evaluating process can identify and project strategies that current or emerging customers and competitors might pursue, and provides an assessment of the implication of these strategies on your company’s future competitiveness.

We need to realise that we have exciting new ways to protect margins, to fight the competition, to achieve breakthroughs. We need to realise the positives will far outweigh the negatives – but only if we change.

 

Forced change is always second prize. The secret lies in putting together a strategy for the future based on sound intelligence.

How to do SWOT Analysis the right way!

SWOT – The most abused analytical technique in management

As most business people would know SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.

Traditional SWOT analysis is possibly the most widely known and among the most utilized means of situation analysis.  A SWOT analysis is used to assess the fit between a company’s internal resources and capabilities (its strengths and weaknesses) and external possibilities (its opportunities and threats).

The technique can be applied to many areas of a company, including products, divisions, and services. The simplicity and ease of using this model have made it a popular technique, particularly for determining a company’s ability to deal with its environment.

However, it is also arguably the most misused, misapplied, abused and poorly understood analysis method in management today.

Have a look at the diagram below.

Most people undertake the first SWOT that, to be honest, provides executives with little insight and no options as to their competitive abilities. It is so easy to fill in four boxes and persuade yourself you have done analysis!

The real SWOT (as originally developed by Harvard Professor Ken Andrews) will always deliver insights and options for good decision making. It is a little harder to do however every client I have worked with using this “proper” SWOT has uncovered invaluable insights and options as to its competitive ability.

SWOT Analysis

So how can you improve your use of SWOT Analysis?

Step 1: The first step in utilizing a SWOT analysis to understand each of the elements.

a. Strengths: Strengths are those factors that make an organization more competitive than its marketplace peers. In other words, those factors that differentiate you from your competitors. It is where the company has a distinctive advantage at doing or what resources it has which are superior to the competition. Listing what you believe are your strengths is simply an exercise in patting yourself on the back! Strengths are what differentiates you from your competitors. Your customers, suppliers and third parties know your strengths well compared to your competitors.

b. Weaknesses: A weakness is a limitation, fault or defect within the company that can prevent it from achieving its objectives. They occur when the company performs poorly or has inferior capabilities or resources compared to the competition. Again, your customers, suppliers, and other third parties would be aware of your real weaknesses.

c. Opportunities: Opportunities include any favorable current or prospective situation in a company’s environment such as a trend, change or overlooked need, which supports the demand for a product or service and permits a company to enhance its competitive position. Opportunities are equally valid for all players in your industry – not just you!

d. Threats: A threat includes any unfavorable situation, trend or impending change in a company’s environment that is currently or potentially damaging or threatening to its ability to compete. It may be a barrier, constraint, or anything that might inflict problems, damages, harm or injury to the organization. Again, these threats are equally valid for all the players in your industry.

Once you have completed your list in each of the four boxes, the hard work now begins.

Step 2: You now need to match each of the boxes with possible strategies you could undertake –

a. Matching your Strengths and market/industry Opportunities – what are some activities/strategies you could develop?

b. Matching your Weaknesses and market/industry Opportunities – what are some activities/strategies you could develop?

c. Matching your Strengths and market/industry Threats – what are some activities/strategies you could develop?

d. Matching your Weaknesses and market/industry Threats – what are some activities/strategies you could develop?

This is not easy to do and requires thinking.

Below is an example of a completed SWOT.

Once you have completed your SWOT, you will notice some common themes in the activities/strategies you have available. These common themes become what I call your strategic imperatives. You should address these in the coming 12 months as they will provide you with a competitive ability based on your current market fit.

Each year, business executives need to repeat this process as your fit will no longer be the same – and neither will your marketplace!

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SWOT Workshop

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EXAMPLE:   SWOT Analysis for Cannondale Bicycle Corporation

Obsessing About Your Competitors is a Rookie Move

Competition-Fine-Line-Between-Healthy-Interest-And-Obsession-720x340Startups and small businesses are at greater risk for competitive failure than large businesses. They have no “fat” to cushion a competitive threat or to recover from a serious blunder. Entrepreneurs (especially early-stage ones) need to take the competition seriously.

For starters, I am not YFS (Young, Fabulous & Self-Employed). I am OCS (Old, Cranky & Self-employed).

My entrepreneurial venture has been successful for 26 years now. In the world of small business, this is close to an eternity. And being at this juncture, I hate to see entrepreneurs fail simply because they didn’t pay the right type of attention to competition. If I save one business owner from going under because he or she didn’t ask the right questions, it was worth writing this article.

Many entrepreneurs are bad at competitive intelligence
My business is dedicated to teaching managers and executives about competitive intelligence which is the method by which companies unmask opportunities and threats in the market. Through the years I have trained thousands of business people in the world’s most successful companies. I’ve also seen entrepreneurs cherish being first to market with their brilliant idea or product, but forgetting that first move advantage is not enough. It happened to me too. After almost a decade of glorious loneliness at the top, competition entered my space as well. I actually trained my own competitors!

C’est la vie
.

Do I keep a 30,000 feet overview of what’s happening in my competitive space? You bet. Do I follow those competitors closely, analyze traffic on their websites, compare their products, prices, keywords, AdWords, page load time, linking roots domain, changing text, quality of photos, mobile optimization, or zillion other minutia to mine, and obsess over social network chats about them and us?

Not for one minute
.

The pundits’ advice is often bad advice
Go on LinkedIn, and a horde of consultants advise entrepreneurs to keep a close eye on competitors by watching social media like a hawk, tracking competitors’ online moves, analyzing site traffic patterns, and many other magical tricks.

This is simply bad advice.

If you want to stay in business, you can’t obsess about competitors.

Knowing what to look for, what is crucial, and what to ignore as a waste of time and resources. Web intelligence and web analytics are not competitive intelligence. Not by a mile. It’s a toy that makes it easy to “spy” on competitors, right from your desk, compiling tons of useless data.

If you are serious about your company’s long-term success, you don’t want to bring a toy gun to a real gun fight.

The real competitive questions worth asking
Real competitive intelligence answers the following very hard questions:

  • What do I offer that’s unique and who can truly benefit?
  • What are the activities that are crucial to this uniqueness? Which are the strongest links in delivering the offering? Who or what pose the real competitive threat to you?
  • How do I stop competitors from imitating quickly?
  • What are the strategic risks and opportunities opening up for us as the market changes?

The problem with relying heavily on web analytics and other online intelligence tools is that they replace strategic thinking with hyped up statistics or meaningless noise. This is a sure way to lose sight of the competition.

Internet trolling and social media obsession haven’t delivered one iota of better performance to anyone but the vendors supplying the tools.

For professionals like us who’ve been analyzing competition for decades for the Fortune 500, the hype surrounding web intelligence tools borders on the hilarious; its serious consequences, however, can lead to your company’s early demise.

Best advice ever: never follow competitors
Best advice #1: Never follow competitors.

Competitive intelligence is about competing, not chasing the tail of your competition, direct or indirect. Sometime, the best way to compete is actually to ignore competitors. That’s why Harvard Business School never succumbed to the wave of MOOCs free courses and cheap online education. The bankruptcy of now-defunct for-profit education chain Corinthian College is testament to the value of competitive perspective over foolishly following others.

Best advice # 2: A channel is just a channel.

Never forget that your company website is just a channel. What will make you win is what you offer on it and who needs it. If you don’t fill a real need you’d disappear, together with your fast-loading, button-happy, feature-rich mobile site with all the right SEO-grabbing keywords in place, state of the art technology just like everyone else.

Digital marketing is not strategic insight. Continuous alertness to possible market evolution requires the discipline to say “No!”
 That’s where strategic minds win.

Technology, anyone?

There are dozens of companies today offering free or low-cost subscription web intelligence services (e.g., Alexa, Compete, HitWise, Google Trends, SimilarWeb and Tregia are just a small sample). Any of them a clear winner over the others? The same companies that allow you to “spy” on your competitors’ traffic and analyze their data to death can’t even win their own competitive race.

Technology is not a substitute for strategy
Best advice #3: Tech is no substitute for thinking.

This is the the third lesson I teach my high tech startup audience. If you are ready for hard work, it is worth it.

The realm of competitive intelligence is the realm of “standing out.”
 
 Do not obsess over competitors’ minutia. Obsesses over your strategy and its underlying competitive perspective. It is a magnitude harder than collecting web noise, but it will pay off if you get into the habit of answering strategic questions with real competitive intelligence.

Leave web analytics for the kids who get excited with toy guns. Don’t be young, foolish and self-employed.

This article has been edited and condensed.

Benjamin Gilad is the co-founder and president of the FGH-Academy of Competitive Intelligence, the leading institution that pioneered the training and certification of competitive intelligence professionals (CIP™) world-wide. He is a former
 strategy professor at Rutgers University’s School of Management, and author of three books on competitive intelligence’s role in companies’ success.