Strategic Framing

Yesterday, Grand Canyon Education, an online education company, came to market with the first IPO in over three months.

I’m not sure I’d call this signs of a recovery, though people are reaching for any good news these days.   The bigger news to me is how completely the IPO market has ground to a halt.  One IPO in three months!  I recall a time around nine years ago when it seemed I ran into someone taking their company public on a daily basis.  OK, OK, I admit I was living in Seattle at the time and people were giddy with the coffee drinks Kozmo was delivering to their offices every hour.

However, the fact remains that issuing new equity or going public is a key part of many company strategic plans.  That avenue is effectively closed right now.   Unfortunately, given our natural tendency towards overconfidence when creating strategic plans, I suspect many of these companies did not create adequate Plan B’s for use in the event that Plan A was not viable.  A good plan B should build from a disciplined look at possible, though perhaps not probable, futures.  These plans are developed as part of the initial planning process to help the company remain proactive when the unexpected happens.  The company essentially takes out options on the possibility that their preferred strategy will not be viable in the future.  The alternative, as we are seeing now, is scrambling to react to unanticipated events.  Reacting to a crisis is not a good place from which to implement strategy.

Layoffs are in the news again and in a big way.  Each day brings a new headline about large company layoffs.  This week, the big news was Citigroup’s announcement that they will reduce headcount by 52, 000 over the next year. Despite what some headlines screamed, Citigroup is not laying off 52,000 employees.  Some of these reductions will come from attrition and asset sales.  Nevertheless, the pain is real at Citgroup and the layoffs are significant.

Back in 2005 and 2006, I spent a lot of time researching and writing about layoffs.  Over the next few weeks, I will revisit some of these findings on this blog.  Layoffs are a type of strategic change.  Obviously, they are not the type of change managers hope for.  I’ve never watched a strategic change presentation with a slide that said “Year four: reduce headcount by 25%”.

For now, here are links to two of my media interviews about layoffs from 2006-2007.  The first interview considered the investor implications of layoffs and was published in The Wall Street Journal.  The second interview discussed layoffs in the pharmaceutical industry and was published on ere.com.

Why Investors may do Well with Firms that Avoid Layoffs by Herb Greenberg, The Wall Street Journal, published on Sept 9, 2006. (subscription required to read full article)

Awaiting Pfizer Cuts, Business Expert says Pharma Sales to go through ‘Painful Transition’ by Elaine Rigoli, ere.net, published on January 17, 2007.

We’ll be singing
When we’re winning
We’ll be singing

I get knocked down
But I get up again
You’re never going to keep me down

- from ‘I Get Knocked Down’ by ChumbaWumba

Painful as these times are for many companies, recessionary periods are times when disruptive innovations emerge across industries.  With old strategies are broken, executives are forced to embrace new strategies.

Knowledge@Wharton has an excellent article about companies ‘getting up again’.  If you are not familiar with Knowedge@Wharton, I recommend checking it out.  It is chock full of fantastic practical articles for managers.

The article is entitled “Why an economic crisis could be the right time for companies to engage in ‘Disruptive Innovation‘”

In the article, Paul Schoemaker, research director for the Mack Center for Technological Innovation at Wharton (and DSI founder), argues that companies need to use the pressures of the down economy to push “Big I” innovations within their organizations.

So all together now!

We’ll be singing
When we’re winning
We’ll be singing

It is difficult to put resources into strategic planning when faced with a difficult business environment.  When everyone is running faster just to meet their end of year goals, it is hard to justify pulling senior decision-makers out of the game to spend time on long-term planning. 

The strategic checkup with implementation follow through is a great option.  This is the two minute drill of strategic planning.  Find a single day (perhaps on a weekend) and gather your key decision makers together for a disciplined look at the next 1, 3, or 5 years.  The trick is to keep it short but commit to the follow through.  Too many off-site planning sessions become wasted time after the fact when nothing ever comes of the ideas.  At DSI, we offer a process to keep the off-site meeting on task and interesting but we also have the expertise to help you design the implementation once the decision makers go back to their jobs putting out fires.

In the following video, John Austin describes how a strategic check-up can be an ideal approach to corporate planning during economic downturns.

Scenario planning has a number of outcomes. As a strategic planning process, it generates a level of creativity that can help a senior team get beyond the obvious, predictable, tired strategies being pursued by all their competitors.

Like any strategic planning process, scenario planning is only as good as the follow through. What is done with the strategy plannng outcome? How is the resultant strategy implemented?

We’ve found value in using an options-based implementation strategy as a path forward from the planning process. In addition, the options approach creates excellent opportunities for leadership development when combined with a change leadership cohort of key executives or high potential employees. I’ve always found my work coaching such cohorts immensely satisfying.

Scenario planning also creates rich insight that can be used as the basis for ‘conversation starter’ articles. Scenarios can spark new thinking by creating vivid stories of possible futures.

One example of such an output is the Scenarios for Credit Unions report DSI completed. This report is a great example of the kind of output our consultants can generate at the end of a scenario planning process.

For more on scenario planning see:

1. Scenario planning in finance
2. Implementing scenario planning in your organization
3. Interesting output from 1997 scenario planning exercise

Roch Paryre, Ph.D., a Senior Partner at DSI, describes the tyranny of small steps and avoiding business failure. Excerpt from a talk on strategic thinking and decision making.

Contact us for more information about Dr. Paryre and other DSI speakers.

Roch Paryre, Ph.D. describes the challenge of rewarding decision process instead of decision outcome. Excerpt from a talk on strategic thinking and decision making.

Contact us for more information about Dr. Paryre and other DSI speakers.

Decision Strategies International provides services designed to improve organizational strategic aptitude. We do this through a unique combination of education, consulting, and monitoring.

DSI faculty and consultants are recognized thought leaders in the areas of adaptive strategic planning, managing in uncertain environments, innovation, scenario planning, decision making, leading change.

DSI clients include over 60 Fortune 500 companies and companies from all points on the globe. We have offices in the US and Europe and clients on six continents.

Our combination of services enables us to identify and improve strategic aptitude in the manner appropriate for the client.

Our executive development team combines deep academic experience with extensive industry experience.

Our consulting team combines deep process expertise with an impressive scope of industry experience.

In partnership with Strategic Radar, DSI helps companies continuously monitor their environment and stress test their strategic actions.

Contact us with your needs and we will be glad to help your organization prepare for, and thrive in, an uncertain future.

Companies designed to do things faster and better can be blindsided by innovations. When a system is build on predictability, environmental change wreaks havoc. With the proper resources and mindset, executives can create vigilent companies capable of thriving in the midst of industry innovation, change, and upheaval.

Roch Parayre, Ph.D. uses his experience working at McDonalds to illustrate the challenges facing performance organizations.

Overconfidence can derail a strategic planning process. It can cause smart people to assume they know more than they do. It can lead groups of people to confidently predict a future when the future is uncertain. It can make a strategy a narrowly focused agenda instead of a map of strategic options for thriving in an uncertain environment.

Roch Parayre, Ph.D. gives some famous examples of overconfidence.