Month: June 2023

Your company has once again begun to look to the future. It’s shaken off the post-COVID blues and must now position itself in its industry with a fresh strategy. But all of your executives are not convinced that hard choices must be made. How can you persuade them?

A friend of mine was recently confronted with a golden opportunity. Her boss, the retiring owner of the company, offered to sell her a majority share.

But she wondered: “What am I really buying here?”

While it’s easy to think in terms of immediate dollars and cents, or the present value of future cash flows, this thinking is limited. While finance MBAs know how to do these calculations with their eyes closed, that was not the real point.

Instead, we decided that she was being offered a future outcome, the result of a possible company strategy.

In other words, she had to decide whether the organisation could craft a plan that was worth the offering price.

As you may imagine, this was a very difficult decision to make, especially as the company had no long-term strategic plan in place. She would have to create one as soon as possible and use it to determine the future value.

Given the number of assumptions and estimates to be embraced, this made the task a challenge. To illustrate, let’s look at the case study of Intel Corporation, the maker of electronic components for computers.

The company passed through three distinct phases in its lifetime. Let’s examine it from the perspective of a potential buyer in each phase.

Phase 1: Success and Ignorance

In 1974, Intel was dominant in its industry. With an 82.9% market share, DRAM (memory) chips made up around 90% of the company’s revenue.

At that point, it seemed that the firm could do no wrong. It had powerful leadership and a legendary founder, Gordon Moore.

Anyone who wanted to purchase a majority share would have concluded that the future was bright.

However, a deeper analysis a few years later would have revealed trouble. The competition (mostly Japanese manufacturers) was gaining ground for the first time. But historically, their products were an industry joke.

Phase 2: Disruption and a Decision

Jumping ahead to 1984, and Japanese companies were riding a tsunami of steadily accumulating advantages. In no particular order, they benefited from:

• lower costs of capital than Intel could attract
• the long-term investment horizons of Japanese stock traders
• steady investments in spite of an economic downturn
• far greater efficiency based on continuous process improvement

The result?

Intel’s market share plummeted to 1.3%.

At this point, someone thinking about buying shares would have asked CEO Andy Grove, “What is the short- and long-term strategic plan now?”

The fact is, Intel had no strategy to deal with the disaster unfolding. But a fateful meeting between the two leaders in 1985 changed everything.

Grove asked Moore: “If we got kicked out of this company and the board brought in a new CEO, what do you think he would do?”

Moore immediately replied, “He would get us out of memories (chips)”.

Andy, with a surprised look, responded, “Why shouldn’t you and I walk out the door, come back and do it ourselves?”

This conversation marked a turning point. The firm made a complete pivot to a different product altogether…microprocessors. Although they had a tiny operation in this niche, this was going to be a big bet. Almost at once, one billion dollars (US$) were shifted from further investments in memory chips to this new offering. In fact, they decided to phase out production of the old line.

Phase 3: The Strategy Pays Off

Today, in hindsight, the two are lauded for their brilliant decision.

Microprocessors became the number one business at Intel, driving annual revenues from $1.9b to $63.05b. The company’s market cap went from around $3b to $151.1b.

While this high-wire approach to strategic planning cannot be recommended, let’s tie that back to the decision my friend had to make.

In essence, she wanted to know: “Is the company in Phase 1, 2 or 3?” As you may imagine, the price she would have to pay would vary tremendously depending on the answer, and the strategic plan called for in each case.

But let’s forget about her. Take a look around your own organisation. If your leadership team has no consensus view on which phase it’s in, consider it to be in danger. While it may become a lucky winner like Intel, don’t count on it.

Instead of waiting for disaster to strike, create a forum to have the difficult conversations required. You’ll protect your stakeholders from potentially ruinous outcomes with a strategy that fits.

Francis Wade is the author of Perfect Time-Based Productivity, a keynote speaker and a management consultant. To search his prior columns on productivity, strategy, engagement and business processes, send email to columns@fwconsulting.com.

As a leader, you need to provide your organisation with a clear path for the future. But you also hate changing direction in mid-stream. Some say you shouldn’t bother to make any long-term plans in the first place, but is that the best solution?

It pains you to think of spending a lot of time and money to create extended plans which require updates when there is a disruption. Why? You know staff can feel disempowered when a rethink is needed.

However, you also realise that having a predetermined, “True North” steadies the ship. It keeps your team focused on the horizon, rather than on the next wave. Confident in the future, they aren’t distracted by their immediate fears. Or social media. Or their email inbox.

But if you stick to the old ways of doing strategic planning, you are likely to fail. Most still try to use a vague vision statement, what Dr. Richard Rumelt calls the “Statement Doctrine.” It’s easy to do, but few remember it.

Some organisations give up without even trying. They simply rename their 5-year list of tactics a “strategic plan” and keep going.

Fortunately, there are modern techniques which can be combined with group dynamics to provide you with the flexible plan you need. Here are a few of these elements.

1. Rapid Backcasting

Unlike forecasting, backcasting is known as a method of strategic planning in which a detailed future vision is defined first.

From this visionary description involving multiple Key Performance Indicators (KPIs), you step back in time to the present.

However, its originators in the academic social sciences have been accused of turning the approach into an exercise requiring months of effort. At high expense.

The end-result is a long report, usually unreadable by the average manager.

Fortunately, there’s an alternative in the form of rapid backcasting. In this adaptation, the output is a single matrix. This picture captures the timing of major decisions in your timeline, as shown in the vastly simplified diagram below.

For example, a company with a 27-year plan can record milestones such as the acquisition of another firm (Project 2 above).

But this is just the start. Overseas expansions, outsourcing, new technology implementation, product innovation, re-engineering, rapid process automation…these are all big decisions to be included in your timeline.

One immediate benefit is that the plan is rigorous and credible. By including major activities and their impact, you ensure the logic is sound. But the other plus is that when circumstances shift, it can be modified quickly.

When COVID arrived, for example, companies changed their backcasted diagrams. It only took a meeting or two. Why?

The fact is that their “True North” didn’t change by much. Only the tactics to get there. By contrast, if they had to deal with a 100-page report, they may have given up.

2. Powerful Group Dynamics

In the old, rigid approach mentioned above, organisations come to believe that their executives don’t have time for long-term thinking. In these circumstances, they may turn to outside consultants.

At great expense, these outsiders attempt to do the hard thinking required on behalf of the leadership team. Along the way, they present voluminous PowerPoint slides and reports. Usually, their thinking is logical, but it’s not enough. Why?

This approach fails to rely on the real experts – those managers who struggle with the challenges each day. Their inside knowledge is nuanced, and often under-estimated by outsiders.

A very different technique would be to teach them rapid backcasting, then set them loose to do it on their own. They can learn how to think from the future back to the present, and develop a complete matrix of results in hours.

Even though they may not have the big IQ’s of the consultants, collectively, they produce something better. After trading different points of view and conducting some hard negotiations, they have made the most difficult decisions. And now they have a credible plan.

I can say from experience I have witnessed teams making the most challenging choices imaginable under these circumstances. It’s inspiring. In an honest and truthful setting, executives actually step away from their personal interests to seek the best for their companies.

They just need to be given the chance to surprise the company with their courage and intellectual prowess.

As such, when the inevitable disruptions occur, the team can call a fresh huddle, confident in their ability to make the necessary changes. After all, they can unmake any original decisions, as they know how to use the tools.

The naysayers argue that such feats are impossible. “Don’t even try” they advise. But they are wrong. Modern approaches like backcasting can now be taught quickly, and doing so makes all the difference.

Francis Wade is the author of Perfect Time-Based Productivity, a keynote speaker and a management consultant. To search his prior columns on productivity, strategy, engagement and business processes, send email to columns@fwconsulting.com.