S7 E41-44 Be sure your business will make money before you launch with Jeremy Gray

Jeremy Gray – Practical Solutions to Difficult Problems
IBGR. Network. The World of Business at Your Fingertips

Be sure your business will make money before you launch. Planning ahead leads to success.

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Episode 41 Need quick results? Use Agility Hacks.
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(Based on an article by Amy C Edmondson and Ranjay Gultai of Harvard Business School published in HBR November – December 2021)

Link to article https://hbr.org/2021/11/agility-hacks

Speed Agility and Responsiveness are the keys to future success
Anita Roddick

Some business processes are well suited to structure and bureaucratic systems. Although the word bureaucracy has negative connotations it sometimes is the best way of getting things done. Payroll processing maybe a good example. If your employees are going to get paid the right amount and on time, there is not a lot of room for flexibility.

Approving sales contracts often follow a rigid structure that ensures that the company will not lose money on a deal, or that they will get the value they expect. But such processes do not adapt quickly to changing circumstances. So at times businesses should bypass their standard procedures to deliver speed flexibility and experimentation.

This is when Agility Hacks make sense if you have the courage to use them.

1. Agility hacks – the use of temporary teams to carry out time sensitive projects quickly.
   1. Shortcuts or novel methods that increase responsiveness or productivity
2. May not use formal agile methods but work within the principles and values.
   1. Hack was originally a quick effective, if inelegant solution to a problem.
3. Often used to capture new opportunities or to respond to major challenges by implementing workarounds to respond more rapidly
   1. GE adopted a change in reporting structure to focus on winning an order from Indian Railways
   2. PepsiCo UK had two years of declining revenues and faced a third. Realizing that PepisCo’s entrenched systems would impede rapid novel solutions, UK GM formed a SLAM team. (Self-organizing, Lean, Autonomous, Multidisciplinary)
4. Best when the goals are seen as important for the company, this minimizes push back from parties who usually maintained standard operating procedures.
   1. Enables team members and others whose support is needed to see the value in the project
5. By definition Agility Hacks fail if they do not deviate from the conventional way of doing things.
   1. Extraordinary times require extraordinary responses
6. Teams need to be given permission and resources to try new things – quickly without delay.
7. Hacks should not be a chaotic free for all but follow a disciplined process of rapid trial an error
   1. Execution as learning – a structured approach to getting projects done while playing close attention to what works and changing course as required.
8. The GE Story 2012
   1. Indian Railways announces a $2.5 billion to revamp its entire fleet of diesel locomotives. Bids to be submitted within 6 months
   2. Processes and distance from HQ limited the likelihood that GE could submit a bid within the deadline.
   3. It seemed likely that the specifications may change during the bidding process 
   4. High risk deal. Bid too high lose the contract, bid too low – potential to lose a lot of money.
   5. Resistance from others – in the past Indian Railway had pulled the bidding process
   6. But huge potential if successful – important to GE as a company.
   7. Required a cross functional team: manufacturing, sourcing, finance, legal and knowledge of government bids in India
   8. By passed organizational layers to report directly to the CEO of GE India and the CEO of GE Transportation
9. What happened? GE won the contract and delivered the first locomotive in 2015. In 2017 Indian Railways decided electrification was the way to go. There was a penalty of US$325 million for breaking the contract. I could not find out how this was settled. It was reported in Business Standard of India in November this year that the electrification project was due to be completed by 2023.
10.  Agility Hacks are short term solutions that do not address underlying problems – but they can be effective in tackling immediate challenges quickly.

Tags: How to start a business, achieve start up success, agility, responsiveness, hacks, business growth, market penetration, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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Episode 42 Stop Sabotaging Your Ability to Innovate. – Avoid these psychological traps. 
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(Based on article of the same name published in HBR Nov-Dec 21 issue. Authors: Cyril Bouquet, Jean-Louis Barsoux and Michael Wade)
Link to article: https://hbr.org/2021/11/stop-sabotaging-your-ability-to-innovate

There’s a way to do it better; find it
Thomas Edison

Innovators can be their own worst enemies. Confidence optimism, traits that are important for innovation can derail a project when taken to excess. Emotions such as fear, doubt, regret and frustration which are often associated with doing something new can stall or destroy an effort.

1. Why Kodak did not successfully develop a digital camera.
2. The fear of getting started – moving from thinking to doing. Doing incurs risk.
   1. Jeff Bezos told his boss at a hedge fund that he was thinking of selling books online. His boss replied ‘I think that would be better for someone who didn’t already have a good job”
3. When faced with fear consider:
   1. Consulting your future self:
      1. We are hard wired to avoid risky behaviors
      2. Consider future regrets – how would you feel in the future if you did not take this chance.
      3. Don’t focus on the pain of failure, imagine how you would feel if you played it safe and shelved your idea.
   2. Let fear be teacher
      1. Its natural to question your new idea
      2. Ignoring this fear can be a mistake.
      3. Fear can be a teacher, a warning that maybe you are underequipped or underinformed. Find the cause of your unease and address it
4. Learn from setbacks. Learning from failure is not automatic. It requires effort and discipline.
   1. Dissect your failure. Failure often generate negative emotions that do not help learning
      1. Analysis your setback – What exactly went wrong? Why? Which assumptions proved true? Which assumptions proved to be incorrect.
      2. Face your grief head on – a three step process
         1. Acknowledge your feelings – discuss them with friends and family.
         2. Accept the facts
         3. Let go of the loss and move on
      3. Reframe Rejection – James Dyson pitched his bagless cleaner to leading vacuum brands and was rejected. Dyson reframed rejections by focusing on what the companies had not said. They offered no rationale for turning him down.
5. Can there be an excess of creativity? Your belief in a new idea can override the need to stay on course.
   1. You may get drawn down a new path and lose sight of your original purpose. Ask the fundamental question – how does this fit with my strategy?
   2. If you are struggling with your base business, the new idea could lure you off track.
   3. The moment of greatest peril comes when switching from thinking to doing. Do not allow yourself to be distracted.
      1. Elon Musk talking about SpaceX and Tesla “Prioritizing has usually been out of desperation not choice”
   4. Set limits on your involvement at testing and implementation stages.
   5. Enlist a counter weight – a partner who can curb your enthusiasm 
6. How to make the most of your tenacity.
   1. Identify what is most important and let other things go
   2. Take breaks – relentlessly pursuing a goal can alienate your support network.
   3. Ask for feedback.

Your creativity is what got you into business in the first place. If you manage it, it will be one of your greatest assets. Let it manage you and you could be heading for trouble. Do not be afraid to change your plans. “When the facts change, I change my opinion. What do you do Sir?” Attributed to Keynes but more likely spoken by Paul Samuelson. 

Tags: How to start a business, achieve start up success, employee strengths, Task execution, profit improvement, engagement business growth, market penetration, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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Episode 43 Moving novel ideas from mind to market is challenging. How to align folks to get the best results.

Based on How Collaboration Needs Change from Mind to Marketplace. Jill E Perry-Smith MIT Sloan Management Review
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Link to article: https://sloanreview.mit.edu/article/how-collaboration-needs-change-from-mind-to-marketplace/

If you are not embarrassed by the first version of your product, you’ve launched too late.”
– Reid Garrett Hoffman

It can take a long time from initial concept to final product. Most truly novel ideas either stall out during the development phase or lose their originality along the way. 

Product development is rarely a straight line. Development loops back on itself causing delays. Each of these loop backs can result in the more novel aspects of the product being removed, so a more mundane product can move forward.

How can this be prevented? 

1. The journey from concept to final product has four stages:
   1. Idea generation
   2. Concept elaboration
   3. Internal promotion
   4. Implementation
2. Each stage requires a different set of collaborators
3. Idea Generation
   1. Expose creators to a people with a range of perspectives
   2. Does not need to in depth, even brief encounters with different opinions can help connect the dots
   3. Weaker ties are better than stronger ties. Friends are more likely to agree
   4. One on One interactions are better – allowing more ideas to flourish
4. Elaboration Phase – includes activities such as lab testing and prototyping.
   1. Now innovators need support and encouragement
   2. The novel idea likely has flaw that the creator cannot see but are clear to others
   3. Detailed criticism can set the idea back
      1. Creator may take them personally
         1. May abandon the idea
         2. Not share novel ideas in future
   4. Creator needs support to have the courage to persist.
      1. Close friends can provide this support
         1. Listen with an open mind
         2. Provide encouraging advice and feedback that can give a project staying power.
      2. Managers are not ideal as they tend to look at ideas though the lens of prior experience
5. Seeking promotion – selling the idea internally and getting approval to move forward to producing the final product
   1. Creator needs support from an influence or net worker broker
      1. Someone who is connected throughout the organization
      2. Can secure buy-in and resources from the needed part of the organization. 
      3. Have the ability to explain the idea in a way that is understandable and resonates with others
6. Streamlining implementation – where the prototype is developed and actions for building the final product are developed. Sourcing of materials, logistics, manufacturing capacity.
   1. Requires a shared vision that motivates the team
   2. Trust, cooperation, social cohesion.
   3. Confident about other’s intentions, committed to the group and its work.
   4. Group think can be an issue, but this is implementation – a focus on getting things done.
7. Changing collaborative behaviors
   1. We tend to consult the same people regardless of where we are on our product development journey.
   2. Create spaces for independent thinking
      1. Allow folks to come up with their own ideas – often working alone
      2. If a team event, consider silent brainstorming. (Brain writing)
      3. Do not rush to conclusions (48-hour delay)
   3. Review with strangers – Board of advisors

Tags: How to start a business, achieve start up success, employee strengths, Task execution, profit improvement, engagement business growth, market penetration, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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Episode 44 The rise and fall of GE. What lessons are there for entrepreneurs?
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In November 2021, the company (GE) said it would spin off its last remaining three business divisions – aviation, healthcare and power – into separate publicly traded companies.

GE Announcement

If you read business articles from the 1990’s to early 2000’s it is likely they will cite GE as an example of a highly successful, well managed business. Yet today, slightly more than decade later it is a shadow of its former self and soon will cease to exist. What went wrong?  What can we learn for the rise and fall of this American business icon?

Too understand more I turned to two articles on from HBR and the other from Chicago Booth.

https://hbr.org/2018/06/ges-fall-has-been-accelerated-by-two-problems-most-other-big-companies-face-them-too

https://www.chicagobooth.edu/review/three-strategy-lessons-ge-s-decline

Starting with the HBR article written Roger Martin (Former dean Rotman School of Management at the University of Management)
Mr. Martin argues that GE’s downfall was due to two effects that are common through out today’s corporate world. Clueless but deep pocket activist investors and mergers and acquisition folks masquerading as strategists.

On October 25, 2015, activist hedge fun Trian announced an $2.5 billion equity stake in GE. Trian claimed that with Trian’s “help” GE stock could be expected to rise from just over $25 to the $40 to $50 dollar arrange by 2017. Trian insisted that to avoid a proxy fight GE should appoint the founder Ed Garten to the boards. In June 2017 GE’s then CEO Jeff Immelt resigned and was replaced by John Flannery, In October Ed Garten joined the board. From this point it was downhill all the way.

1. Mergers acquisitions and divestments became GE turnround strategy tool. – Historic GE businesses were divested – Light bulbs, appliances and locomotive engines.
2. Juggling the corporate portfolio is common in large companies.
   1. Strategy heads often have a belief that if a company is in trouble the solution is to buy or sell something. 
   2. Its not that MA&D cannot help strategy – used in context of the longer-term business strategy it can work.
      1. Google buying Android, Facebook buying Instagram.
   3. But for a business that is struggling they are a distraction when the focus should be on fixing the customer value equation.
3. The MA&D activity plus cost cutting did not improve GE’s performance
   1. GE announced the divestment of GE Healthcare and Baker Hughes. Two giants of GE. Plus of course some more cost cutting
4. What did Trian get out of the deal. At the time this article Ed Garten was no longer on the board and Trian’s investment had been devalued by about one third. 

What can we take away from this? 

• Although it is unlikely your business will be the target from an activist hedge fund, if you have backers – they may want to influence how your business is run. If they are knowledgeable this can be a blessing, if they are not – who knows where this might lead. Choosing your backers is critical, as a startup you may not have a lot of choice in selecting your investors but where possible partner with people who share your dream and can bring some knowledge to the table.
• M&A is a part of your strategy toolbox which can help you achieve your long-term goals. It is not a strategy in itself. Before you buy or sell a company check with yourself, how does this purchase or sale move me towards my goals.

Let’s turn to James E Schrager’s article in Chicago Booth’s Report. Although written a year later than the HBR article Mr. Schrager argues that GE troubles started much earlier. Jack Welch failed to plan for the end of history, what happens when the existing strategy no longer delivers?

Mr. Welch took over a sleepy company in 1981. He stripped out layers of bureaucracy, pushed decision making down to the field. Set up management education programs that matched that of topflight business schools.

Jack recognized that with capable executives running divisions there was a risk that information flow to HQ could be stifled. He insisted that any issue that might become problematic reached the CEO’s desk promptly.

Welch recognized that growth was the magic sauce that Wall Street required. So, he developed a strategy to grow via acquisitions. Not any acquisition but companies that were number one or two in an industry with few players. This assured a leading position within the chosen industry.

The problem was that Welch failed to see that there was a limited supply of such companies. And what was worse many companies had seen GEs success and were looking for the same acquisitions. This drove up prices. Not only that but in the 1990’s private equity companies entered the game.

The lesson we can learn from this is that no business strategy, market or product will be successful for ever unless re-invented. Always keep the end game in mind. Plan to disrupt your own business before some else does that for you. 

Now a final thought from my own experience. A company I worked for was also enamored with GE’s success and hired several senior executives from GE. Some of them were very unpleasant to work with. One believed fear was a great motivator, another was just difficult to work with. Some of you may have heard that GE used a forced ranking system of its employees. With the bottom 10% been seen as non-productive and should be terminated. I never worked in GE but I cannot believe that such a system encouraged co-operation. If any listeners did work for GE I would love to hear your views.



Tags: How to start a business, inflation, supply chain, procurement, cost control, contract negotiations, achieve start up success The successful entrepreneur; business common mistakes; small business startup; avoid these common mistakes of business; mistakes in business; IBGR.network; Jeremy Gray; Practical Solutions to Difficult Problems

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