As we continue with our theme of the SUCCESSTM model and the need to think more strategically about your business and the market it serves, the critical concept of your core ideology should be revisited to confirm its relevance for the future. Will this vision of your business still serve you well during Season 2-4 and deliver the required shareholder returns?
Core ideology is defined as a combination of core purpose and core values, the essential and enduring principles that create identity and guide the organisation.
Exploring the “U” in the SUCCESSTM model takes us through the journey of revisiting this very important principle and here at Uspire Network we use references from the great Jim Collins book and in particular the “Hedgehog Concept” along with understanding your “strategic foundation or anchor”. We believe that as a process it is critically important and much more involved than the pure textbook definition.
Failure in business today will more than likely be caused by a failure to change. Commercial leaders who create the right vision and core ideology are giving the business a licence to dare and to get better than they were. It provides the beacon and control system to prosper in a “new normal” and prevents directionless anarchy and confusion. However, whilst every strategic planning process requires structure it must not become a 300-page document that stifles creativity and autonomy.
I think it was Steve Jobs who stated, “Would you rather be a captain of a cruise liner or a pirate ship?” Although one of the best articles I ever read which accurately and creatively describes the principle of a well-developed core ideology driven by the spirit of leadership was written by John Clarkeson. A similar comparison to Steve Jobs when he asked, if you would rather lead a symphony orchestra or a jazz band? In the world of classical music the symphony would be regarded as a complex creation requiring the integration of a large assembly of highly talented individuals into a performance. So what in this analogy represents the music? Well the leader must provide the vision, mission and values and ensure the music is played out consistently in the symphony. In this example the score is clearly defined for each player - when to pause, when to play, how loud and what notes.
However, when you look at the history of Duke Ellington, he was not that type of leader, not a theorist and in fact people often doubted how well he could read music. If you chose to measure him by the output of his original compositions he was one of the most dominant figures in 20th century music. This prodigious creativity could be explained by people that worked with him and learned how to forge the divergent personalities of his jazz group into a single, highly creative instrument. Members of his band described how he learned to create on the run; he would offer up the core idea and the principles of what he wanted from the team then rely on his players to take cues from each other and fill in their parts as they thought best. His players were good but not without equal. He knew their strengths and weaknesses but importantly they were passionate about his core ideology and the jazz market they served. He just wanted them to learn the things that they did not think they could do. Some players came and went and the best ones stayed for years, they developed by learning from each other and following the vision of the leader. When performing Duke Ellington was on the piano and in the middle of the process providing the cues, the results were astonishing and their capacity for innovation grew as they built on their cumulative experience.
Great leaders understand the importance of these guiding principles; if you get these right then everything else flows.
So lets refresh ourselves with the Jim Collins “Hedgehog Concept” and how we recommend that your strategic anchor is fundamental to setting the “musical rhythm” of your core ideology.
The original idea came from an ancient Greek proverb “The Hedgehog and the Fox” which pitted the two natural enemies against each other. Foxes pursue many ends at the same time and see the world in all its complexity; they are scattered or diffused moving on many levels and complex paths. Never integrating their thinking into one overall concept or unifying vision. Hedgehogs in comparison simplify a complex world into a single core idea and a set of principles that guide everything. Regardless of all the world’s complexities the hedgehog reduces new challenges and dilemmas into simple ideas and a clear path, anything that does not hold to the hedgehog ideology holds no relevance. When foxes and hedgehogs are pitted together the hedgehog always wins.
Jim Collins argued that great companies could answer three key questions that created a crystalline concept that flowed from a deep understanding about the intersection of the three key dimensions. Here at Uspire Network we advocate that the ‘magic story’ comes from this important exercise but at the centre of the circles is your strategic anchor a definition of how you serve your market and what drives its performance.
Your strategic anchor like the other components of this core ideology act as a compass and decision making tool for the company. These are used in conjunction with the core values and the most critical of these often represents a company’s true passion.
When core ideology between individuals, customers and the company are out of alignment then self-destruction can occur. You will observe poor customer service, lack of productivity, low employee engagement and falling revenues. This fundamental process is the starting point of your strategy and everything cascades from it.
Circles of the hedgehog concept adapted to integrate the strategic anchor at its centre
Lets gain a deeper understanding by reviewing the chart below. We have identified ten strategic anchors, which represent the foundation of a majority of companies.
The graph begins with ‘Natural Resources’ (like BP or Shell for example) and moves to a more market focussed position across the bottom.
A. NATURAL RESOURCES
- Coal, oil, metals, water, etc.
- You sell them, others process
- Your competitive advantage lies in quality, quantity, location or form
- You excel at exploration and conversion
B. TECHNOLOGY
- You invent or acquire hard technology or soft technology
- Your competitive advantage lies in the unique quality of this technology and your ability to develop a wide range of applications from it
- You excel at research and application marketing
C. CAPACITY
- You have large capital invested in plant and equipment
- Full use of this capital is essential and you are price sensitive
- You have the knowledge to make specific products or service
- Your competitive advantage lies in optimising your capacity, turnaround times and price
- You excel at plant efficiency and substitute marketing
D. PRODUCT OR SERVICE
- You meet very specific needs of users around common characteristics of appearance and function
- You grow by finding a broader range of future users
- Your competitive position lies in your ability to differentiate your product and service. The best product and service wins the game.
- You excel at P&S development, process development and after sales service.
E. CUSTOMER/USER NEEDS
- You are organised around a specific describable customer or end user e.g. age, sex, occupation
- You have a wide variety of unrelated products
- You are always trying to identify their new needs to be first to market
- Your competitive position lies in your strong relationship with these users
- You excel in market/user research and at maintaining user loyalty
F. MARKET NEEDS
- This is a variation of user needs
- You are attached to a describable industry market e.g. hospitals or large dominant manufacturers
- Market is not limited to consumers it includes all sectors e.g. B2B
G. SELLING METHOD
- You have a unique way of selling
- All of your products must be sold using this method
- Your customers will only be reached using this method
- You will offer products from other companies using this way of selling
- Your competitive edge is your management of this selling method
- You excel at recruitment, retention and training your sales team
H. DISTRIBUTION METHOD
- You have a unique method of distribution – Only offer products delivered this way including those of other companies
- You expand by identifying other distribution channels
- Your competitive edge is this distribution method
- You excel at distribution organisation
I. SIZE/GROWTH
- You are anchored in volume and critical mass
- Your desire to get larger or smaller leads to a change in your business
- You sacrifice earnings to achieve physical growth in size or geography
- Your competitive edge is in your size
- You excel at maximising volume and asset management
J. RETURN/PROFIT
- You are anchored in the business profit
- You are focussed on profit ratios above all else
- You will choose any product or service based on its profitability
- You are not concerned by product or market synergy
- If a company is not making the required returns you sell it and buy another
- Your competitive edge is financial controls
- You excel at Portfolio management and MIS
On the upcoming Think Tank we will discuss examples of powerful strategic anchors and how to create and check the relevance of your business “core ideology” to this critical foundation stone.
The other fundamental questions that should be answered according to Jim Collins are as follows:-
What are you the best in the world at?
This goes far beyond your core competencies, just because you have decided what they are doesn’t mean you can aspire to be the best in the world. Conversely what you can be best in the world at might not even be something that you are currently doing. This whole question is not just a goal or strategy to be the best at something, it is an understanding of what you can be best at and equally important what you cannot be the best at?
What drives your economic engine?
To gain the essential insight into drivers of your economic engine search for the one denominator (profit per X) or (cash flow per y, for example), that has the single greatest impact. If you were stranded on a desert island and you could ask one question about the performance of your business, (financial perspective). One key ratio to systematically increase over time to make a greater impact what would it be? This measure can be subtle and sometimes unobvious. The key is to use the denominator to gain understanding and insight into your economic model.
What are you deeply passionate about?
Great companies do not pick a course of action, then encourage their people to become passionate about their direction. Rather those companies decided to do only those things they could get passionate about. In Duke Ellington’s example – Jazz music! They recognise that passion cannot be manufactured nor can it be an end result of a motivation effort. You can only discover what ignites your passion and the passion of those around you.
Now, lets consider in leadership language how you can strengthen the ideology of your business, it is the first imperative of a strategic process. Included within its rich tapestry are the following key business drivers:-
- Its part of articulating the companies values and passion
- It unites employees around a common cause
- It fundamentally supports your brand image (use with a brand key process).
- It translates the external brand into internal brand language
- It provides your strategic identity against the competition
- It communicates the long-range intentions of the company
- It enables greater innovation and creativity within the chosen pathway
- It helps you to build “stories” that explain the business you are in and its cultural architecture, behaviour and standards.
- It helps you to hire based on competencies and organisational fit
In the next “Think Tank” we will use some Uspire Network designed questionnaires to measure the effectiveness and acceptance of your company’s core ideology.
Finally, during this unprecedented crisis it is also interesting to listen to experienced CEO’s who have discovered new things about their business and the market they serve.
When developing your strategic plan take time out to reflect on the following?
- Name up to three unexpected successes in your industry or in your company?
- Now name up to three unexpected failures in your market or company?
What can you learn from these, what benefits did they bring or where did they go wrong. Answering these types of questions helps you to look at your business through a different lens.
Colin Wright is the Chair of the Midlands POD of the Uspire Network. To find out more how The Network can help you become the best leader you can be contact Colin for a confidential chat.