strategy

The rise of the chameleon…why adaptation matters in organisations

/ Lisa Bondesio / Leave a comment

Image: Dreamstime

What do Chameleons, Stick Insects and Squid have in common?  They are all creatures that change colour depending on their surroundings, enemies, temperature or mood. In the natural world this ability is known as signalling, and has evolved as an evolutionary means to communicate or camouflage.

You are probably wondering what bearing this has on the modern business habitat?

Well, it may not be a jungle out there, but to survive – and thrive – corporate leaders and managers need to be comfortable with change.  Adaptability is key.  The financial pages are littered with stories of organisations who were looking the other way when the winds of change blew in.  In 2009, UK retailer Woolworths went bust after 100 years of trading history. 30,000 people lost their jobs. While there are many reasons for the decline, the contributing fail factor was a lack of focus on their core retail strengths (you could buy anything and everything) and an inability to respond fast enough to inclement market conditions. In these credit-crunching times it any wonder that these premises are now occupied by discount retailers such as Poundland – squarely aimed at budget-constrained consumers?

Savvy organisations recognise that change is a constant – and are able to respond to their environment.  Super-savvy organisations actually build this type of reflex into their strategy.  I’m reminded of the latest TV campaign for Amazon, who claim they ‘make the revolutionary, routine’– the premise being that innovating for change is the new normal.  For such businesses, change is not merely something that happens, but something  that the leaders of these organisations actively shape.

Sharks may be the ultimate predator, but their corporate repertoire is somewhat limited. Far better to be a chameleon. Not only can they change their spots in 20 seconds flat, they can focus on two objects at the same time. They also catch prey at about 30 thousandths of a second. Now that’s what I call a reflex! Managerial mimicry, anyone?

What do you think?  Can being a corporate chameleon help you adapt? Comments on the blog, please.

Hocus, Focus…

/ Lisa Bondesio / Leave a comment

I am often asked by clients what makes for good strategy.  Almost as if  it is a magic potion that will miraculously cure all organisational ills, while at the same time please shareholders, employees and the CEO.  Blue Ocean?  Kai Zen?  In theory, good strategy could be one of a dozen variants – there’s an entire rainforest of management text books that claim to have the definitive answer.  And if you don’t believe me, a quick trawl of Amazon.com revealed 27,719 titles under the ‘strategy’ category!  Clearly this matters to organisations.

To paraphrase Michael Porter, ‘Strategy is what helps organisations create competitive advantage by preserving what is distinctive’. Being a common-sense consultant – I confess – I prefer management practice to management theory…but, Porter is right. You out-smart the competition in two ways. Either you do similar things, differently or you do something completely different.

Strategy may be about differentiation, but in reality, the type of strategy you deploy to create competitive advantage doesn’t matter all that much. Magic potion or not, the true wizardry lies in delivery.  Intent without action is worthless.  Just so, strategy without execution simply won’t deliver on it’s promise.

The key word  here is focus. The other key word is action. To my mind this is where many organisations go wrong.  I’ve lost count of the number of companies I’ve come across who are drowning in ‘strategic initiatives’.  ‘Ah yes’, the CEO will say: ‘We are implementing our strategy’. Really?  This strategic activity seems to create a lot of busy, stressed people, running around with Excel spreadsheets and GANNT charts, but doesn’t actually move the organisation forward.  Since when is having 1,001 initiatives, strategic?

Surely, being distinct from your competitors means taking a more discerning look at what you will do, and how you will do it.  Narrowing your scope to those actions that will truly transform the business, and then acting on them.  Effectively. Consistently.  As Jack Welch so famously said: ‘Strategy is simple – just pick a general direction and execute like hell!’

Trust me, I’m a banker…

/ Lisa Bondesio / Leave a comment

Our most recent financial crisis has brought the way in which the banks and financial markets operate into sharp relief.  Perhaps more significant is the amount of money it has cost to bail out the banks, as UK taxpayers underwrite levels of national debt which – depending on the election -could herald a new era of sluggish UK growth & relative decline, and strengthen the case for joining the Euro.

Many commentators have squarely laid blame at the door of financial innovation. But financial disasters are nothing new and they are not caused by a single event. They repeat with astonishing regularity, and often radiate from the center through commodity prices, capital flows, interest rates, and shocks to investor confidence.  This time round, cataclysm was closely linked to a series of economic circumstances – strong growth, low inflation and the increased flow of international trade and finance. And although the global financial crisis was not caused by these factors per se, they highlighted the vulnerabilities in the financial and regulatory systems of the UK and US – fundamental weaknesses that were exposed because they combined with a number of unsustainable trends such as rapidly rising property values, high levels of consumer debt and untrammelled bank leverage.

While financial innovation may have a role to play in fomenting disaster, it is likely to occur in combination with other systemic factors. Bankers are incentivised to penalise risks that can be seen and measured, but this time round they invented new and sophisticated financial products which generated added value and high profit, but which carried risk they did not see – or perhaps chose to ignore.

 In good times, the City attracts wealth, generates economic wellbeing and creates employment. In bad times, it can put our AAA credit rating at risk and prolong recession by limiting the flow of credit in the financial system. Still, financial services are crucial to the allocation of resources in a modern economy. We would be wise to realise it will be impossible to prevent future calamity – that is simply the inherent nature of the capital markets. By implementing a combination of regulatory and systemic changes, the UK may seek to retain its position as a leading global financial market. A successful outcome will depend largely on the appetite of the State to do battle with the bankers, and the motivation of investors to think intelligently about financial innovation.

Last Post: Will the Royal Mail survive?

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Along with Cockneys and Cabbies, Routemaster Buses and Buckingham Palace, the Royal Mail’s distinctive red pillar-boxes are considered an enduring symbol of all things British. Formally established by Oliver Cromwell as the General Post Office (GPO) in 1567 (The British Postal Museum and Archive, 2008) this is an institution with a long and robust history. However, as the latter day Royal Mail, its future is less certain. Against a backdrop of increased competition resulting from industry de-regulation in 2003 and 2006; a fractious relationship with employee unions that has led to wildcat strikes and severe disruption of business; and public and political censure at plans to close local post offices, Royal Mail faces a stark threat to both its survival as a business and its corporate reputation.

Royal Mail: What are the business issues?
By its own admission, Royal Mail has to contend with significant business challenges. Unlike other former state monopolies such as British Gas and British Telecom, Royal Mail was not privatised in the last decade, but remains a public limited company (plc) wholly owned by the UK government. As such it is fettered by dual obligations which appear to conflict – the requirement to run as a cost-efficient, commercially profitable enterprise since being made a plc in 2001 and a public duty, or ‘universal service’ requirement laid down by The Postal Services Act 2000 (OPSI, 2000).

  • The terms of the licence granted to Royal Mail by the UK regulator Postcomm include obligatory service standards, a cap on prices, and a requirement to provide a universal postal service – a ‘one-price-goes-anywhere’ delivery model.

Clearly, this makes it impossible for Royal Mail to increase profits simply by raising prices, but the terms of their licence also expose them to increased competition from other UK carriers, who operate as private companies and are not hidebound by government. Bulk mail services have been open to competition since 2003 and by 2011 the entire EU market will be fully liberalised. (Postal Services Regulator, 2008) This will make it extremely hard for Royal Mail to compete, let alone prosper unless their business model is radically overhauled.

  • Modernisation of the business model is another thorny obstacle. Despite an already huge transformation since becoming a plc, and turning losses of more than £1 million per day into a £534 million operating profit for the year ending 2004-2005, Royal Mail’s latest annual report indicates that the group is barely profitable, with operating profit down by 30%, and Royal Mail Letters and Post Office Limited recording overall losses of £3 million and £34 million respectively. (Royal Mail Holdings Plc, 2008) Additionally, they are sitting on a Pension Fund deficit of £3.4 billion which, given nose-diving capital markets and increased life-expectancy, could double the liability by the time the scheme is re-valued in 2009. Despite the UK government setting aside £1bn to cover any shortfall, it is incumbent on Royal Mail to make sufficient money to meet their obligations to the members of the scheme.

It is also unlikely that any future UK government will be willing to bail out Royal Mail in the way they have done for the Banking Industry – the perceived burden on taxpayers would cost votes. One option to greater profitability would be to privatise Royal Mail in order to secure an injection of capital – however the political obstacles to this route are considerable. The ruling Labour Government, which is funded by union contributions, is under duress from the Communication Workers Union (CWU) to keep Royal Mail in public hands. Indeed it made this promise in its 2005 election manifesto, and given the proximity of a general election, Labour may be reluctant to risk an internal party revolt as the UK government wrestle with economic downturn and a looming election.