New Leader Focus Area — Creatively Wielding Occam’s Razor

I’m wrapping up this first series about what goes into taking over a new organization (earlier posts (herehere, here, and here).  The theme of simplicity and parsimony gets mangled during many discussions; for example, sometimes people think that “simple = easy”.    Also, that old simplicity maxim — Occam’s Razor — focuses on analysis to the exclusion of creation (BTW, it wasn’t given its modern form by William of Ockham himself). 

Ockham’s own phrase Frustra fit per plura quod potest fieri per pauciora [It is futile to do with more things that which can be done with fewer] better expresses the essence of elegant design.  Notice the shift from “explain” to “do”?  With Ockham’s words in mind, let’s consider these HBR New Leader leading questions about complexity:

  • How complex are your product or service offerings, and what is that degree of complexity costing you?
  • Where is your innovation fulcrum?
  • What are the few critical ways your products stand out in customers’ minds?
  • How complex is your decision making and organization relative to competitors’?
  • What is the impact of this complexity?
  • Where does complexity reside in your processes?
  • What is that costing you?

New Leader Focus Area — Competitive Position

Per earlier posts (herehere, and here), I’ve been thinking about what goes into taking over a new organization.  This post takes a look at competitive analysis via benchmarking.  Benchmarking is always useful, though I’m always wary of getting too hung up on one’s competitors.  I don’t have any particular comment on the eight questions from the HBR New Leader article, but you might want to look at the strategy outline on the QuickMBA site (here):

  • How do you and your competitors compare in terms of returns on assets and relative market share?
  • How are the leaders making money, and what is their approach?
  • What is the full potential of your business position?
  • How big is your market?
  • Which parts are growing fastest?
  • Where are you gaining or losing share?
  • What capabilities are creating a competitive advantage for you?
  • Which ones need to be strengthened or acquired?

New Leader Focus Area — Customer and Profit Pools

Per earlier posts (here and here), I’ve been thinking about what goes into taking over a new organization.  In my last post on this topic, I may have given the impression that costs and prices should be one’s main focus. 

To that end, this area is one that I’ve neglected — the HBR New Leader article wisely emphasizes looking at customers up front.  In a past role, I spent too much time working cost, price, and process issues.  When I finally got to the customers I realized that I had left considerable revenues and profits on the table.  

  • Which are the biggest, fastest-growing, and most profitable customer segments?  This should tell you whether you’re in the right segments.
  • How well do you meet customer needs relative to competitors and substitutes?
  • What proportion of customers are you retaining?
  • How does your Net Promoter Score track against competitors?  There are a number of doubts about this specific methodology, but a systematic look at loyalty scores — and the reasons behind loyalty or switching behaviors — is essential.
  • How much of the profit pool do you have today?  How is the pool likely to change in the future?  Again, the authors are from Bain and are referencing a Bain-aligned approach.  On the same topic, I recommend this book on Strategic Cost Management by a business school professor of mine.  Shank and Govindarajan introduce some great tools for looking at the value chain.
  • What are the opportunities and threats?  Opportunities and threats to WHAT?  Use the preceding questions to focus the SWOT analysis.

New Leader Focus Area — Costs and Pricing

Per an earlier post (here), I’ve been thinking a lot about what goes into taking over a new organization.  Considering the economy these days, this may happen to more of us!   

Anyway, the principle that costs and prices almost always decline over time is a reasonable foundation for looking at one’s competitive and operations health.   Below are six questions from the HBR New Leader article I originally referenced which help to focus the analysis:

  • How does your cost slope compare with your competitors? In other words, are your costs lowering or rising more or less quickly than your competitors?
  • What is the slope of price change in your industry right now, and how does your cost curve compare?
  • What are your costs compared with competitors?  I’d also look at prices as well… competitors with prices eroding faster/slower than me should tell me something about the sweet spots in the value chain, offerings most valued by the market, etc.
  • Who is most efficient and effective in priority areas?  A pretty generic suggestion.  Looking at relative pricing and what that tells you about the market should give hints about “priority areas.”
  • Where can you improve most, relative to others?  Look hard at the capabilities you actually have or could build quickly.  Avoid immediate focus on topics that you can’t change.
  • Which of your products or services are making money (or not) and why?  Don’t automatically trust the received wisdom on who makes and loses money.  Invest some time and money is getting REAL numbers and answers.

New Leader’s Guide to Business Diagnostics

I’ve had a stack of stuff that I’ve meant to comment on, but set aside, forgot, etc.  Here’s a link to a great HBR article from the February 2008 issue “The New Leader’s Guide to Diagnosing the Business“.  The authors put together a powerful and flexible template that can be applied to most business environments.

[I]t is built on four widely accepted principles that define any successful performance-improvement program. First, costs and prices almost always decline; second, your competitive position determines your options; third, customers and profit pools don’t stand still; and fourth, simplicity gets results. Along with each principle, we offer question sets and analytic tools to help you determine your position and future actions.

In particular, I like the emphasis on quick, but focused, action.  Maybe you can think of this article as the quick and dirty complement to  The New Leaders’ 100-Day Action Plan.

[G]ather a lot of data quickly, ideally within the first three or four months of your tenure. Ask your senior leaders to head up teams that take on as many questions relevant to their areas of responsibility as they can handle. Ask for short, focused presentations to facilitate discussions about the main threats and opportunities. That should enable you and your teams to make quick, accurate decisions about the few areas on which to concentrate your efforts.

Good article on SAP CEO transition

I liked Carter Dougherty’s recent article (here) on the pending handover from Henning Kagermann to Leo Apotheker.   Most of the focus is on Henning and the tone is casual and chatty, befitting a successful exiting CEO.  For the most part the facts, spin, etc. appear correct.  It’s also useful to remember that Henning did lead sales for a bit; he isn’t simply a coder. 

There is one bit of emphasis I’d like to add to this paragraph:

There is some truth to the tale being told in the markets, but the reasons run deeper than a mere change of chief executives. The company is indeed shifting its focus more toward the bottom line,…

Definitely agree so far.

… and less on the multibillion-dollar investments in technology that helped make it the market leader in the lucrative field of business software.

Don’t agree here… in fact, my take is that we’re being more careful about how we spend our R&D dollars.  The intent is to focus the development portfolio on initiatives that are true game-changers or keep us on top of the current game, which usually aren’t small potatoes.

For more on this, my own comments when we announced the new R&D targets are here, along with some from Dennis Howlett (here) and Larry Dignan (here).

Mentorship Start-up “Crash Course”

I very much liked this BNET article by Jennifer Alsever on starting a mentorship drive (here).  The article is rich with sources and tips, so check it out.  The four basic steps are listed below:

Decide Why You Want a Mentor Program — Set your program up to succeed by defining goals and involving top execs.
Pair Up Proteges and Mentors — Create profiles and match people according to your goals.
Set the Rules for Engagement — Make sure people meet regularly — and know what to talk about when they do.
Keep Tabs on the Program — Make sure mentoring is providing the results you want.

Not that I’m looking to integrate mentorship into my group’s social media strategy, I appreciated the explicit decision and goal-setting advice.  I’ve seen many explicit promotions of mentorship in people development efforts, but I’ve never had any real idea of what that mentorship was supposed to accomplish.  Now that I have a chance to drive this topic, perhaps I can learn from those mistakes!

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