One of the most exciting times in a company’s history is when it begins to grow, grow, grow. One of the most stressful times is when you begin stabilize, slowdown, or stop growing. I have worked with a number of organizations in the area of moving into growth again, after being stalled. One of them was a successful manufacturer in the Twin Cities area that had a long, very successful run in growth because they were excellent at what clients needed. It was the envious position as a business that could raise their prices when revenue seemed to be lagging to make up the loss in sales. However, there came a change in the management of the organization, and I was asked to help analyze the vital signs of the company. It turned out, although successful, they had become over 75% dependent on one organization as their customer, and this customer had begun to use reverse auctions to lower prices on the things that this organization had provided for so many years successfully. These changes in their largest client sent a signal to the CEO that we need to renew our strategic plan for the organization.
As we began the process of creating this plan, we decided to use scenario planning as our preferred method because it was uncertain exactly where the company would go next. We developed 8-10 viable or outrageous scenarios just to test the boundaries of our thinking as a group. During this process, the leadership of the organization invited another outside counsel they employed for marketing strategy. He recommended, based on market research that the organization transform into a different type of service, rather than primarily manufacturing product. He made an exciting case for this opportunity for the organization. As I sat with the leadership to evaluate this and the other options, something kept bothering us. The problem with the new scenario, as attractive as it was, is it did not line up with the capabilities that the organization had been building for years, and going that direction would require the learning curve of a whole new capability system. Another one of the scenarios actually was the expansion of two capabilities in the organization that were only 5 years old, but were showing promise and growth, although small at this moment. The leaders chose to go with the scenario that built on their existing capabilities and expanded them, and this organization doubled revenue in 3 years.
Booz&Allen, a national business research consultancy, has done extensive research on the importance of bringing what they call strategic coherence to organizations. They define Coherence as: “as a resolute, clear-minded focus in a company on three critical elements: its way to play, it’s most distinctive capabilities, and it’s lineup of products and services” Furthermore, one of the most important characteristics for distinctive capabilities is to limit them to 2-4, and continue to become excellent and relevant with those capabilities over time. It is very risky to try to pursue a growth strategy where you do not have those distinctive capabilities in place to win in the marketplace, but is can be a common belief amongst business executives when things are going well. They can lose their humility and think they are invincible. Using our metaphor of the human body, capabilities equate to the muscular system and the training of these muscles (actually what is called the procedural area of the brain) to execute a series of activities well. Muscle memory, as it is often called, is actually the building up of an expertise, stored in your brain, about a series of activities you repeatedly are involved with. Over time, this becomes your differentiating capability as you add knowledge, skill building, and experience to the muscle memory in your brain. Malcolm Gladwell is famous in his investigation of capabilities where he determined it takes about 10,000 hours to build mastery. The leadership of any organization, as they seek to stay competitive, must take seriously when they are evaluating scenarios for the future this critical question: do we currently have, or can we resource the differentiating capabilities we will need to capture significant market share in this arena? If the answer is no, it is best to move onto another envisioned future. A question for your input and discussion. In companies you are involved with, has distinctive capability alignment been an important topic of discussion or not? Where do you see coherence as essential in the arenas where you work?