On Thursday, September 20, Mark Morgan gave an outstanding talk about how to make a successful transition from a start-up to a sustaining organization.
Introducing Mark Morgan:
- Cal Poly bachelor’s degree in Engineering
- Golden Gate Univ MBA
- Stanford Certified SCPM - Advanced Project Mgmnt
- PMI cert
- Mark had been teaching at Stanford Advanced Project Management Program this week
Corporate Strategy originated from:
- Founders of Boston Consulting Group, Bain and McKinsey developed some Strategic fundamentals in 1960s
- Mark is involved with turning Strategy into Reality - actually executing on the strategy. The perspectives differ between Startups and Established firms.
Odds: The odds are higher at playing Blackjack vs Executing Strategy. So, if you had $1M, what would you do with it? Play Blackjack? Or Execute Strategy?
- Blackjack has a 2-point spread advantage for the house (49 to 51). In the long term, Blackjack players will eventually lose.
- Strategic Execution: In the long term, there is no guarantee of loss. Some companies do fine for a while.
Conventional Wisdom has often failed, as demonstrated by a number of business book titles…
- "Good to Great" - doesn't stay that way.
- "Built to Last" - hasn't.
- "In Search of Excellence" - didn't.
Einstein told us that "Significant problems can't be solved using the same level of thinking that we used when we created the problem." (or something like that)
Levels of Thinking: Need to use a different level of thinking to solve problems.
- example of understanding the desert trails in South America that turn into drawings of animals when viewed from an airplane.
How do you Turn Strategy into Operational Reality?
- Operational Reality is where the money is actually earned.
- A Strategy needs to be converted into a Portfolio of Projects & Programs.
- A Strategy only stands a chance of working when it is aligned with the rest of what makes up the company DNA
- How you deploy your assets (Portfolio) is where Execution meets the road.
- Example: The Six-Sigma strategy should not be applied to everything. It works great in Operations, but does not work great in Innovation. Six-Sigma is Fine on the factory floor, poor on the R&D department where variation should be maximized, not minimized.
- Strategy must be aligned with Culture and Structure.
- Strategy must be also be aligned with Goals and Metrics.
· Startups often have a limited set of Goals & Metrics, so alignment is often assumed. At a later point in time, if the Startup has grown, they often realize they should have formally planned that alignment all along.
· Startups often don't bother with Portfolio planning, but if they don't, and they later grow. they'll run into problems because their organization has not been prepared to scale
- Corporate Culture can arise from knowing its Identity.
- Identity & Long-Range Intention inter-relate with each other.
- The corporate Purpose (Vision) drives Identity and Long-range intention.
Ultimately, everything originates from Purpose:
Purpose => Identity => Culture
Purpose => Long-Range Intention => Goal
Identity <=> Long-Range Intention
Triangle: Culture <=> Structure, Structure <=> Strategy, Strategy <=> Culture
Triangle: Goal <=> Metrics, Metrics <=> Strategy, Strategy <=> Goal
Strategy => Portfolio
Upper Triangle: Portfolio <=> Program, Program <=> Project, Project <=> Portfolio
Lower Triangle: Program <=> Project, Project <=> Operations, Operations <=> Program
Example: How does Mozilla organize 150 employees and 10,000 unpaid volunteers?
It does not use "Shareholder Value" as a Purpose (there are no Shareholders; there is no intent to be a profit making company). The non-profit culture leads to people acting a certain way.
Improving the alignment between Purpose, Identity & Culture does not need extra resources. A better alignment often leads to better profits.
Some businesses have a culture/exit-strategy of: Get acquired. This is an OK strategy, but does not fall into the domain of sustainable enterprise. A weakness of this approach is that there may not be a fallback position if the only offer is too low.
If the company has the purpose to grow (instead of being acquired), then the company preserves both options: to grow or to be acquired.
Strategic Positioning: Where do you want to play?
- a product provider? How to differentiate the product? Features? Cost?
- a solution provider? What items/How to bundle? Many product providers find themselves pushed into becoming a solution provider.
- a system/platform provider?
Walmart = mix of System & Product
Bose = mainly product provider
Southwest Air = mainly product provider
IBM = mix between solution & system
Microsoft, Google, Intel, eBay = mainly System/Platform Apple iTunes/iPhone/Apps = mostly System, partly product
Strategy: How do you want to win? Rivalry between players is affected by...
- threat of new entrants
- customer power in negotiation
- threat of substitutes or alternatives
- supplier negotiating power
Strategy: How much room for growth is there?
- Some startups appear as 1-trick ponies. No room to grow after first release.
- Are there limits of differentiation?
- Are there limits of market saturation?
Strategy: What are your next 3 moves?
- Running a startup is not like Tennis (thinking 1 move ahead), but more like Chess (3 moves ahead)
- What is the level of integration? (chips vs data centers)
- What is the level of customization? (off the shelf vs one-of-a-kind)
- How does your "Capability Required by Strategy" match against the planned level of integration & customization? If the capability does not match the levels after 3-ish moves, it will be difficult to survive.
How to put content in the Gap between Strategy & Projects?
- Traceability: forward from goal to project, backward from project to outcome
- Sufficiency: will the project outputs fulfill the strategic needs?
- Capacity: can all the projects be done with known time & resources?
Strategy = vector sum of all projects.
- if the projects are poorly aligned, the vector sum will be zero
- if some projects are de-scoped (to meet limited resources), you have to remember to change the goals
Metaphor for capacity:
- Sliding tiles around on a board to align them. The tiles can only slide when there is an open hole. The open hole represents "slack", or spare capacity.
- if all resources are tied-up, there is no slack, and no ability to change and transform the business.
Portfolio Balance is Critical - need to have people allocated to all 3 of these:
- Product development/operations – Working in the business
- Continuous product Improvement – Working on the business
- Continuous process Improvement / business change – working to transform the business
Strategy & Execution:
- Strategy - deciding what to do. "Doing the right thing" Yet, after a while, all successful unique products become commodity. So, the Right Thing must keep changing.
- Execution - how well the action is done. "Doing the thing right"
Change must be orchestrated before the need arises.
- Without change, all successes will eventually fail.
- Initially successful companies often go through the phases of: Success -> Hubris -> Undisciplined spending (portfolio planning here) -> denial of risk -> search for silver bullet (look for acquirer) -> capitulation.
"To get something we have never had... We must be willing to do something we have never done before."
John van Heteren has over 20 years of Engineering design and management experience. As Director of Hardware Engineering at Varian Medical Systems, his job is to encourage a group of Mechanical, Electrical, Firmware and System Engineers to design improved ways to treat cancer without appreciably raising the cost of the treatment devices. Over the years, he has shifted from developing products and patent applications to developing people and teams to deliver products and patent applications. John is always on the lookout for new ways to introduce tactics that encourage innovation in heavily regulated industries such as medical devices.