What keeps you up at night? Chances are it is the nagging things that are being delayed for seemingly no reason or things that are putting your business at risk. Some of these risk factors simply need to be insured or you have to self-insure them via some kind of reserve fund in case something goes wrong.
But many of the nagging things are actually caused by four kinds of barriers that can plague the established firm. In this article, I want to delve into them. I have discussed these in more depth in my 2004 book The New Science of Strategy Execution: How Established Firms Become Fast, Sleek Wealth Creators and can send readers a free pdf if they are interested.
First, let’s make a distinction between the new start up and the established firm. Our focus in this article and the others in this series is the established firm. But making this distinction is important. If you have ever tried to start a new business or a major new venture startup, then you know that myriad things go wrong that can seem like barriers to your progress. The old saying that “it will cost twice as much and take two times longer than you imagined” to drive your new business forward has a lot of truth to it. We strategists label most of these messy problems as “hold up”. Getting simple permits can take forever and god forbid if you will have to deal with the FDA. No one really thinks you will succeed except for you and thus you are on the bottom of the priority list for people and entities that need to help you. You persevere through these as you try to get a foothold in your market.
The established firm is different. Every successful established firm has a base group of customers who are at least semi-loyal if not delighted with your firm. And this is a good thing and a curse. The good things are obvious. You have a built-in group of customers with whom you can experiment with new offerings, both quickly and relatively cheaply. The curse is your firm and people in it can start taking these base customers for granted. The excess free cash flow that gets built up from these base customers can cause a view that the good times will never end. If your firm reaches this point, you likely flip over into a mode of “mistaking momentum for leadership”. This can presage the beginning of the end if you are not careful. There are four kinds of barriers that can take root when your firm has “flipped over” and it bares weighing each for successful established firms.
The four kinds of barriers follow, listed in order from simple to complex:
Subject Matter Barriers – are things that you simply do not know how to do yet and need to learn to move forward. The example I usually give is: say you want to make ceramic mugs? They need to handle hot and cold liquids, be able to be manufactured in runs of say 10,000 and they have to be able to be stacked in shipping cartons of say 200 mugs per carton. If you do not know how to do this, this barrier is obvious. But you put a team on it and they figure it out. Note subject matter barriers can be thorny. But they are obvious.
Process Barriers – anything that causes your firm to be slow and have a lot of re-work associated with the slowness. Lack of a process orientation and process disciplines, too much bureaucracy and too many controls and sign-offs are usually the culprits. These barriers can be deadly in today’s business world as customers can become very frustrated.
Structure Barriers – from time to time the way a firm gets structured can pose a barrier in and of itself. When I say structure, think of your organization chart. Is your firm structured and organized by function, geography, or products? Or, perhaps you use even more complex forms of structure, like a matrix or network. My experience, backed with some academic research, shows that normally about every seven to ten years the established firm will find the way it is structured causes it to lose touch with customers and is frustrating for those customers. Firms need to shift to a more useful structural form or face serious trouble.
Culture Barriers – are the most difficult to identify and remove. We normally use the word culture in the positive sense of the values and beliefs that are the glue that holds the firm together. Here I am using the word culture in a negative sense and they actually stem from previously successful strong cultures that have morphed into bad things. These are blind-spots, faulty mental models, inertia, dogmatism, and infighting that zap the energy and motivation of your people. They can be insidiously cancerous. A classic example is Encyclopedia Britannica. Space precludes a lengthy discussion but it was culture barriers that doomed that firm until it was sold to a Swiss financier. In a nutshell the senior management team and the board viewed the rise of personal computers in the early 1980s as mere toys. Their deeply ingrained mental model was that the best thing parents could do for their children were to buy them a set of encyclopedias. They sold for $1500 and cost $395 to make. They were sold by a door-to-door sales-force. Enter Bill Gates of Microsoft and Encarta. Originally it sold for $120 and cost pennies to make on a CD. Then Bill gave it away when he packaged it with Microsoft Works, a scaled down version of Office. The computer came to be the thing parents could enable their children with.
If your firm has a mix of all of these barriers, your firm is in trouble. Well-run firms will only have subject matter barriers. Any firm that is innovating and growing will have new things to learn. Well-run firms have the courage to identify and quickly remove any process, structure or culture barrier that rears its head. But this takes a culture of what I call a “transparent meritocracy” and real leadership and tools to diagnose which barriers are taking root and what to do about them.
How is your established firm doing with respect to the four kinds of barriers?
This article is part of a series on what causes a firm’s value to increase
Dr. William Bigler is the founder and CEO of Bill Bigler Associates. He is the former MBA Program Director at Louisiana State University at Shreveport and was the President of the Board of the Association for Strategic Planning in 2012 and served on the Board of Advisors for Nitro Security Inc. from 2003-2005. He has worked in the strategy departments of PricewaterhouseCoopers, the Hay Group, Ernst & Young and the Thomas Group. He can be reached at firstname.lastname@example.org or www.billbigler.com.