3 Tips to Becoming More Strategic

by ChiefExecutive.net

Involving more senior leaders in a dialogue about strategic direction allows leaders to get their organization to be ready to face emerging opportunities and to respond quickly to unexpected threats, say McKinsey colleagues Chris Bradley, Lowell Bryan, and Sven Smit, in their McKinsey contribution, “Managing the strategy journey.” For far too long the writers say that strategy has been the domain of a small group including the CEO and the chief strategist who is more often than not protective of their domain.

Companies they say are well advised to exercise their strategy muscles by broadening the approach by including business unit heads and others responsible for execution. They offer three tips that any executive can act on to become more strategic. They The suggestions may appear deceptively simple, but based on interviews with company leaders and their client experience, these ideas represent foundational skills for any strategist provided leaders put them into practice. In summary these are:

1. Understand what strategy really means in your industry.

General ideas can be misleading, and as strategy becomes the domain of a broader group of executives, more will also need to learn to think strategically in their particular industry context. It is not enough to do so at the time of a major strategy review. Because strategy is a journey, executives need to study, understand, and internalize the economics, psychology, and laws of their industries, so that context can guide them continually.

For example, being able to think strategically in the high-tech industry involves a nuanced understanding of strategy topics such as network effects, platforms, and standards. In the utilities sector, it involves mastery of the economic implications of (and room for strategic maneuvers afforded by) the regulatory regime. In mining, leaders must understand the strategic implications of cost curves, game theory, and real-options valuation; further, they must know and be sensitive to the stakeholders in their regulatory and societal environment, many of whom can directly influence their opportunities to create value.

2. Tailored executive education courses can also be beneficial.

We know organizations that have taken management teams off-site to focus not on setting strategy but on deepening their understanding of how to be a strategist in their industries. For example, one raw-materials player headquartered in Europe took its full leadership team to Asia for a week, in hopes of shaking up the team’s thinking. Executives explored in depth 20 trends that would shape the industry over the next decade, discussing both the trends themselves and their implications for the supply of and demand for the organization’s products. They also looked across their industry’s full value chain to understand who was making money and why—and how the trends would change that. A number of the executives in the discussion were surprised by how much value certain specialized intermediaries were capturing and others by how the organization was losing out to competitors that were financing retailers to hold their inventory. The executive team emerged with a clearer appreciation of where the opportunities were in its industry and with ideas to capture them.

Building this kind of industry understanding should be an ongoing process not just because we live in an era of more dynamic management but also because of the psychology of the individual. Experience-based instincts about “the way things work” heavily influence all of us, making it hard, without systematic effort, to take advantage of emerging strategic insights or the real lessons of an industry’s history. War games or other experiential exercises are one way executives can help themselves to look at their industry landscape from a new vantage point.

2. Become expert at identifying potential disrupters.

Expanding the group of executives engaged in strategic dialogue should boost the odds of identifying company or industry-disrupting changes that are just over the horizon—the sorts of changes that make or break companies.

But those insights don’t emerge magically. Consider, for example, technological disruption. For many executives, the rise up the corporate ladder requires a deep understanding of industry-specific technologies—those embedded in a company’s products, for example, or in manufacturing techniques—but much less knowledge of cross-cutting technology trends, such as the impact of sensors and the burgeoning “Internet of Things.” Moreover, many senior executives are happy to delegate thinking about such technology issues to their company’s chief information officer or chief technology officer. Yet it’s exactly such cross-cutting trends that are most likely to upend value chains, transform industries, and dramatically shift profit pools and competitive advantage.

So what to do? Some executives choose to spend a week or two visiting a technology hub, such as Silicon Valley, to meet companies, investors, and academics. Others ask a more technophile member of the team to keep abreast of the issues and brief them periodically.

Picking up weak competitive signals is more often than not a result of careful practice: a systematic updating of competitive insights as an ongoing part of existing strategic processes. Executives with diverse backgrounds can boost the quality of dialogue by contributing to—and insisting on—issue-based competitive analyses. Who is well-positioned to play in emerging business areas? If new technologies are involved, what are they, and who else might master them? Who seems poorly positioned, and what does that mean for competitive balance in the industry or for acquisition opportunities? Focusing competitive reviews on questions like these often yields insights of significantly greater value than would be possible through the more common practice of periodically examining competitors’ financial and operating results. It also helps push the senior team away from linear, deterministic thinking and toward a more contingent, scenario-based mind-set that’s better suited to today’s fast-moving strategy environment.

3. Develop communications that can break through.

A more adaptive strategy-development process places a premium on effective communications from all the executives participating. The strategy journey model described by our colleagues, for example, involves meeting for two to four hours every week or two to discuss strategy topics and requires each executive taking part to flag issues and lead the discussion about them.

In such an environment, time spent looking for better, more innovative ways to communicate strategy—to make strategic insights cut through the day-to-day morass of information that any executive receives—is rarely wasted. This requires discipline, as it is always tempting to invest in further analysis so that the executive has a deeper grasp of the issues rather than in communications design to ensure that everybody has a good grasp of them. It also may require building new skills; indeed, developing messages that can break through the clutter is becoming a required skill for the modern strategist.

Experiential exercises are one way of boosting the effectiveness of strategic communications within a top team. A strategist we know at a shoe manufacturer wanted to illustrate the point that many of his company’s products were both unattractive and expensive. He started with a two-by-two matrix. So far, so predictable. But his matrix was built using masking tape on the floor of the executive suite, and the shoes were real ones from the company and its competitors. His colleagues had to classify the shoes right there and then—and he made his point. Similarly, we know another strategist who spent an afternoon cutting the labels off samples of men’s boxer shorts. She wanted the board members to put them in order of price so they could see how their perceptions of quality were driven by brands and not manufacturing standards.”

5 Lessons from FedEx CEO Fred Smith

by ChiefExecutive.net

Fred Smith founded FedEx in 1971 with borrowed money and has grown it into a $42 billion company, so it’s safe to say he knows more than a little bit about management.

When Smith spoke with Fortune, he had many great insights that apply to all CEOs.

The top five insights were:

1. Make reputational intelligence a priority: Your reputation is different from your brand. Smith notes that FedEx sells trust (e.g. the promise that medical equipment will make it to important destinations) and not just package delivery. You need to know what your brand is really about and emphasize it.
2. Create a culture that is always striving for excellence: FedEx employees have the Purple Promise in which they declare, “I will make every FedEx experience outstanding.”
3. Don’t hide your failures, but use them to improve: When a video went viral of a deliveryman throwing a computer screen over a fence, Smith didn’t try to hide it. Instead, he talked about it openly and used it as a platform for learning and improving.
4. Always look to improve your processes: FedEx has never sacrificed service (even if it would be almost unnoticeable to customers) in order to add to its bottom line.
5. Take advantage of unexpected areas for growth: Did you know that FedEx repairs electronics like iPads and Nooks? The delivery company has the systems in place to transport items to a central repair shop and the technology to fix products. While not the core of its business, it’s still a $15 billion market.

The 12 Greatest Entrepreneurs of our Time (part 6 of 6)

Great ideas are hard to come by

Putting them to work is even harder

Meet the founders who turned concepts into companies and changed the face of business

10. Narayana Murthy

Company: Infosys 

Sales: $6.0 billion 

Market Value: $32 billion 

Employees: 145,088 

Advice: Sacrifice today, cash in tomorrow

In 1974, Narayana Murthy was a 28-year-old politically left-leaning engineer on his way home to India from France. During his journey on a train, he struck up a conversation with one of the passengers "about the travails of living in an Iron Curtain country." He says: "We were interrupted by some policemen who, I later gathered, were summoned by a young man who thought we were criticizing the Communist government of Bulgaria."

Murthy was dragged out of the train and left in a small room without food or water for 72 hours, then thrown back on another departing train and released in Istanbul. His treatment purged Murthy of any affinity he had for the left and would ultimately help make him one of India's and the world's most successful capitalists. If he was to be a reformer, he realized, it would have to be through a system that was rejected by the Communists.

He proved that India could compete with the world by taking on the software development work that had long been the province of the West. As one of six co-founders of Infosys and the CEO for 21 years, Murthy helped spark the outsourcing revolution that has brought billions of dollars in wealth into the Indian economy and transformed his country into the world's back office.

His important lesson: An organization starting from scratch must coalesce around a team of people with an enduring value system. "It is all about sacrifice today, fulfillment tomorrow," explains Murthy, 65, who is now chairman emeritus. "It is all about sacrifice, hard work, lots of frustration, being away from your family, in the hope that someday you will get adequate returns from that".

11. Sam Walton

Company: Wal-Mart Stores

Sales: $446.9 billion

Market Value: $36.5 billion

Employees: 2.0 million

Advice: Give the people what they want

In 1984, a 66-year-old Sam Walton put on a grass skirt and did the hula dance on Wall Street. His wacky performance was in the service of a lost bet over Wal-Mart's profit margins with his chief lieutenant, David Glass.

"Most folks probably thought we just had a wacky chairman who was pulling a pretty primitive publicity stunt," Walton would later write in his biography (Sam Walton: Made in America, coauthored by Time Inc. editor-in-chief John Huey). "What they didn't realize is that this sort of stuff goes on all the time at Wal-Mart."

Well, that stuff, a whole lot of hard work, and, believe it or not, innovation. The reason Walton, who died at 74 in 1992, 30 years after opening his first Wal-Mart store, was the most successful retailer in American history is that he also was way ahead of his competitors in bringing efficiencies and discipline to the world of retailing.

The cornerstone of his company's success ultimately lay in selling goods at the lowest possible price, something he was able to do by pushing aside the middlemen and directly haggling with manufacturers to bring costs down. The idea to "buy it low, stack it high, and sell it cheap" became a sustainable business model largely because Walton, at the behest of David Glass, his eventual successor, heavily invested in software that could track consumer behavior in real time from the bar codes read at Wal-Mart's checkout counters.

He shared the real-time data with suppliers to create partnerships that allowed Wal-Mart to exert significant pressure on manufacturers to improve their productivity and become ever more efficient. As Wal-Mart's influence grew, so did its power to nearly dictate the price, volume, delivery, packaging, and quality of many of its suppliers' products. The upshot: Walton flipped the supplier-retailer relationship upside down.

12. Muhammad Yunus

Company: Grameen Bank
Advice: Small gifts can equal big impacts

In the early 1970s Muhammad Yunus was teaching economic theory to students in a university classroom in Bangladesh. But outside the campus of Chittagong University, all he saw was crushing hunger and poverty. His desire to do something to help the local citizens led to a simple but powerful gesture: Yunus loaned $27 to destitute basket weavers in a village next to his university's campus.

He could not believe the excitement the small amount of money caused. For people living on pennies a day, just a few dollars could transform their lives -- and in many cases it did. The gift was used to support and expand these very small businesses, and that helped many overcome their poverty. Much to Yunus' surprise, the basket weavers actually paid off the loans -- and on time too. He then moved from one village to the next, finding all sorts of entrepreneurial projects to fund.

It wasn't until 1983 that Yunus founded Grameen Bank, the institution that helped pioneer and spread the concept of microcredit. By the time Yunus won the Nobel Peace Prize in 2006, the Grameen Bank had outstanding loans to nearly 7 million poor people in 73,000 villages in Bangladesh. More important, Yunus, 71, helped create a global movement toward microlending. The Grameen model moved on to more than 100 countries worldwide and helped millions.

While the bank could not eradicate poverty, it lifted many lives. No less critical, Yunus' idea inspired countless numbers of young people to devote themselves to social causes all over the world.

Fuente: CNN Money - FORTUNE

The 12 Greatest Entrepreneurs of our Time (part 5 of 6)

Great ideas are hard to come by

Putting them to work is even harder

Meet the founders who turned concepts into companies and changed the face of business

8. John Mackey

Company: Whole Foods

Sales: $10.1 billion

Market Value: $15.5 billion

Employees: 56,200

Advice: Purpose inspires people

In 1978, John Mackey and his then-girlfriend Renee Lawson opened their first vegetarian food store in an old Victorian home in Austin. They had modest ambitions: to make a living, have fun, and help a few people live healthier by eating better. A bearded, shaggy-haired college dropout, Mackey had just turned 25 and thought profit was little more than a "necessary evil."

Fast forward: Whole Foods Market now has more than 300 supermarkets and over 56,000 employees (or "team members"). The success of the upscale food retailer has changed the way many of the industry's mainstream competitors operate. "If you told me 20 years ago that Wal-Mart would be one of the leading sellers of organic foods in the world, I would have thought that was ridiculous," the 58-year-old Mackey says.

How does he do it? Among the six fundamental precepts that are at the core of Whole Foods are a commitment to sell the highest-quality natural and organic products available, satisfy and delight the customers, and promote environmental stewardship. Many companies have mission statements with lofty principles that are little more than wall hangings. 

9. Herb Kelleher

Company: Southwest Airlines

Sales: $15.6 billion

Market Value: $6.4 billion

Employees: 45,392

Advice: Make your employees No. 1

When Herb Kelleher took an aptitude test at Wesleyan University, where he majored in English, he was told that there were three things he was best suited for: working as a journalist, an editor, or a lawyer. Kelleher chose law, and it was a good thing. It would take five long years of often tortuous litigation by competitors to get Southwest Airlines out of court and into the air in June 1971.

In an industry plagued by vast amounts of red ink, Southwest marked its 39th consecutive year of profitability in 2011, a feat unmatched in U.S. aviation history. What's more, Kelleher, 81, proved that you could still charge low fares and be nicely profitable. Southwest is not only the largest U.S. domestic airline but also responsible, as one economist noted, for 90% of the low-fare airline business that exists in America.

How did Kelleher do it? He kept costs extraordinarily low and customer service high -- and he did both by creating a culture that respected the people he carefully hired. Like Sam Walton, he understood that front-line personnel can either make you or break you. And Kelleher got his people to sign on to the program through profit-sharing plans and stock options that made employees feel and act like owners. It separated Southwest from the pack.

"Years ago," he once told an interviewer, "the business schools used to pose it as a conundrum. They would say, `Well, who comes first? Your employees, your shareholders, or your customers?' But it's not a conundrum. Your employees come first. And if you treat your employees right, guess what? Your customers come back, and that makes your shareholders happy. Start with employees and the rest follows from that".

Fuente: CNN Money - FORTUNE

The 12 Greatest Entrepreneurs of our Time (part 4 of 6)

Great ideas are hard to come by

Putting them to work is even harder

Meet the founders who turned concepts into companies and changed the face of business

6. Howard Schultz

Company: Starbucks

Sales: $11.7 billion

Market Value: $40 billion

Employees: 149,000

Advice: Always challenge the old ways

In the darkest days of the Great Recession, many analysts and media pundits had written off Starbucks as an overreaching victim of changing consumer habits. Howard Schultz, who regained his job as CEO in early 2008 after an eight-year hiatus, would have none of it.

When he returned, Starbucks' profits and revenues were tanking. The stock price had fallen so severely that at one point he feared the company could be taken over. Starbucks had become a brand that had been stretched beyond its demography. But Schultz did what few builders of companies are known to do -- but what all of the greatest entrepreneurs always do: He brought financial discipline, bottom-line efficiency, and a back-to-basics focus to the company.

Growth and success had covered up a lot of mistakes and led to a tremendous amount of waste. The world's dominant purveyor of chai lattes, for example, had been losing tens of millions of dollars a year by pouring excess steamed milk down the drain. By simply putting a serrated internal ring inside a pitcher to guide how much milk a barista should use for a latte, Starbucks saved millions. "You wouldn't think a steaming pitcher could be sexy," says Schultz. "But it became very sexy at Starbucks."

As with Steve Jobs at Apple, the second coming of Howard Schultz saved Starbucks from being just another also-ran. And in turning around an iconic brand, Schultz, now 58, demonstrated that he could do what most founders are said not to do: challenge the old way of doing things.

7. Mark Zuckerberg

Company: Facebook 

Sales: $3.71 billion 

Market Value: $75 billion-$100 billion (estimate) 

Employees: 3,200 

Advice: Embrace paranoia

By the time Mark Zuckerberg celebrates his 28th birthday this May, Facebook will in all likelihood have gone public and become the biggest IPO of all time. The long-anticipated event will create hundreds of millionaires, result in a valuation of an Internet company that will approach $100 billion, and make the geek who dropped out of Harvard University his generation's Bill Gates.

Yet it has been only eight years since the social-networking site was launched from Zuckerberg's dorm room at Harvard. It would be easy to chalk a good bit of his success to luck and timing. But that would be a serious mistake. What's helped make Facebook the world's dominant social network is an obsessive entrepreneurial genius who has taken a page from another of Silicon Valley's legendary denizens, Intel's Andy Grove, who famously stated -- and lived by -- the dictum that only the paranoid survive.

Zuckerberg is the Valley's most paranoid entrepreneur these days, taking nothing for granted. It's why he has pushed out a constant flow of innovative changes to Facebook's platform, making it easier for developers to create applications for the community and ensuring that each new iteration keeps it ahead of the competition. It's the single most important explanation for why Facebook has yet to face any formidable rival in its space, including last year's challenge from heavyweight Google.

Fuente: CNN Money - FORTUNE

The 12 Greatest Entrepreneurs of our Time (part 3 of 6)

Great ideas are hard to come by

Putting them to work is even harder

Meet the founders who turned concepts into companies and changed the face of business

4. Jeff Bezos

Company: Amazon
Market Value: $84.0 billion
Sales: $48.1 billion
Employees: 56,200
Advice: Take regular mini-retreats


After ignoring his boss' advice and quitting his job in New York, Jeff Bezos drove across the country to Seattle, drawn by the city's large population of software developers. Once he launched Amazon in 1994, it took the e-commerce company more than six years to report its first quarterly profit.

He was in no hurry then and he is in no hurry now to boost profits at the expense of building "an important and lasting company." Bezos has long resisted entreaties from an often frustrated Wall Street to manage his company for profit instead of revenue growth and customer service.

Leading a closely watched, high-growth company can be frenetic. One of the biggest problems: finding the time to be pro-active rather than reactive. But Bezos, at the end of each quarter, solves this by just going away. His solo retreats have been put to good effect, resulting in several new ideas and products, including Amazon's fulfillment center for third-party sellers. As he has explained it, "I just lock myself up. There are no distractions from the office. No phones ringing. It's just because with a little bit of isolation I find I start to get more creative. I do spend a lot of time web surfing during those two or three days and just looking at what hobbyists and hackers are doing. What are the sorts of things that are on the cutting edge?"

Bezos, 48, will then write up two- or three-page memos, sometimes to himself, other times to his executive team. "What I find is, by the time that process is done, I'm never really sure if I invented something or not, because it starts here and ends up there. That's what you want if you have a bunch of smart people. Somebody says, `Well, that will never work because you forgot x, y, and z.' And then you step back and recognize that's true and then it morphs and builds".

5. Larry Page and Sergey Brin

Company: Google

Sales: $37.9 billion
Market Value: $203.2 billion
Employees: 32,500
Advice: Spare no expense on innovation


Just like Paul McCartney, who says he literally dreamed the melody to "Yesterday," one of the most covered songs in the history of recorded music, Larry Page recalls the night in 1996 when he was 23 years old and had vividly dreamed about downloading the entire web onto computers. "I grabbed a pen and started writing," says Google co-founder and CEO Page. "I spent the middle of that night scribbling out the details and convincing myself it would work."

It certainly did. For the first time ever, in the final three months of 2011, Google exceeded $10 billion in quarterly revenue. Every day people around the world now use Google for an astounding 2.5 billion searches. But in all the gee-whiz statistics one could cite about the ubiquity of the company on the web, one statistic is even more telling: Page, 39, and co-founder Sergey Brin, 38, have spent $11.8 billion on research and development in the past three years.

That money fuels an innovation machine second to none, one that has moved Google well beyond its dominating lead in the search engine business. Staying innovative while scaling into a behemoth organization is often the most difficult passage for any growth company. For Page, who became CEO last year, and Brin, it comes down to what they call the 70-20-10 rule.

"About 70% try to work on the core efforts of the company," explains Brin, "about 20% goes to adjacent areas and expansion, and for the 10%, anything goes. As we have expanded our breadth of offerings, it's actually harder and harder to find the 10% out there. But I think that's important -- to let people be really creative and think outside the box".

Fuente: CNN Money - FORTUNE

The 12 Greatest Entrepreneurs of our Time (part 2 of 6)

Great ideas are hard to come by

Putting them to work is even harder

Meet the founders who turned concepts into companies and changed the face of business

2. Bill Gates

Company: Microsoft

Sales: $69.9 billion

Market Value: $273.5 billion

Employees: 90,000

Advice: Find very smart people and create small teams

Bill Gates is one of the very few extraordinary entrepreneurs who have had the opportunity to change the world twice in one lifetime: First, as the world's most influential geek, he helped usher in the personal computer revolution. Now he is tackling the stubbornly difficult challenges of global health and public education as the world's most generous philanthropist.

If there is a similarity between how he led Microsoft and how he is leading the Bill & Melinda Gates Foundation as its co-chair, it's a focus on hiring very smart people and putting them to work in small teams to solve big issues. "There is no way of getting around that," he has said. "In terms of IQ, you've got to be very elitist in picking the people who deserve to write software."

Once asked what his best business decision was, Gates replied without hesitation that it came down to picking people. "Deciding to go into business with Paul Allen is probably at the top of the list, and subsequently hiring a friend, Steve Ballmer [Gates' successor as CEO at Microsoft]. It's important to have someone who you totally trust, who is totally committed, who shares your vision, yet who has a little bit different set of skills and who also acts as something of a check on you."

Says the 56-year-old Gates about Ballmer: "Some of the ideas you run by him, you know he's going to say, `Hey, wait a minute. Have you thought about this or that?' The benefit of speaking off somebody who's got that kind of brilliance is that it not only makes business more fun, but it really leads to a lot of success."

3. Fred Smith

Company: FedEx

Sales: $39.3 billion

Market Value: $30 billion

Employees: 255,573

Advice: Rely on "first-level" managers

Despite the story that Fred Smith came up with the idea for Federal Express in a term paper for a Yale University class, it was this entrepreneur's experience during the Vietnam War that really allowed Smith to glimpse the future. From 1967 through 1969 he served two tours of duty, first as a rifle platoon leader in the U.S. Marines and later as an air controller.

It was a profoundly formative experience. For one thing, Smith got to see up close the awe-inspiring logistical efforts of the military, effectively mobilizing more than half-a-million troops and millions of tons of supplies. The discipline, training, and leadership experience would stick with the Marine captain. "When people ask me what principles have guided me since I started FedEx Corp. years ago," he says, "my answer often startles them: It's the leadership tenets that I learned in the U.S. Marine Corps during my service in Vietnam."

In the Marine Corps it was not heretical to have ground and air groups together. "When you come ashore in landing boats, you don't have any artillery, so the Marine Corps is the branch of the service that actually invented close air support, dropping ordnance close to you. So I made Federal Express an integrated air-ground system. It had its own pickup and delivery operations on the ground that were integral to the hub-and-spoke air operation."

Smith's leadership handbook draws heavily upon his Marines experience. "We tell our executives that the key to their success is to rely on their first-level managers [the company's counterparts to noncommissioned officers], to set an example themselves, and to praise in public when someone has done a good job. All those are standard operating procedure in the Marines."

Ultimately Smith, 67, gave many small businesses the customer reach that had long been the province of far larger companies. It was a game-changing innovation for FedEx, but also for the broader entrepreneurial economy.

Fuente: CNN Money - FORTUNE