Archive for the ‘Formulation’ Category

Strategic Analysis: UK Political environment

Oct 14th, 09 / 1 Comment

Houses of Parliament, London

Houses of Parliament, London


This post is intended to be used as part of the strategic analysis that any well-run business should undertake. It is intended to contribute to the political element of any strategic environmental analysis using the variants of the PEST framework( PESTEL, PESTLE, STEEPLE, PESTLIED etc.)

The final term of the current UK government has begun following the summer recess and the party political conference season. The economic context is similar to many other legislatures; it is a year since stock markets fell and economies crashed into recession following the failure of Lehman Brothers and the near-collapse of many elements of the global banking system.

So, how do things look a year on? The macro-economic measure of GDP growth suggests that China, followed by a number of other countries, is recovering and economic growth has returned. A number of developed economies are static, and economies that had a high dependency on Financial Services (UK, Ireland, Iceland) are trailing behind.

The narrative in the UK is worrying though. Some politicians, supported by the media, appear to have either forgotten recent history, or revised it for party political advantage. In an economy that is suffering because of mistakes made by banks, not only has government failed to secure changes to business practice and culture, but the opposition has very cleverly changed the story from abject failure of deregulated markets to one of reckless public expenditure and the need to pay down national debt.

Party politics is a feature of the particular form of parliamentary democracy that we have in the UK, but when it diverts political debate from the real issues it is dangerous. When the area it moves to (reducing public expenditure during a recession) is potentially damaging to the medium-term economic health of the country it is reckless.

An election is due next year. It is vital for the UK economy that the election debate considers the real issues rather than dangerous and potentially damaging illusions.

Formulation, Strategy, economy

Strategic issue in Ireland

Jul 23rd, 09 / 0 Comments

This is just a short post to note the significant change to the social element of the business environment in Ireland following the passage of a new law making blasphemy a crime. President Mary McAleese signed the Defamation Bill 2006 into law yesterday.
Most businesses won’t be directly affected, but it could be an indicator of other trends within Irish society.  We will track developments to see if the impact is felt beyond simple statements deliberately intended to cause offence.
There is already a campaign to test the new law by publishing statements that could be construed as blasphemous. This will be a useful barometer for gauging public opinion. If it is widely supported in Irish society, the world will know that this is a country that has taken a backward step and it may affect future inward investment. If, on the other hand, the challenges cause the new law to fail, it may be treated as a temporary problem and quickly forgotten.

This post is being written in the UK and it is not trying to denigrate Ireland in any way.  It is written in sympathy as we have seen societal changes here with the government extending the remit of the equalities bodies to include religion and, according to former cabinet minister James Purnell in the Guardian newspaper last week, the UK government has “been allergic about having any kind of debate about the fact we’re making lots of parents have to pretend to be religious at school … it’s a completely terrible position to put people in..”

There is a well-established principle that a law is only worth passing if it is accepted and, therefore, requires minimal policing. Time will tell in this case. In the meantime, any strategic evaluation of the business environment in Ireland has to record a negative trend in the sociological arena.

Formulation, Strategy

Strategy formulation: economic signs mixed but, on balance, no green shoots

Jun 29th, 09 / 0 Comments

Strategic analysis should include an evaluation of the external business environment.  This post could be used as input for the Economy section of a PESTEL analysis.

Continuing the theme of conflicting evidence about the state of economic recovery, today again sees apparently contradictory signs:

The Guardian reports that UK mortgage lending has reached a 13 month high, which reflects growing consumer optimism – which is a key component of the economy independent of data, but net lending figures were at their lowest level in at least 16 years.  The increased house purchase activity supports other, albeit weak, signs of recovery in the housing market since the start of this year.

They also cover a reoprt from the Basle-based Bank of International Settlements which claims that “Overall, governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks”, which further underlines the need for government action to curb the enthusiasm in the banking sector to return to unjustified remuneration for the very managers who allowed these toxic assets to cause so many banks to fail.

The FT reports that the International Energy Agency has reduced oil demand forecasts with global oil demand now forecsat to grow at 0.6% over the next 6 years.  In an extract from the report, the IEA say: ”The recent resurgence in economic activity could…simply reflect the rebuilding of depleted inventories across several industries, making it arguably premature to predict an imminent and strong economic rebound, not least because the elimination of spare capacity, the deleveraging of the private sector in several highly indebted countries and the rebalancing of global demand are still at an early stage.”

The balance of data and analysis suggests that the economic recovery still has a long way to go.  Business strategy, as we have said in previous posts, should assume further setbacks before the economy recovers and the focus should be on agile approaches to strategy that have contingencies rather than trying to formulate definite medium and long-term plans.

Formulation, Strategy, economy

Green shoots sprouting or dead cats bouncing?

Jun 24th, 09 / 0 Comments

Current headlines are giving mixed signals about the prospects for economic recovery. There are many stories this week that point to the emergence of green shoots following the 2008 global economic shock:

  • “OECD sees strongest outlook since 2007″
  • “Oracle executives signal that demand for the company’s software picked up noticeably in recent weeks”
  • “Monsanto earnings beat expectations”

Equally, there are many contradictory views also being aired at the same time:

  • “OECD chief warns about medium term risks”
  • “European Central Bank and other economists have been wary about forecasting any early return to growth”
  • “Japanese exports continue to tumble”

So, what to make of this when trying to develop short and medium term business plans or revise corporate strategies?  Unfortunately, as always, forecasting is inexact at best – the future, is of course, unknown. However, there may be some value in digging into the various stories to understand the timescales being referred to, and taking a view on the position of the pundit or analysts presenting the forecast.
For example, the apparently contradictory OECD headlines are both based on the same OECD report. inevitably, a document with a large scope will have some complexity which allows the contents to be spun in a particular direction, or provides different conclusions if you only consider particular aspects of it.
Much of the analysis and speculation concerns stock markets and share prices which are of limited interest for strategic thinking because they reflect sentiment rather than fact. Economic analysis attempts to consider facts but is limited by the quality of data and conflicting schools of thought.

However, an interesting study that compares the current recession to the Great Depression shows that this shock has been faster and more severe than the predecessor from the last century, and it is possible that there is more shrinkage to come before growth returns.

Our view is that when the future is uncertain it is best to use contingency and scenario planning combined with an emergent approach to strategy formulation and business planning. Scenario and contingency planning help you to be prepared and changing from a planned to an emergent approach to strategic management enables you to be prepared to adapt – fast.

Formulation, Strategy, economy

Down with strategy!

Jun 8th, 09 / 0 Comments

There was a comment on twitter this weekend explaining that the business world has moved on from a ’strategy, structure, systems’ approach to ‘purpose, people, process’ and how enlightened that shift has been. This binary approach to management where a new idea has to replace an old idea in some form of intellectual coup is dangerous. Sure, purpose, process and people are vital dimensions for any business that wants to map out the road ahead, but so are strategy, structure and systems. We might take a view that architecture and design are a better way of expressing structure, but that is very different to saying structure is unimportant.
The discontinuous mind, as Richard Dawkins calls it, is dangerous in business.

Formulation, Strategy

Wolfram Alpha Launch

May 18th, 09 / 0 Comments

Wolfram Alpha has been available for testing over the weekend and is due to go live today.  Initial reports, possibly inevitably, compare it with Google, but that comparison is not helpful.  Google is a (the?) search engine trawling the web to return information.  Wolfram Alpha appears to do some trawling, but relies quite heavily on a curated database for source material.

It is billed as a computational knowledge engine, which seems to be a pretty good description.  The power of Wolfram Alpha comes from applying the computational capabilities of Mathematica, the Wolfram software engine combined with access to a large database.  The limitations in these early days appear to be due to the restricted data (vast, but US-biased and often lacking precisely what you are looking for) and it’s ability to understand natural language queries.  The strengths are in computing mathematical or statistical problems.

So, does it have a role in business?  First impressions are that it has a limited role.  Certainly it can quickly compute comparative data for listed companies, even recommending what proportion of an investment portfolio should be invested in a stock, or group of stocks.  However, this is software that has emerged from the world of mathematics and physics, so this is where it is strongest.

In academic terms, business is a branch of social science , so by definition, Wolfram Alpha can only offer insights where quantitative data exist and much of business is based on the messy, unpredictable actions of people so a computational knowledge engine will always be limited in it’s application in this field, but many aspects of business can be expressed and measured in figures and the quantitative analysis offered here is no less than a revelation.

Formulation, Implementation, Strategy

Canute Strategy

May 12th, 09 / 0 Comments

A survey we are running is starting to show that organisations of all sizes are turning their attention to strategy in response to the global recession.  So far, so good.  What is surprising however, is the approach.  The initial indications are that there is an attempt to control events through top-down, prescriptive planning.  This approach works when the world is stable and extendable, i.e. trends can be extrapolated with a reasonable degree of certainty.

The situation we are in now is far from stable, and I defy anyone to predict where employment, inflation, interest rates, currencies etc. are heading in the short term.  Long term we can rely on regression to the mean, but it is difficult to know how long that will take.

The situation we are in now calls for adaptable, emergent approaches to business strategy – by all means use a plan to set a framework or general direction, but please don’t try to manage to a detailed strategic plan.

It may be mythology (at least to an extent), but the story of King Canute is relevant here – he was wise enough to understand that he did not have dominion over the environment and sought to prove this to a credulous people by commanding the sea to recede while the tide was coming in.

Adaptable approaches to strategy are not easy to implement.  They require clarity of purpose, values, vision, objectives and, yes, strategy.  They also require well-defined management processes and a discipline in execution that is far more demanding than just following a plan.  This is what we are doing with our clients and it is the only sensible answer to these turbulent conditions.

Formulation, Implementation, Strategy

Speed of change

Apr 20th, 09 / 0 Comments

The music industry has struggled to come to terms with the Internet.  The first signs of change were evident to the wider world almost a decade ago when Napster was launched.  With the prospect of free music (albeit with no copyright control), the record companies sat up and took, not only notice, but also action which resulted in the site being closed, then relaunched in a denuded form.

The brilliant realisation by Apple that the key to the success of the new MP3 players was not contained in the machine itself but the supporting infrastructure led to the development of the iTunes store and a significant new route to market for legally downloaded music and video.  The industry dominance that Apple achieved is remarkable, but despite their success, the record industry still appears to be wary – as evidenced by the continuing wrangles over royalties, digital rights management and the continuing absence of some significant elephants, or maybe dinosaurs, from the room.

The impact of iTunes has been so significant it is hard to remember that it didn’t exist in Europe in 2003, and was only introduced to Australia in 2005.  After a century of distributing physical media with a licensed copy of some music or video, the industry agreed to allowing virtual copies of music, movies and TV shows to be sold.  More recently we have seen the arrival of some competitors, including significant players such as Amazon (which itself was only launched in 1995).

October 2008 saw the launch of Spotify.  If you have not encountered it yet, this is an internet music service that  enables your computer to access a vast library of music for free.  There are no downloads and, more significantly, no purchases of anything either physical or digital.  The price you pay is to listen to advertising, or a modest daily or monthly fee to remain advertisement free.  Many big name companies signed up to the service and, from the outside at least, it would appear that they did so with less protest than they did with iTunes.

So, the pace of change is quickening.  Will Spotify replace iTunes or merely add another choice?  The challenge for the music industry is the speed of this change.  I know it is a cliché, but hopefully the diagram below illustrates that in this case it is a real business issue.

Recorded music distribution media timeline

It isn’t enough for the record labels (how much longer will this be a valid term?) to decide how to respond to Spotify;  they have to think about what will come next and anticipate the trend.  At the current rate of development, the next significant advance could be here in less than 5 years, and with an increasing number of artists finding success through independence, the need to finally get ahead of the trend is imperative.

Formulation, Strategy

A Convenient Movie

Jan 3rd, 07 / 1 Comment

A recent visit to New York provided an opportunity, albeit ironic, to finally see Al Gore’s movie “An Inconvenient Truth”. Plenty of food for thought; in particular the prospect of making a positive difference through the combined effectof small individual actions. I’m not convinced that all carbon offset schemes are equally valuable – is there any objective comparative research that organisations can use to determine the best route towards carbon neutrality.

A useful summary of the issues is provided by the New York Times: http://www.nytimes.com/ref/science/earth/energy.html

Any business strategy has to consider external factors, and environmental opportunities and threats are going to become increasingly significant forces as evidenced by today’s news from the UK that the government is highlighting the opportunity for farmers from biofuels, while also considering taxing farmers for the methane “emissions” from cattle – already being dubbed “the fart tax”. http://tinyurl.com/yaewut

A silly story to illustrate a serious issue.

Effectiveness, Formulation, Organisation, Strategy

The Effective Organisation

Dec 10th, 06 / 0 Comments

Welcome. This blog is intended to stimulate discussion and ideas for making organisations more effective. It covers Direction (Vision & Values, Mission, Goals and Strategy) and how to translate this into results through aligning people, processes and systems. The scope also includes organisation design and development, change management, business process management and information systems.

The intention is to stimulate discussion about what distinguishes an effective organisation from an ineffective one. Your thoughts and contributions are welcomed.

Design, Development, Effectiveness, Formulation, Implementation, Leadership, Organisation, Strategy