One of the first things a management consultant does when working with a new client is spend time with as many members of the organization as possible. Some companies want you to actually interview their folks, but much of this interaction can be done informally, joining them for lunch in the cafeteria, attending some of their meetings, or just visiting their work areas. One of the ailments that stands out in most corporations is the general lack of understanding about the company’s vision and goals. I’m not just talking about the people in manufacturing or the warehouse failing to understand the vision and goals – I’m talking about middle management and higher.
This is a dangerous situation, because the entire corporate system must be lined up with the vision and goals. What do I mean by corporate system? Everything from which departments exist to what work those departments do to how they do the work to what systems they do the work on to who is hired to do the work and everything in-between. All of the components of a company form one big system, and the study of business systems is the study of system dynamics. System dynamics thinking says that a change to one part of the system will have an effect on all other parts of the interrelated system, so the entire system must be managed holistically.
Why is this important? Think of a business as a mechanical device. A car. There are a lot of components in a car, but individually they don’t matter very much. The most comfortable driver’s seat in the world probably won’t impress you if it’s in a livingroom. A well-designed engine doesn’t perform well if it’s not fed by an efficient fuel system or good fuel. If an engineer works very very hard to develop the fastest engine on earth, but doesn’t work with the engineer designing the auto body, the car could break apart at high speeds. Making extremely good parts doesn’t guarantee an extremely good whole.
The strategy, organization, and control systems of a company must be integrated. If the only people who understand the strategy are senior executives, the system won’t work. The best way to share strategy across a large number of people is through developing good vision statements and meaningful goals. Many companies approach vision and mission statements as fluff they need to share on their website or on a plaque on their reception wall. That’s a mistake, and furthermore, system dynamics can’t be meshed with fluffy feel-good statements.
There’s a woman named Caryn Spain who teaches a program called Chart Your Own Course. She works from an accepted B-school approach to establishing competitiveness, but she puts it to a system that’s easy for a business to follow. To be competitive you must have differentiation and competitive advantage in equal measure. Spain argues (accurately) that no one thing will give you both differentiation and competitive advantage. Even a great patent won’t do that on its own. So her process guides clients to develop four elements that, when combined, make them competitive. She calls it the “secret sauce.”
The reason Spain’s approach is a good one for this topic is because she directs her clients to take their vision statement straight from the secret sauce. For example, if a company’s 4-point secret sauce (i.e., strategy) was that they would (1) offer a patented music device (2) using direct response/direct-to-consumer sales techniques instead of retailers so they could (3) cut out the middle-man pricing to give consumers a great deal and (4) partner with indie music companies to offer 25 cent downloadable songs to members of their internet club — that would be a differentiation and competitive advantage strategy.
The vision statement would be a paragraph that announced those four points. Every person in the company should know that the vision of this company is: “We offer a music device that nobody else can offer, and we sell it direct to consumers instead of through major retailers, so consumers can get the best possible price. Because we are committed to giving our customers a quality product at a great price, we are also partnered with over 80 indie music companies to offer their songs – to our subscribers only – for 25cents per download.” Spain actually recommends a much more robust internal vision statement – a full paragraph or more on each of the four points of strategy that describes in detail how the company intends to achieve each point.
The mission statement would be an elevator speech taken from the vision statement. Short and clear. “We offer a patented music device at a great price and preferential access to indie music on our consumer friendly website.”
If you stopped there, that would still be a better approach to vision and mission than most companies take. But to ensure full system integration, you must take it further. Next you attach your organizational goals and objectives to those four points, and you prioritize the organization’s resources according to the degree to which they serve those four points. In this example, the company clearly has to develop very strong web development skills, they have to have incredible relationships with their indie music company partners, and they have to have great manufacturing capacity or manufacturing partners to ensure they do not incur backorders on their patented music device.
And the integration of systems must go deeper still. If you are hiring a web designer and you have two terrific candidates with comparable technical skills, you need to hire the one who is most likely to love music – and indie music at that. If you have a choice between technically equal marketing directors, you’ll choose the one more in touch with pop culture. To appeal to the customers who are likely to gravitate to your business model, you’re probably going to want a culture that is informal and friendly – not corporate. If your supply chain people try to put a Wal-Mart-ish supplier management program in place, it’s going to turn off the indie music company crowd and relationships will be damaged. Nothing should be taken for granted – all aspects of the system must be compared to the vision to ensure they are in harmony.
Perhaps a company has a great vision statement already – something that isn’t fluffy, but is based on sound thinking and clearly expresses their competitive advantage and differentiation. They need to parse the vision statement to understand what its individual components mean, and then evaluate the entire company to see if the systems of the company are in line with the spirit of the vision statement. You’d be surprised (or maybe you wouldn’t) how often senior executives undermine their own competitive strategy.
In one company they kept cutting back marketing – even though marketing was a strategic element. In another company they based their entire market argument on over-the-top service, but they wouldn’t staff their customer support positions adequately because they didn’t want their labor costs to be too high. In yet another company they prided themselves on their intellectual property, but they wouldn’t hire an intellectual property attorney to acquire and defend their patents because the attorney would be too expensive! The list goes on and on.
If your company wants to be able to compete without having to compete on price, you have to offer something that customers don’t mind paying for. You may offer a better or otherwise unavailable product, unusual or just plain better service, a unique selling experience, a community of like-minded customers, or some other experience or attribute that makes the company desirable. Whatever it is, you (and all the other members of the organization) must be able to articulate the vision. To be successful organizationally, you have to be able to assess, day in and day out, whether or not each of the elements of your system – including policies, goals, and personnel – serves the strategy.
After all, what’s the point of buying an expensive car if it won’t go fast around the track?
(c) 2007, Andrea M. Hill