When senior managers consider a major change in direction – such as making an acquisition, building a new facility, entering a new business, or launching a new product – they usually take two discrete steps: 1. They conduct the research and analysis necessary to justify the case for moving ahead; and then, having made the decision, 2. they design an action plan for implementing it.
In a relatively stable business environment, this process makes sense. It reduces the risk not only of a bad decision, but of a good decision failing to achieve its intended results. There are, however, three common weaknesses in this process that often limit or undermine success, particularly when business conditions become volatile and unpredictable as we’re seeing today:
1. Long time delays: Given the importance of these major strategic decisions – and the cost of a wrong decision -- managers can easily be tempted to carry on the research and investigation process as long as the search for more information promises to help solidify the decision. But an endless pursuit of “correctness” can serve as a drag anchor by unduly extending the time to make the decision. And, as time drags on and conditions change, the research and analysis become increasingly outdated.
For example, the head of a one division of a large telecommunications manufacturing company decided that they had to redesign some of their products in order to serve a business segment that was growing very rapidly but in which they were not engaged. A number of his engineers, however, doubted whether they had sufficient strength in the technology needed to compete in this new arena successfully. Nevertheless, given the determination of their boss they undertook a comprehensive program of research and experimentation so they might make the best decision. As each test was completed, however, they were never satisfied with their results. And they kept claiming they had to do “just one more test" -- while the technology was advancing around them.
2. Limitations in Implementation Capability: The ultimate success of any major strategic decision depends not only on the soundness of the decision, but also on the capability of the organization to implement it. No matter how bold or imaginative a strategic plan may be, it is only as good as the organization’s capability to carry it out. Yet weaknesses in implementation capability are rarely dealt with during the lengthy research and decision-making process, but only months later when they happen to arise as impediments during the implementation of the plan.
Example: The New York Legal Assistance Group, a rapidly growing public service organization, was about to launch a strategic planning process to lay out its growth plans for the coming years. The Group's president asked a consultant who was working with them to interview some 15 key players to get their perspective on the future. When the consultant started the interviews he was surprised to discover that no one wanted to talk about the future. There were too many current operational problems they were concerned about to even think about dealing with the future. As a result, the strategic planning effort was deferred and an operational performance improvement process immediately began to focus on resolving the multitude of immediate problems.
They were lucky: If they had – in the more typical mode -- launched a strategic planning process without first resolving some of the operating issues, the planning might well have failed, while the malfunctions got worse and all the potential performance improvement opportunities would never have even been identified.
3. Rigidity of Action Plans: Once implementation of a strategic plan gets under way and the organization begins to carry it out, new insights into the decision are revealed. This insight can provide fresh perspective on various aspects of the decision itself or on the plans that have been made to carry them out. But since the plans for implementation have been based on the big strategic decision and have undergone extensive scrutiny, rarely do the plans include (or even allow) opportunity for rapid and flexible modification based on the early experiences in implementation. So the effort may get frozen in the agreed-upon master plan rather than being flexibly reformulated as experience occurs.
One of our colleagues was asked to assist a large fiberglass manufacturer to accelerate substantially the disappointing sales of a new product. The product was the happy result of a successful R&D effort pushing into a relatively new and very challenging technology. As the client began the new acceleration effort, it was revealed to our colleague that the formidable technical challenges the team had faced in developing the new product itself had motivated them to formulate very detailed plans to guide its technical development. But sufficient attention had not been focused on planning how to market the product once it was successfully developed; consequently they found themselves with a valuable new product that simply wasn’t selling very well.
So Given these Barriers, What’s the Alternative?
In Our View It Is To Make Strategic Transformations More Actionable, More Dynamic and Therefore More Successful
The incremental successes approach is not just a way to achieve more correct decisions – it is a way to change strategic decision-making itself from a high risk game to a minimum risk game. It may not be applicable in every situation, but it will be a powerful methodology in enough situations to consider it whenever you and your colleagues begin to debate a big strategic decision.
The basic idea of incremental successes is to break any big transformation being contemplated into self-contained, continuous increments, each a kind of minimum viable unit of change. It begins by carving off one element of an overall big decision that can be made and carried out fairly rapidly -- before all the other sub-decisions and planning for the “big decision” have to be concluded. For example, if a new product is the subject being considered, the first sub-decision might be to improvise a sample version of the new product (or something very close to it). It can be tested in use or might be given or sold to some test customers who can be asked to help test the new product and consult on its efficacy. Such a mini decision project can demonstrate some of the benefits of the incremental successes approach. By making and testing something close to the potential new product, the idea behind it can be validated. And one or several methods for actually implementing the idea can be tested. Further, because it is not the big make-or-break decision, customers and representative groups of sales, marketing and product development people can be informally involved.
Moreover it can help the key leader of the change effort develop the process for carrying out the big decision once it is made. The requirements for additional talent needed on the implementation team – and for other resources needed to support implementation – can also be identified. And all of this progress can get moving in a fraction of the time needed to prepare for the big decision -- and can get going while the basic research on the fundamental idea itself is continuing. In fact these early action/implementation experiences can contribute to the continuing research.
Thus the approach permits the principals to get started implementing the first elements of the change and testing its validity even while continuing with the research for making the overall decision somewhat later. Moreover this experimentation focused on the first incremental sub-decision –and then the subsequent ones -- can be treated as a team learning process, with frequent reviews of what’s working and what needs to be improved. And this process can be launched and be well under way and making progress while the overall decision is yet to be made.
Here’s how the fiberglass company (cited earlier) used this incremental success approach to move forward its stalled new product. The division general manager called together people from R&D, Engineering, Production and Marketing. He asked what could be done to accelerate the sales of their new product without devoting major time and energy to developing a new marketing master plan for doing that. The answer to that question was easy: Select two or three of the most promising applications for the new product and concentrate on pushing them for a while, setting aside all of the many other promising applications.
Once they focused on this task, without getting bogged down discussing all the overall strategic implications, they selected a few of what they all agreed to be highly promising applications. The general manager assigned accountability for each application and asked for a detailed action plan within a few days.
During the next few months they succeeded in achieving substantial sales gains with their languishing new product. And by the end of six months they were able to apply the learning from their successes to additional applications and then to laying out a longer term sales plan.
Another example of the process was provided by the Investment Office of the California Public Employees Retirement System (Calpers). They decided they had to reduce the cost of the investment advisers they retained to supplement the work of their modest-sized staff in managing a fund valued at over 250 billion dollars. The cost of this advice at that time was approximately one billion dollars a year. The Investment Office management had devoted much time and energy to trying to develop a strategy to reduce that cost.
Finally the head of the investment office demanded some immediate progress. To break the log jam he charged a small team to take some immediate steps forward while others continued trying to find an overall answer to the puzzle. This first step aimed at making an actual reduction in the adviser cost and learning from that experience. After considerable debate about how ambitious to make the goal of this first experiment, the team made the head-spinning decision to try a first-step experiment of getting the fees actually reduced by 50 million dollars a year.
They spent the next three months improvising and testing various approaches – each aimed at making some actual reduction in the fee levels. They were less concerned about the overall strategy and more about trying a variety of approaches that might work. The actual savings achieved by this action-oriented approach within a few months were much greater than the 50 million dollar figure.
And, equally important:
- They developed much more insight into how to achieve what they were trying to achieve (for example how to renegotiate contracts before expiration)
- They had some successful experience in doing it and could make more realistic plans with more confidence
- They realized they could keep the process going and continue reducing the cost of advisory services while gradually developing the overall goal and master plan.
In our experience, the incremental successes approach to major strategic transformation almost always yields a double benefit: It produces immediate, reinforcing results and it also contributes to mastery of the large scale advances. As it did in this final case:
A global pharmaceuticals company, following a major merger, had to face the fact that they were great at developing new products and bringing them to market but not so great at deciding when and how to retire declining products – and they now had plenty of those. But there was no formula for helping to judge the import of any product’s declining sales levels since they were convinced that many apparent “losers” still had huge potential. But which ones?
Having conducted more studies on this subject than they could even count – which had produced only very modest results -- they decided that trying to develop an overall “master solution” would not pay off. Instead they decided to do the following experiment in three different countries: In each one they did a quick market analysis of their current products and they interviewed a sample of physicians and medical researchers. But instead of searching for losers that might be “killed,” this experiment aimed at identifying a small number of products that had the potential to do much better than they were doing –“hidden nuggets” that were not getting any focused attention from sales and marketing. The experiment aimed at increasing the sales of these “hidden nuggets” and doing so without shifting any promotion budget away from other products to help advance the nuggets.
In all three countries they achieved significant increases in sales within three months.
In the second round they did the same experiment in ten countries. Gradually they expanded this process around the world -- leading to a billion dollars in net sales improvement within two years. In the years since the initial experiment, the company has continued deploying this methodology in order to capture value from older products. The company also has gradually migrated patients to newer drugs and gradually phased out or sold off many older products that could not be mined.
Yes, the early incremental sub-decisions and the successes they almost always engender in this approach mean that management learning almost always occurs as a by-product while successful incremental decisions are being accomplished. Yet when this incremental success approach is suggested to senior managers confronting major strategic decisions, a surprising number of them seem to be made uneasy by it – almost as though there is something sinful or dangerous about carving off management actions that are relatively easy to carry out and that produce rewarding results.
We believe it is not uncommon for senior managers to feel this way -- that in order to be considered really “significant,” any achievement needs to be big, stressful, and extremely difficult – like an uphill marathon rather than a daily run. That psychological reluctance by many senior managers to break large scale undertakings into more simple, easier increments should be examined, quite apart from the focus of this article.
Your two co-authors have, together, well over 100 years experience helping managers enjoy achievements like the ones cited briefly. And similar experiences can be achieved by any.