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July 2004

Want to bring strategy to life?

- Then shift people's mental model!

By Douglas Berger, Innovate LLC.

The success of strategy depends on the daily actions hundreds or thousands of people. The key to effective execution is having people internalize strategy as a new mental model of the business, and how it is run.

Implementation of new business strategy has been studied and written about in our contemporary business literature over the past several decades, and continues to be a major topic. The question is 'Why?' -- Why is implementing business strategy so difficult? How can a business executive implement a new business strategy more quickly and effectively? What does it take to make the strategy stick?

Everyone has their individual impression of what strategy is or is not. Executives seem to agree that strategy is about altering the future of the organization - putting the organization on a new trajectory.

Excessive attention is focused on strategic decisions. The premise is that capturing most of the value happens in the decision. What markets? investment? products and services? business model? If strategy was as simple as making important decisions, the concern for strategy implementation would have long become a mute point. Yet, in survey after survey, we still find that less than 1/3 of strategic initiatives deliver their aims.

What have we learned?

We have learned that while initiating a strategy is based on the decisions of senior managers, the success of strategy depends on the actions of hundreds or thousands of people. To implement strategy is to change the daily thinking and actions of people at all levels.

"The larger and more complex a company becomes the more important it is for senior managers to train employees at every level to make independent decisions about priorities that are consistent with the strategic direction and business model."
Clayton Christensen, The Innovators Dilemma (1997)

Let's take that one step further : success depends on strategy taking on a life of its own with hundreds or thousands of people. Until strategy is enacted throughout the organization, it is just an idea. How do we get ideas to take on a life of their own? Or, as seen from a different point of view, how can we enable the hundreds or thousands of people to internalize an idea as "that makes sense . I see new actions for me to take . I see old actions for me to stop . NOW.

What is a mental model?

One senior manager recently changed companies, going from a large corporation to a start-up. After a few months in the new company, he commented.

"I feel like I've been to a chiropractor and had my head completely turned around. In the past month, much of what I firmly believed about managing for high growth has been has been overturned. Things that make perfect sense to me today were exactly those ideas that I rallied against in my former company."

An executive in a consumer products company was recently discussing a new concept for growth. The concept was sound and had been validated by other enterprises. What did that executive perceive as fundamental to success?

"I have to establish a new mindset. People must appreciate that future growth and profitability will come from a different way of doing business in our traditional markets. The company will be conducting business differently, so they will be conducting their individual business differently. [...] I wish it were as simple as telling them what to do. Everyone needs to figure out new responses and break from unquestioned habits of the past."

This executive appreciated that ingrained thinking, habits and practices keep people acting in business-as-usual mode. These automatic responses undermine a future of promise.

The NY Times (May 20, 2004) reports Pat Russo, CEO of Lucent Technologies, as saying "[..] must change the mindset of a company that was once a cornerstone of the American industrial landscape."

Each of us has our way of making sense of our world - our work world. Mental models represent our internal perception and thinking processes that shape what information we see and hear, and how we understand it and how we act on it. Our mental model organizes the way we see and interpret the world around us. The day to day actions of people are shaped by unconscious, unexamined or unchallenged assumptions, conclusions and rules for conducting business.

Encourage people to makes sense of the world in a new way - their actions will follow.

Changing the formal structures, decision-making and business processes doesn't get at the myriad of individual behaviors . It is people's mental model that guides (and limits) everyday effectiveness. That is why most attempts to change behavior, change culture or achieve bold, ambitious results fall far short. When the mental model shifts, people begin to view familiar situations in a new light. They naturally create distinctly new opportunities for business and individual success, leading to higher levels of performance.

As a shared mental model of how the enterprise operates, culture has a determining influence on people's energy, creativity and performance. Culture is like the tide - it lifts or lowers everything. The power is in recognizing that the individual's effectiveness is strongly influenced by culture.

Shifting the Mental Model

While the data creates the intellectual reason for change, data doesn't create the compelling motivation for people to change. Analysis and facts do not change people's minds. If they did, millions more people would not be smoking; tens of millions more people would not be chronically overweight due to poor eating and exercise habits.

1.  Engage people on an emotional level

Stories, metaphors, and analogies create a vivid picture. They appeal to our senses, emotions and imagination. Listeners are stimulated to see and feel a new future. This provides people with a different way to interpret reality. Stories and metaphors exemplify strategy - they transform strategy from a concept to a real, personal experience.

2.  Reveal today's implicit and often hidden mental map

We can't change what we can't see. We can't change what we can't openly discuss. To shift the mental model requires that leaders reveal the existing and often implicit mental map. This is what guides today's actions. It 'pulls our strings.' Hidden truths must be challenged. Revealing unseen and unspoken forces and even more critical is making the unseen and unspoken discussable. This is often the most daunting challenge for a leader.

3.  Use contrasts

People get a clearer picture when we use contrasts. In many markets, contrasts are the accepted way to attract customers. Consider how the dieting industry uses before and after photos of customers. Home remodeling uses before and after photographs to show the value of their work and attract new customers. Picture yourself driving that brand new BMW. There is an emotional appeal in the contrasting the pictures.

When Jack Welch took over as CEO of General Electric (GE), he shaped the story about the present day, by saying GE's complex machinery was slowing them down. Competitors were eating their lunch because they did not have as many layers of decision-making. Welch used examples of other companies that stuck to their old model, causing them to fall on hard times. In his story about the GE businesses, Welch shared the weaknesses that were hard for employees to see. Then he painted a picture of the future GE - an exciting place to work 'where ideas win, people flourish and grow' (Noel Tichy,
The Leadership Engine
1997). People remember the compelling proposition that GE will be #1 or #2 in each of its markets or it will exit the business.

Welch created an explicit contrast between the current day and the future that effectively introduced and facilitated the strategy change at GE. Welch's story also graphically described how people would achieve this vision, by articulating the new values that were to guide behaviors.

'The Game' as a Framework for Shifting the Mental Model

Games have existed throughout history and in all cultures. There are many types of games: games of chance, board games, sports games, video games. Children play games from a very young age; they learn using games. Trainers use games to teach adults new skills. There are large businesses built around games that teach employees everything from teambuilding to customer service to management. Games are an integral part of human experience. People are drawn to games -- to be a player, an owner, a spectator, or a fan.

"I watch my seven-year-old son playing Pokémon on his GameBoy. He is learning focus. He collaborates with friends to find new ways to advance to the next level. He is excited in sharing his progress (I listen attentively, though to my ears he is speaking a foreign language with English subtitles).

I coach his AAA Little League. I see my son developing attitudes and skills by being on the playing field. These are skills that I have no chance of conveying through explanation."

Playing games is a fundamental human aptitude and inclination. The human mind has a natural absorbency to learning The Game. This makes The Game a powerful concept for discovery, learning, and shifting the mental model . Using the framework of The Game, we can help people redraw their mental map. This helps people create a "new common sense" for what to attend to, and how to act individually and collaboratively. The Game brings strategy to life.

Problems of strategy implementation through the lens of
The Game

A thought experiment : Imagine your business through the lens of The Game. What difficulty would you have implementing a course of action (strategy) if:

  • Winning is individual and every player is on their own?
  • Some players do not have the game playbook or don't understand everything in it, or there was no playbook?
  • There are hidden rules that can only be discovered through trial and error?
  • People are arbitrarily allowed to make up rules for other people?
  • The rules have built in ambiguity or conflict; there is no shared behavior for resolving ambiguity or conflicts?
  • We don't debrief and learn from playing?
  • There are negative consequences to players while they are learning to play the game?

Unfortunately, this is the situation that top executives often face while attempting to implement a new course of action.

'The Game' you play determines the results you get

For every company, there are consequences and implications of their game. Two companies can be directly competing in the same marketplace, yet playing very different games. The Game your organization is playing will shape the results you are producing. Market leaders are always playing a different game. Market disruptors are playing a different game.

Dell Computer is playing a different game than Hewlett-Packard. Johnson & Johnson is playing a different game than Proctor & Gamble (in their consumer business) or Merck (in healthcare). Their Games are fundamentally different. Different strategy, different growth prospects, widely differing cultures and business processes. The Game permeates the thinking of employees at all levels.

  • Trend of results

Most organizations play their game better every year. Year over year results show improvement. Through lens of The Game, true winning happens in the marketplace. When growth and profitability results are compared to your history - you are playing The Game against yourself. This internal guidance system can throw you off course without you even realizing it.

  • Recurring patterns of problems and issues

The mental model when played out by hundreds and thousands of people, day after day gives rise to the pattern of problems and issues. Just as any manufacturing process establishes upper and lower limits on quality, The Game defines boundaries of performance.

  • New Game Plan - New Business Opportunities

The mental model when played out by hundreds and thousands of people will also give rise to what opportunities are recognized, prioritized, and enacted.

The Elements of The Game

  • The Game

There is an overall game that your organization is playing. It is what you are organized to do. We are a _______________ company. Dell employees have their answer; H-P employees have theirs. This is not what the brochures say. This is what the employees know. Remember, The Game is people's internalized mental model.

  • The Playing Field - The Business Environment

- The fundamental competitive and economic structure of your segment
of the industry.
- You operating environment is established by your parent company.
- Your key competitors have an operating environment which is often
different from your own. How will competitors respond to your moves? You are competing against organizations, not just their products
and services.

  • Winning and Keeping Score

People want to be part of a winning organization. They play to have the organization win. The marketplace scores performance.

There is another critical score. It is the metrics through which you operate the organization. In his book Good to Great, Jim Collins emphasizes (2001) the importance of how YOU score your performance as a critical Engine for success.

  • Rules

Rules define allowable action. The internalized mental map always has a few, easily understood rules. These rules may or may not conform to the formal rules of policy and process.

  • The Playbook - Ways of Doing Business

- How we play to win.
- What everyone knows regarding how we do business.
- The few critical priorities.
- The few things we do with excellence.
- The spontaneous problems or opportunities we look out for
and our programmed responses.

  • The Players - Ways People Succeed

Everyone is playing to individually succeed. In many cultures, individual success has become the highest priority. It might supercede business success. Through the framework of The Game, we highlight the key drivers of individual success.

The Velcro Point

To realize the full potential of any strategy it must take on a life of its own with people at all levels of the enterprise. Articulating the strategy as an Old Game contrasted with the New Game enables people to internalize the shift.

 

The language of The Game is clear and concise. The rules are explicit. Everyone can understand the game plan. When using the framework and language of The Game people internalize:

  • What needs to be done for both the organization and for individuals to succeed within the new business strategy.
  • Specific new ways of doing business that explicitly contrast their old business model - they have a reference point that facilitates their decision-making.
  • In simple terms, what the benefits of working at implementing this new strategy will do for the organization and for individuals.

An Illustration

The following illustration shows how we use The Game to shift people's mental model when implementing a new strategy. This client organization was undergoing a fundamental shift from a manufacturing organization to a regional supply-chain organization.

As a manufacturing organization, everything was made in-house. Decisions were country by country. Countries too small to justify their own manufacturing operation were at a supply disadvantage. Manufacturing cost was high, yet key variables were under the control of marketing or product development. If you look at how the organization got to where it is - the decisions were a natural evolution. However, it no longer made sense in light of the changing business conditions in the region.

The individual pieces were in place to make the new strategy work. Yet people were still thinking about the business in the old ways including people working in marketing, finance, product development.

Let's see how articulating the strategy as a shift from the Old Game to the New Game helped internalize:

  1. The rationale for the change
  2. How today's problems are a result of the Old Game, and won't go away as long as we continue playing the Old Game?
  3. What will really be different in the business? The same?
  4. What must I base my actions on, so I will succeed?

The Old Game

We are a collection of local manufacturing operations within
Latin America

The New Game

We are a regional supply-chain business

The Changing Business Environment

Old External Environment

  • Costly trade barriers
    Unreliable outside suppliers
  • Fragmented sales channels
  • Long product life cycles

Old Parent Company Environment

  • Regional business autonomy
  • Grow in local currency
  • Scatter investment in a broad variety of customer models is key to growth

Emerging External Environment

  • Free trade zones
  • Competitive outside suppliers
  • Consolidating sales channels
  • Product innovation cycle

Emerging Parent Company Environment

  • Increasing global business unit direction
  • Grow in US$
  • Focus investment in select models is the key to growth

Unchanged

  • Slow growth in regional economies
  • Currency fluctuations


The Old Game

The Old Game

We are a collection of local manufacturing operations within Latin America

Winning in the Old Game

  • Meet budget quarter by quarter
  • Meet new product launch schedule

The Rules

  1. Independent operations by country
  2. Make product internally
  3. Manufacturing services its local country
  4. Senior staff reports to country manager
  5. Local country has all the power

Old Ways of Doing Business

  1. Decisions based upon authority
  2. Launch at any cost
  3. Do cost improvement after launch
  4. Job of leadership is running manufacturing
  5. Local, isolated cost improvements
  6. Forecast by country
  7. Individual Sourcing plan by country

Individual Success

  1. Comply with authority
  2. Minimize problems

Old Results

  • Worsening trend line of competitive cost
  • Worsening trend line of inventory
  • Worsening trend line in meeting product launch

Problems with the Old Game

  1. Product profitability while the stated objective is in reality a secondary priority
  2. High cost in local markets
  3. One size fits all production lines
  4. Small countries without manufacturing are at structural disadvantage
  5. High obsolete inventory


The New Game

The New Game

We are a regional supply-chain business

Winning in the New Game

Eliminate any competitive disadvantages on landed cost and reliability of supply in every country within 3 years.

The New Rules

  1. A single business with regional focus
  2. Source products at competitive costs through internal and external suppliers
  3. Get product cost right by time of launch
  4. Key metrics: product launch scorecard
    (competitive cost, product model profitability, schedule)
  5. Senior staff reports to Regional business
  6. Local country is a valued business partner

New Ways of Doing Business

  1. Decisions based upon fact
  2. Design for cost
  3. Strong link to the local business
  4. Deliver on commitments
  5. Job of leadership is improving the business
  6. Regional cost improvements
  7. Forecast by region
  8. Sourcing plan for region

Individual Success

  1. Do what's right for the region
  2. Improve the business
  3. Benefits of the new approach
  4. Lower cost structure for all products
  5. Leaner inventory
  6. Regional cost improvement initiatives
  7. Healthy conflict between marketing and manufacturing when introducing small volume or unprofitable product models
  8. Reduced product line complexity
  9. Source of innovation to the entire commercial enterprise

 

Doug Berger is Managing Partner with Innovate ( www.Innovate1st.com ). Innovate specializes in large-scale systemic innovation and breakthrough initiatives across a variety of industries. Doug can be reached at doug@Innovate1st.com or tel +1-732-546-0945

©2004 Innovate LLC (all rights reserved)

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