There is a saying about business leadership that describes the root cause of many business failures: “Leaders don’t resist focus; they just find opportunity so seductive.” The saying goes to the heart of three classic errors in execution.
Logic (and Strategy)
Type I errors are those of logic and strategy. An entrepreneur and his or her company want to do something that really captures their imagination - but they don’t subject the idea to rigorous, logical scrutiny. A company I was part of made this mistake in the early days of outpatient surgery. In retrospect this was a compelling, even a noble idea - but it was undertaken nearly a decade before the insurance industry reimbursed for this type of procedure. When our business faltered, my colleagues and I beat each other up over what we thought was a failure to execute on a sound strategy - right up to when the wheels came off. Looking back on it, we should have forced ourselves to build out a comprehensive business model, which addressed how all the different, inter-dependent aspects of the business were going to be funded and operate. This would have forced us to “play out the hand” and see that we were doomed to advocating for a new kind of service that we weren’t going to get paid for - no matter how successful we were at selling it.
Alignment
Type II errors are those of alignment. Leadership teams would do well to put “alignment” on the agenda right up there with strategy. Remember an important principle: organizations are perfectly designed to achieve the results they are getting. Managers and employees alike need a clear line of sight to see, understand and act on the connections between mission, strategy, functions, business processes and critical initiatives. Case in point: the need to get Sales and other personnel to work across departmental lines to attack market opportunities and serve the customer. If you can’t do this without getting entangled in complexities and disputes arising from different departments’ compensation and incentive plans, you’re not going to do much cross selling or other kinds of cross-group collaboration. The consequence will be warring silos, disappointing execution and a culture of blame.
Control
Type III errors have to do with control. In my experience, fewer than half of all companies that launch critical initiatives have a forum or a format for reviewing progress honestly. Is brand equity growing? Did better after-sale service succeed at improving customer retention? Are we more fully penetrating key accounts? Are changes in our distribution and logistics reshaping demand as we’d intended? It’s easy not to look hard--and retreat to reviewing the mission statement. Control doesn’t just mean telling people what to do. It means making mid-course corrections based on a realistic assessment of what isn’t working.
Better company performance comes from tempering exciting, new ideas with logical scrutiny. Map out the entire business process required to sell products or services to customers at a profit. Make sure that the entire company is aligned and ready to pull together toward a common goal. Add the discipline of honest control. Avoiding all three types of errors will greatly improve your chances of success.
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As a CEO, Director and Advisor to CEO’s on strategy and governance, Mike has compiled a track record of navigating complexity, refining business models and cultivating leadership. To contact or learn more about Mike, visit his Newport page.
