Quick takes

Citation

Gorrell, C. (2002), "Quick takes", Strategy & Leadership, Vol. 30 No. 5. https://doi.org/10.1108/sl.2002.26130eae.002

Quick takes

Editor's note

Catherine Gorrell's "Quick takes" presents the key points and action steps contained in each of the feature articles.

Page 5On misdirecting managementVincent Barabba, John Pourdehnad and Russell L. Ackoff

A great deal of the business advice produced by management gurus is either incorrectly inferred from data (but nevertheless may be true) or is platitudinous and therefore trivial. Their self-promotion goes like this: theorists unveil new ideas, christened with some acronym and tarted up in scientific language, which are supposed to "guarantee competitive success." But success is elusive; so a few months later, another new idea is unveiled.

Recommendation: make your company's managers aware of the shallowness of much of the widely touted advice on change management, even if well-known "authorities" offer it.

Source of the problem

1. 1.

   The quality of the advice is suspect. Much of it is based on faulty logic or data:

2. 2.
   • •

     Erroneous premise: corporate success depends on one or more specific properties of an enterprise or its management. The would-be guru "proves" this by citing a number of apparently successful companies. Problem: the properties cited do not have a positive and significant correlation with a random sample of successful corporations. The fact that success is improperly attributed to a set of properties does not mean that the attribution is necessarily wrong, but only that the inference is not legitimate and has a significant probability of being wrong.

   • •

     Much of the advice drawn from studies conducted is nothing more than platitudes – statements to which no reasonable person would dare assert the opposite. Accordingly, the statement is trivial. Examples include Tom Peters' advice to "stay close to the customer" or have a "bias for action." Who would assert the contradictories?

3. 3.

   Many of the gurus identify traits that should be the beginnings of hypotheses to be tested, not conclusions.

4. 4.

   In the face of rapid change, complexity and uncertainty, managers can be overly receptive to "guru" advice.

5. 5.

   The more complex the problems, the simpler are the solutions most managers seek. Most fads – for example, benchmarking, process re-engineering, and outsourcing – address parts of the organization considered separately, not the organization as a whole. They should be seriously questioned before adoption, for this reason if for no others.

The best defense

Defend against misdirection with three steps:

1. 1.

   Learn the ways to identify platitudes and tautologies, and then ignore them.

2. 2.

   View your organization as a social system. Fads and panaceas that address parts of corporations, without explicitly considering their effect on the organization's performance as the whole, are potentially harmful.

3. 3.

   Ask for evidence of the validity of the guru's advice.

Page 10Going from good to great: a conversation with Jim CollinsWilliam C. Finnie and Stanley C. Abraham

Jim Collins is the author of the book Good to Great: Why Some Companies Make the Leap … and Others Don't. It addresses the widespread interest in the question: how could a company make the transition from average performance to greatness? A "great" company being defined as an enterprise that is able to sustain high performance (outperforming the S&P 500 by at least three to one) for a period of 15 years.

Based on his six-year research, Mr Collins believes there are eight traits of good-to-great companies. They are cited in the article with these points of emphasis:

• •

  Level 5 Leadership. The leader of a great company is incredibly ambitious for the enterprise; it is an ambition that is for the "cause" of the work – the outcome, the company, the organization – above the self. This ambition is coupled with a ferocious willfulness to act on that ambition. Doing the right thing on behalf of the higher standard of creating something great is the signature of a Level 5 leader.

• •

  With regard to succession planning and implementation, most Level 5 leaders would understand that their report card only comes in when their successor succeeds. They act to set their successor up for a spectacular success. Only sustained performance indicates true greatness.

• •

  First who then what. In average companies, the leaders came in to their position with "the what" and then tried to get everybody to go there. In the great companies, the leaders began with getting the right people in place ("the who") and then figured out what to do. Having the right people is nothing new. But the key is that it is more important to first get the right team and only later figure out where to drive the business. This is absolutely contrary to what is taught in many business schools.

• •

  The world is clear to the good-to-great company executives. In contrast, there was an opaque, scattered, diffused, fog-like feeling in the comparison companies. The clear vision of the great companies centered on their understanding of what they can be best at, their understanding of their economics, and their understanding of themselves and what they were really passionate about.

• •

  Discipline is a core competency of good-to-great companies. There is almost a fanatical concentration to act consistently at the intersection of three circles: what they can be best at, their unique economics, and their passion.

Mr Collins concludes with the premise that the characteristics that he identified in his comparison of great and average companies will not necessarily guarantee success but they do give a very good chance of achieving remarkable results.

Page 15Portfolio power: harnessing a group of brands to drive profitable growthAndrew Pierce and Hanna Moukanas

Brand portfolio management is an expression of corporate strategy. Even though brands are intangible assets, they will directly affect corporate profitability because brands can be leveraged to build or protect shareholder value. To do this, make the link between intangibles and hard financial metrics and benefits by following these five precepts:

1. 1.

   Align the brand portfolio with the business design. Embed branding decisions into each aspect of the company's business, from customer selection to the internal organizational system. The evolution of brand strategy at Citigroup is used to illustrate this precept.

2. 2.

   Consider building a brand pyramid. Individual brands within a portfolio become far more powerful when they are interrelated, as Kraft Foods has demonstrated. Without a coordinated holistic portfolio strategy each brand cannot be tailored for a distinct level of the pyramid. The pyramid model requires constant vigilance and defense against attacks at its base. For example, use economic measures that reflect incremental costs, allowing the higher levels to cover the core costs. Manage the base of the pyramid as a low-cost business design, with production eventually moved to low-cost countries.

3. 3.

   Grow winners and harvest losers. While adding brands is easy in prosperous times, in a slower economy, concentrate investments on smaller groups of power brands. Unilever's practice with their brands is cited to show how they were rigorous about cutting or repositioning weak brands.

4. 4.

   Play the cards you are dealt. Rather than stretching a brand so far that it snaps, build a new brand or buy a brand. This is based on a clear understanding of where the company can and cannot take their brand. Marriott's practices are used to illustrate this point.

5. 5.

   Counter the tendency to make brand decisions in a decentralized, ad hoc manner:

6. 6.
   • •

     Establish a brand management function with management guidelines that outline when, how and where a brand should be used.

   • •

     Reward managers for making decisions that benefit the entire portfolio, rather than for building one brand at the expense of another

   • •

     Coordinate marketing's focus on demand generation to drive sales and branding's focus on longer-term image building to achieve sustained growth.

Fact-based insights, grounded in an understanding of both brand equity and a brand's economic contribution to corporate profits, form the foundations for a winning brand portfolio.

Page 22Brand architecture: building brand portfolio valueMichael Petromilli, Dan Morrison and Michael Million

The 1990s boom years resulted in a proliferation of products and brands. In today's environment of more demanding customers, corporations must ask "how should we allocate existing financial and human resources among our brands to grow shareholder value?" This question is important. Firms experiencing the largest gains in brand equity saw their ROI average 30 percent; those with the largest losses saw their ROI average a negative 10 percent. Message: focus on getting the most from existing brands through better organizing and managing brands and brand inter-relationships within the existing portfolio.

Definitions

"Brand architecture" is the way a company organizes, manages, and markets its brands. It must align with and support business goals and strategies. Different business strategies require different brand architectures. The two most common types are:

1. 1.

   "Branded house" architecture – employs a single (master) brand to span a series of offerings that may operate with descriptive sub-brand names. Examples are Boeing, Kellogg and IBM.

2. 2.

   "House of brands" architecture – each brand is stand-alone; the sum of performance of the independent brands is greater than they would be if under a master brand. Examples are General Motors and Procter & Gamble.

Neither type is better than the other. Some companies use a mix of both. The key is to have a well-defined brand architecture strategy.

Steps to maximize brand architecture

1. 1.

   Take stock of your brand portfolio from the perspective of customers. Their view is the foundation for your strategy. Key questions are offered.

2. 2.

   Do "brand relationship mapping" to identify the relationships and opportunities between brands across your portfolio, checking for these criteria:

3. 3.
   • •

     the perceived or potential credibility of the brands in that space – the perceptual license;

   • •

     whether or not the company currently has or can develop competencies in that space – the organizational capabilities;

   • •

     whether the size and current or potential growth of the market is significant enough to merit exploitation and investment – the market opportunity.

4. 4.

   Mine the opportunities where all three criteria are met (aka, the "sweet spot") or use these innovative strategies if all criteria do not intersect:

5. 5.
   • •

     "pooling" and "trading";

   • •

     branded partnerships;

   • •

     strategic brand consolidation;

   • •

     brand acquisition;

   • •

     new brand creation.

6. 6.

   Continuously emphasize the portfolio-wide thinking and business-wide implications of brand-oriented decisions. Consider creating a brand council.

When managed strategically and used as a structure to anticipate future business and brand needs, concerns, and issues, brand architecture can be the critical link to business strategy and the means to optimize growth and brand value.

Page 29Gathering information for strategic decisions, routinelyMark McNeilly

Most business leaders make important decisions every day under less than optimal conditions. But what can be done to improve this situation? Do the leaders in your enterprise have a simple but effective routine for making their strategic decisions? This article offers a clear-cut approach to creating an infrastructure and mindset that will aid your leaders, at all levels. A chart at the end summarizes the points of the author.

Step 1: Information gathering

For strategic decisions, ongoing collection and discussion of information can be done around three focus points:

1. 1.

   Know the competition. The facts, the competitor's strategies, and the competitor's probable response to your company's actions.

2. 2.

   Know your company. Gather knowledge of strengths and weakness first hand and keep up-to-date. Structured self-assessment tools are beneficial.

3. 3.

   Know the market. In-depth market research and analysis should be combined with information obtained from the those at the many customer contact points.

An infrastructure of formal processes ensures that there is a link-up of information to analysts and executives. One company did this by creating seven-person cross-functional teams that significantly increased the amount and types of information as well as creating the "right mindset" for all involved.

Step 2: Decision-making

1. 1.

   Put rigor into this stage of the cycle. Regularly get decision makers together to create synergy within the executive team and to allow each to know the others so well that they can anticipate each other's thinking. This latter result can be a powerful attribute, as shown in the example cited.

2. 2.

   For making timely decisions, consider using General Colin Powell's rule: make decisions when you have only 60 percent of the information. Making a decision any later risks delaying so long that the opportunity vanishes.

3. 3.

   For understanding the future and for "experiencing" the outcomes of strategic decisions, consider using techniques such as scenario planning and wargaming.

Step 3: Implementing action

Ensure that the agreed-to strategy is implemented by using these three guidelines: communicate clearly and directly with the implementers, lead by example, and plan-assign-and track the implementation.

With these simple steps and basic tools standard practice, your team will be better prepared to collect vital information, make effective decisions, and carry them out.