Lance Kurke

Tuesday, 30 October 2001 12:24

Water tower strategy

When Germany invaded Russia during World War II, its army had carefully prepared its assault. But it still ran into some unanticipated problems.

German railroad managers correctly prepared for the fact that Russian rails were spaced farther apart than German rails, and the Germans brought kits to retrofit German locomotives.

However, they missed the implication of the wider and heavier trains -- the Russians could carry greater quantities of water on board, and consequently spaced the water towers further apart. That was disastrous for the German locomotives. The logical solution, of course, was to build more water towers, but the railroad workers were civilian and took weekends and holidays off, despite the desperate need for railroad transport.

As a consultant, I'm frequently asked how any businessperson can catch such quirky problems if the mighty German Wermacht was unable to anticipate such things. The best answer I can give is to read and read and read.

The exposure of reading, coupled with learning from doing -- living -- is better than just living. Consider what I admit is a highly biased, irreverently annotated and incomplete list of strategy books for your corporate library.

My hope is, ultimately, for you to find your water towers spaced appropriately.

* The single most important work on strategy is Sun Tzu's ''The Art of War.'' This book almost certainly has been read by more people than almost any other, and for good reason. Of the numerous editions in print, by far my favorite is James Clavell's, published by Delacorte.

* Two other Eastern works that are nearly universally admired are Miamoto Musachi's ''The Book of Five Rings'' and Yamamoto Tsunitomo's ''Hagakure'' (periodically out of print).

* Machiavelli's ''The Prince'' is a classic, though overrated.

* Von Clauzewitz's ''On War'' is widely touted, but dense, inaccessible and unreadable. I do not recommend it.

* B.H. Liddel Hart is nearly universally admired for his thoughtful analysis, ''Strategy,'' although it's very demanding.

* The granddaddy of modern business planning is George Steiner, and his ''Strategic Planning'' is highly recommended.

* If you're seeking great literature that is fun, easy to read and will give you lots to think about, I recommend John McPhee's ''Place de la Concorde Swisse'' (a one-of-a-kind, gem that just may save your business); James Clavell's ''Shogun'' (the shogun was modeled after Ieyasu Tokugawa, who arguably combined the greatest political, business and military acumen of all time and whose academic biographies are boring); and ''Scipio Africanus'' by Liddel Hart. Scipio arguably was the greatest general ever.

Some will disagree with this list, but if this column causes you to read just one work and you become a better strategist for it, my irreverence will have been worthwhile. Enjoy. Lance Kurke, Ph.D., is president of Kurke & Associates Inc., a strategic planning and leadership development firm. He also serves on the faculty at Duquesne and Carnegie Mellon Universities. Reach him at (412) 281-2930 or at lance@kurke.com.

Monday, 22 July 2002 09:45

Are you a chopper or a cutter?

If you live in a forest and depend primarily on agriculture for survival, the removal of trees becomes a necessary but significant obstacle. Contrast how two cultures, Native American Indians and European settlers, solved this problem.

Soon after European settlers arrived at new locations, they began to chop down trees. This was very labor-intensive and wore out expensive axes at a terrible rate. The benefits from clearing the trees were instantaneous: The settlers could produce lumber for housing and prepare the land for planting crops.

When some Native American tribes moved into an area, they “banded” a section of forest — cutting a piece of bark around the tree. Banding kills a tree without being labor-intensive and consumes knives at a slow rate. Then they patiently waited the requisite number of years until the forest fell down, which enriched the soil and made it more productive. In the interim, they planted crops in a previously banded, now felled, forest. They thought, scheduled and planned ahead.

The contrast is startling. More startling is that businesses today are just as different in their methodologies and efficiencies in dealing with their environments. One business, like the Europeans, will face an immediate problem, and in good Yankee style, solve it by throwing resources at it — a reactionary approach.

Perhaps low-quality supplies are delivered to your firm, which undermines the quality of your product and the timeliness of your delivery. You solve the problem by paying a premium for another vendor to provide your supplies expeditiously, on their terms (read “expensively”).

Another business might take years to develop supplier certification programs or training programs — a proactive approach. This firm would minimize the likelihood of the panic, expense and resulting negative effects experienced by the reactionary firm.

Think of your environment in three levels — external, industry and operating environments — moving from the remote parameters to those closer to your organization. In this column, I will address the remote environment, its importance and how you break it down and gather data about it.

Consider five facets: technological, social/demographic, economic, political and ecological. You must systematically understand these environments and their ramifications on suppliers, customers and internal operations.

Technological. Imagine that your firm finds a simple solution to a problem that haunts your industry. It might be invented in-house, acquired by license or brought to you by a possible joint-venture partner. You may now have access to the solution to an industry-wide problem. However, only by identifying the need and monitoring the availability of this technology can you be first to market. Firms more typically will find that their competitors already have moved ahead with such new technology.

Social/demographic. Consider two competing firms that introduce super-premium ice creams simultaneously. At first, the strengthening economy helps drive up demand and supports both of their marketing decisions. But later, the social and demographic trends of health consciousness diminish demand. If, say, Ben & Larry were to monitor these social trends while, say, Doug & Hoss did not, Ben & Larry would likely respond by decreasing capacity in the U.S. accordingly and expanding geographically into other high-income, high-demand areas.

Economic. Monitoring the economy is essential. When some U.S. firms entered Russia, they discovered the ruble was not convertible to the dollar. To extract profits, they purchased local quality goods, such as premium vodka or caviar, exported them to the U.S. and sold them at a profit. Those who monitored the economic situation were able to quickly respond. Others still have their profits tied up in the ruble.

Political. As political situations change, you must keep abreast so that you can prepare for any negative consequences, as well as grasp opportunities before your competition does. Monitoring zoning news can reveal future retail locations; keeping an eye on plans for new road locations can reveal future plant or warehouse locations; surveying federal trade negotiations can reveal export opportunities. Often, political situations are combined with economic and ecological opportunities.

Ecological. The U.S. government has negotiated with Brazil and China to reduce greenhouse emissions in exchange for preferential treatment by the U.S. on certain treaties. To help these governments reduce emissions, the U.S. has promised assistance, including access to U.S. technologies, subsidies for insurance and financing to exporters and trade missions. For one of my clients in Pittsburgh, the awareness of and planning for the confluence of environmental forces has resulted in a very low-risk, multimillion-dollar annual opportunity.

Lance Kurke, Ph.D., is president of Kurke & Associates, Inc., a Pittsburgh-based strategic planning firm. He is president of the CEO Club of Pittsburgh and serves on the faculty of the business school at Duquesne University, where he teaches strategic planning and leadership. He also is an adjunct professor at Carnegie Mellon University. Reach him at (412) 281-2930 or at kurke@msn.com.

Monday, 22 July 2002 09:41

On knowing yourself

“If you know yourself and you know the enemy, you need not fear the result of a hundred battles.” — Sun Tzu

More than 2,000 years ago, the wise general Sun Tzu admonished his compatriots to constantly gather information to know themselves and their enemies (read: competition).

Unless you understand both — your organization and your competition — you cannot predict, with any degree of confidence, your success.

What does it mean in a business to know yourself? The simple answer is a SWOT analysis, an analysis of your strengths, weaknesses, opportunities and threats.

Strengths. Every organization has strengths that provided the impetus for it to enter the market in the first place. Some are unique; most are relative. Strengths range from technology or patents to distribution channels and logistics, to human resource capabilities and motivation and reward systems. The most powerful ones are those which are unique and cannot be copied.

However, the toughest trick is to get an accurate assessment of your relative strengths. Picture this: You have assembled your top management team to gather input about your firm’s strengths. It’s easy to imagine that each manager will be inclined, perhaps just a little, to exaggerate his strengths or those of his function. Cumulatively, these creeping exaggerations build into a very skewed picture.

The problem is that the firm will implement its strategy based on the assumption that these strengths are accurate. Your firm may fail because of misperceptions.

Weaknesses. Every organization has weaknesses. Some may be common to firms in your industry and some may be unique.

Back to our scenario: This time, some of your top managers duck acknowledging their responsibility for weaknesses in their area. This is easy to understand. Their boss and his or her supervisor are present, and the lowly managers are supposed to say something terminally career damaging such as, “Our distribution channels are not working out; our last ad campaign flopped; we had a failed new product introduction; and our sales costs are out of control.”

Even if true, no one in his or her right mind will be so honest. Because of fear, these facts will be veiled in hyperbole and disguised. Unfortunately, without an accurate analysis, your organization may proceed and be undermined by its false perceptions.

Opportunities. In contrast to internal organizational strengths, opportunities are positive options that exist outside of the company. Unfortunately, opportunities are common to all participants in the industry who have identified them. The competitive advantage goes to the firm that identified them first.

The availability of the opportunity for you is contingent upon your unique strengths. Many people think organizations should simply respond to opportunities as they arise. But companies that actively survey their environments for opportunities are best poised to capture them.

Imagine top management conducting a SWOT analysis. Collectively, they not only anticipate many obvious opportunities, but because of their interaction, they brainstorm and discover others that were less obvious and remain unknown to their competition. These opportunities position the firm to outcompete the competition and gain market share.

The final caveat is not to believe you have found all your opportunities. They are endless.

Threats. Anticipating and systematically identifying threats lets you create ways to prepare and prevail. Taking a proactive stance is always more efficient.

By continually monitoring your strengths, weaknesses, opportunities and threats, you will uncover the information you need to prepare effectively, operate efficiently, gain competitive advantage, constantly make you aware of new opportunities, keep from making serious mistakes and prevail in your industry.

Lance Kurke, Ph.D, is president of Kurke & Associates, Inc., a Pittsburgh-based strategic planning firm. He is president of the CEO Club of Pittsburgh, serves on the faculty at Duquesne University and is an adjunct professor at Carnegie Mellon University. Reach him at (412) 281-2930 or at kurke@msn.com.

Monday, 22 July 2002 09:40

People are like bats

Spelunkers report that if you place a 4-by-8 sheet of plywood upright in a bat cave shortly before dusk in a previously unobstructed space, upon flight, hundreds of bats will slam into the plywood and fall to the ground.

Fortunately, they pick themselves up, fly around the obstruction, and spend the night hunting insects. Bats ingest their weight in small insects each night and they do this with incredible accuracy while both predator and prey are flying in the dark night air.

How can this small mammal be so precise in its feeding yet so klutzy in its own "home" bat cave?

Bats navigate by two methods, echolocation, a kind of sonar, and memory. However, echolocation is extremely energy intensive, whereas mammalian memory uses very little energy. Consequently, bats memorize their routes through their caves, then navigate based on that memory. Thus, when they run into the plywood, they are flying blind.

When they pick themselves up, they memorize where the obstruction is (really fast growing stalactite?), then fly around it. This can be confirmed by moving the plywood. They continue to navigate around the assumed obstruction and fly smack into the newly positioned board.

To this extent, people behave like bats. They figure out how to complete a task, negotiate a deal, introduce a new product, get a date, find a hotel, order a wine, etc., then tend to stick with the solution, even though the world changes at a fierce pace. We no longer see what is really there.

Scientists call this routinization of perceptual scrutiny. I argue that we are flying blind in our own organizational cultures just like bats in their own bat caves.

This month, we will explore the rudiments of culture, and in a future column, consider how to use culture to help implement your vision and strategy. Aligning culture to strategy is essential. Implementing your strategy is likely to fail without proper regard for the role of organizational culture. Also, nothing effective will happen to culture unless the CEO supports the change effort. All organizations have cultures. The difference is how aware of it you are, how you perceive it, and if and how you use it to bring about your firm's mission and realize its vision.

So what is culture? Organizational culture is the pattern of shared beliefs and values that gives the institution's members meanings about their behaviors and rules for how to behave. The key words are pattern, shared beliefs, and meanings and rules. Patterns are key because isolated incidents don't make up cultures. Shared beliefs are important because individuals are emphatically not the culture (although the CEO may cast a long shadow).

Beliefs must be shared or they aren't part of the culture. When a pattern of beliefs is shared, the beliefs collectively provide meaning for employees.

My simplified advice to leaders is to assess your current culture, define the desired future culture that will enable you to successfully implement your strategy, and decide clearly how you will manage the transition from current to future.

Assessing the current culture is easy, if the investigator is systematic. Examine the physical setting. Contrast the informal campus at NIKE, which is one of the most beautiful, idyllic noncollegiate spots, with the much more formal Manhattan headquarters of a tobacco company, which is encumbered with high-tech security and its implications.

Among other things, consider who is promoted and the value statements of leaders. Does the head of marketing or operations get the nod to be CEO -- is it an insider or someone from the outside? Pay attention to informal norms like attire -- casual running gear at NIKE versus suits at other corporate headquarters.

To create your future culture, you must create and clearly communicate the vision for the future. That vision must include specific, desired behaviors about your employees -- you cannot be vague. The final step is to recognize that your future culture must fit with your strategy. Next month, I will explain how to change your company's culture and give tips on watching out for the proverbial plywood. Lance Kurke, Ph.D., is president of Kurke & Associates, Inc., a Pittsburgh-based strategic planning firm. He is president of the nonprofit CEO Club of Pittsburgh, serves on the faculty at Duquesne University, and is an adjunct at Carnegie Mellon University. Reach him at (412) 281-2930 or at kurke@msn.com.

Monday, 22 July 2002 09:36

The maggot method

After an early U.S. Civil War battle, the Union army retreated from the field, leaving the Confederate surgeons to treat the wounded -- starting with their own, of course.

The battle was so bloody that it took the surgeons three days to complete their surgeries and treatments. At the time, the standard treatment for a saber wound was to take the muddy, bloody uniform from a dead soldier lying nearby, shred the cloth, such as it was, and bind the wound to stop the bleeding.

These soldiers often were left aside for days. If gangrene developed, doctors resorted to amputation as the only possible course of action to save the life.

As the unfortunate Union soldiers lay in the fields, many died who might have otherwise survived with proper treatment. But many who managed not to die were found days later -- and with clean wounds. One surgeon, whose name is not known, very closely observed one such case and was startled to see that maggots were crawling around in the wound.

As you may know, maggots eat only dead flesh. This surgeon reasoned correctly that a fly had landed on the open wound, laid eggs, which then hatched, and the resulting larva fed upon the blood and dead tissue, thus "cleaning" the wound.

Now, you and I may look at that wound and gag. We might have asked an orderly to "clean" the wound. But that particular surgeon performed an important, incredibly powerful act, one that is fairly rare in modern business: He made a keen observation, unadulterated by preconceived perceptions and beliefs, then proceeded to transform it into cold reasoning, no matter how counterintuitive the deductions seemed.

He reasoned that if you purposely took those maggots and "infected" a wound with them, they would clean that wound.

The Northern and Southern doctors were trained at the same medical schools before the war, yet only this one Confederate doctor saw and reasoned appropriately. So significant was this insight that it was kept as a military secret for the remainder of the war, resulting in Confederate soldiers returning to the front lines to fight again in much higher percentages than their Northern brethren -- a tremendous competitive advantage.

Now for the moral: You need to conduct an unbiased examination of your own business, then undertake some ruthless reasoning. Consider these grand strategies:

1. Concentrated growth -- This often is the comfortable strategy of choice, and at times, it's the correct one, but not always. Is there a growing need for your product or service? Can you continue to provide a strong competitive advantage?

2. Market development -- Have you considered a new or nontraditional market for your product or service? Instead of going head to head with local competition, you may find a nonserviced, untapped customer base in a different market. Or you may consider opening a sales office in Cleveland, exporting with a joint venture partner, or even entering the European Union with a complete facility somewhere in Europe.

3. Product development -- With evolving market needs and wants and quantum technology advances, developing new products or services may be key to your survival. This may be as simple as changing the compilation of your product or services mix.

Learn to look at your firm and your industry as a whole, without preconceived conclusions -- then explore promising options. By the way, field doctors practiced the medical use of maggots as far back as the Napoleonic wars, 150 years before our Civil War. It's interesting how common knowledge can be so easily lost. Do you think you have lost any?

Lance Kurke, Ph.D., is president of Kurke & Associates Inc., a Pittsburgh-based executive education and strategic planning firm. He also is president of the CEO Club of Pittsburgh, serves on the faculty at Duquesne University and is an adjunct at Carnegie Mellon University. Reach him at (412) 281-2930 or at lance@kurke.com.

Monday, 18 February 2002 05:43

Why you shouldn't plan

Organizations that routinely use a systematic planning process dramatically outperform their counterparts that do not. Yet about four out of five companies don't have a formal planning process. Why?

Why would a wise business owner not plan, when his company so likely would reap significant increases in ROI, ROA, ROE, stock price, market share, top-management wealth, new product introductions, etc.? In my planning practice, I've heard hundreds of excuses, but here are the four heard most often -- and why they simply don't work.

1. We are successful. "The company is successful, and you can't argue with success," they'll say.

Well, actually, you can argue with success. Success is relative. Your competition may be more successful than you are, and the long-term result will prove disastrous. You may be driving down costs at half the rate of the industry, and in no time at all, you will not be cost competitive.

Another reason not to be lulled into not planning by your own success is that the world changes so rapidly. In industry after industry -- computers, software, autos, financial services and consumer goods -- environmental changes create opportunities for those prepared to act. Plans prepare organizations to act.

2. We're too busy now. According to Stephen Covey's "Seven Habits of Highly Effective People," it's imperative to work on important but not time-sensitive tasks, because if you're always fighting fires, you'll never get to the important things unless they become time sensitive.

Planning is important -- but never time sensitive (unless you need a document to help with a bank loan or a potential sale of the business). It's easy to keep busy, but are you busy doing the wrong things? A plan keeps you clear about the things you should be doing.

3. I do my planning in the shower. Many leaders tell me, "But I do plan. I do it in the shower (or while shaving or driving)." Unfortunately, this doesn't count as a formal planning process. These plans often amount to little more than setting goals for that particular day. Strategic planning requires you to systematically gather data about your industry, competition, etc., then come up with an appropriate response to the resulting beliefs created about your world.

4. Planning documents are static. There is an acronym that often applies to strategic plans -- WORN, which stands for Written Once, Read Never. But good plans have a life of their own. The leader (and facilitator) needs to make sure the implementation is revisited regularly. The plan must be modified often, with changes communicated clearly to everyone involved.

Never mind your excuse. Well-constructed plans create futures that otherwise would not be. What is your dream, and how will you achieve it? Lance Kurke, Ph.D., is president of Kurke & Associates, Inc., a strategic planning and leadership development firm. He also serves on the faculty at Duquesne and Carnegie Mellon Universities. Reach him at (412) 281-2930 or at lance@kurke.com.

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