Energy transition. Corporate social responsibility. The post-COVID-19 world. Change management.
These are soundbites that are very fashionable at the moment. But when we use these words, what are we talking about? Are we talking about business transformation, or maybe business change? It could be an update to the business, or remarketing of the business, or maybe something else?
We can take the analogy of a textbook that is a few years old that is in need of an update to improve sales. Is the book factually sound, and we only need to modernise the cover to make it more appealing to a wider audience? Perhaps we need to update the book, add a chapter to include the latest thinking? It could be that the textbook is covering the right subject but needs a complete rewrite to bring it up to date and make it relevant? Or, is the subject that the textbook covers now obsolete and we need an entirely new book covering different material?
The one thing we do know:
If the textbook is obsolete, designing a new cover is not going to fix it
Business transformation is like this textbook, and it depends on where you are on the spectrum of change. Is the business fundamentally sound, and you only need to update the marketing material, or do you need to transform your business into something completely different. Be careful, if your business is obsolete, clever marketing is not going to fix it.
In business transformation, there are difficult questions to answer. The good news is that we can formalise the process of business transformation into seven logical steps:
Conduct a scenario analysis.
Set the vision.
Select a strategy.
Determine the mission
Resource your business to execute the mission.
Execute the mission
Review and recycle
What do we mean by scenario analysis? It means different things to different people. Scenario analysis is often confused with strategy analysis.
In the context of business transformation, we use the term scenario as a possible future.
We do not know what the future will turn out to be like, but we can imagine different futures. How these forward-looking predictions impact our choice of strategy is the foundation for business transformation. We can also signpost the future and develop indicators and metrics that tell us which path we are moving down.
We can take a simple example of a post-COVID-19 world that has a social awareness of climate change. We could imagine four future worlds.
Fast recovery and a rapid transition away from carbon energy.
A quick recovery, a slow shift away from carbon energy.
A slow recovery with oil and gas remaining the primary energy source for the foreseeable future.
A slow recovery but a rapid move away from carbon-based energy.
All of these worlds are possible, but can you design a strategy to cover all eventualities? Do you need to choose a scenario? When do you need to choose? What indicators should you look for that will put you down one path or another?
Set the Vision
Considering the various scenarios, what is our vision for the business? What do mean by vision? We can take a look at two examples of a vision statement. NASA and Apple.
NASA's vision is:
To discover and expand knowledge for the benefit of humanity.
We believe that we are on the face of the earth to make great products and that's not changing.
Notice that NASA's vision statement says nothing about space exploration, and this may surprise you. Similarly, Apple's vision statement says nothing about making mobile phones. The point of a vision statement is to set out the clarity of purpose so that the people who work for you and the customers who buy your goods and services know why you do what you do.
It is why, and not what, that is important to attract people to your business offereing.
What you will do to achieve your vision is your mission (discussed later).
Once you have an idea of where the world is going and what your vision is, you can select a strategy. A strategy is a set of decisions that you will need to make to achieve your vision. Example decisions are:
What products am I going to market? Who is my target audience? Who do I need to hire? Which markets am I going to target? What research and development do I need to do? What size does my business need to be?
All decisions are questions, and there are multiple choices for each decision.
The creation of strategy involves creating various options for each decision and then stringing together those options in different ways to develop alternative approaches. The different strategies you create should be distinctly different, mutually exclusive and collectively exhaustively. To choose, it would help you if you compared different strategies with the scenarios you have developed, your vision for the business and the value drivers for your business. As you develop the analysis of your strategy, you often end up creating hybrids, particularly if you want to cover more than one scenario. The strategy you choose and relevance to one or more scenarios depends on your attitude to risk. All in for one scenario or cover all worlds?
At this point, it is worth mentioning that the order of setting the vision and choosing a strategy can switch. You may need to do some form of strategic analysis before you define your vision. Iteration between vision and strategy often occurs in business transformation
The mission (or missions) you set for your business fall out of your strategy These are the things you are going to do to realise your vision. If you check out NASA's webpage, their missions are crystal clear and are related to their vision.
An example of a mission is NASA's Artemis program:
With the Artemis program, NASA will land the first woman and next man on the Moon by 2024, using innovative technologies to explore more of the lunar surface than ever before.
The mission forms the basis of everything else that will now happen in your business. You can create plans, and your mission will have SMART objectives (SMART standing for specific, measurable, achievable, relevant and time-bound).
You now have the makings of a project that fits the mission that you have set to create the business transformation that will ultimately achieve your vision.
Now you know where you are going to can resource your business and answer questions like: Who can help me deliver my mission? Who do I need in my business? What kind of skills do I need? What help do I need? What size does my business need to be?
One of my favourite set of questions:
What should I start doing? What should I stop doing? and What should I continue doing?
The advantage of having a Vision, Strategy and Mission is that you have created a clarity of purpose that can help attract the talent you need to deliver the business. For people already in your business, you have a compelling and authentic story to motivate them. Those that have belief in your vision will work for you, and those that do not will naturally leave your company. If you need to raise capital, you have clarity in your business plan and something tangible for investors to believe in
Now you have everything place; you can execute your mission. And this comes down to operational excellence. You will need to develop and continuously improve things like project management, financial management, commercial innovation, people management, health and safety, contracting, technology strategy and so on.
Review and Recycle
The world is in a continual state of change. You must expect to have to review your plan for business transformation against the signposting towards different scenarios. You may have to develop new scenarios sooner rather than later. At any point, be prepared to recycle back to a previous step in the transformation process.
An excellent example of an organisation that is incredibly good at scenario analysis and continual evolution of the business is the Danish company AP Moeller-Maersk
'A.P. Moller - Maersk is a Danish integrated container logistics company. Connecting and simplifying trade to help our customers grow and thrive. With a dedicated team of over 80.000, operating in 130 countries; we go all the way to enable global trade for a growing world.'
A.P Moller-Maersk is ostensibly and shipping company with its values firmly rooted in its family history. At the core of the business is a belief that the world will always need goods transported. Nothing seen today tells us that this is not true.
Beyond the core business, A.P. Moller has had an uncanny knack of being in the right business at the right time. In 1962 Moller recognised the importance of the extraction of raw materials and wanted to protect the exploitation of oil and gas resources for the benefit of the Danish people. This realisation sparked the beginning of the Maersk Oil and Gas company. In 2018, just before climate change activism took off and before 'Energy Transition' was in common usage Moller sold Maersk Oil to Total.
Oil is not the only thing Moller have owned and sold, Airlines, shares in Supermarkets, supply vessels and others. It would appear that A.P. Moller has been able to continually review future scenarios and adjust their business model at just the right time.
You can read more about Moller here:
Ask yourself this question, in the current world we are experiencing, how many businesses do you see making rapid adjustments, cutting costs, reducing the workforce, changing what they do. Most seem to be operating below the level of mission, making operational adjustments rather than rethinking scenarios and what that could mean for their own business vision and mission.
In a world fundamentally changed by COVID-19 and the idea of 'Energy Transition' how many companies are offering a compelling vision, with a clearly defined communicated strategy and mission flowing from their vision.
In future blogs, I will look at the various parts of Business Transformation, starting with Scenario Analysis.
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Decision Frameworks offer training and software to support business transition through excellence in decision quality This offering includes facilitating the exploration of scenarios, decision framing and the setting strategies.
At Decision Frameworks, we believe in clarity of action through quality decisions, for everybody, every day. We challenge the status quo that only experts can apply the process and, instead, we live by the mantra, "Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime". Anybody can learn and employ the principles of decision quality and we strive to help our clients make decision quality a habit for all their decisions: personal, community, and business. We partner with organisations and individuals and provide decision quality enabling products and services which are beautifully designed, practical, and simple to use. Decision Frameworks is an enablement firm. We facilitate structured decision workshops, we make robust, practical decision software, and we deliver relevant case-based training and coaching to ensure sustained decision quality within our client organisations.
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