Michael Porter

Thanks to fellow Mindshopper Mario Vicari, I found a book that takes all of Michael Porter's work and distills it into some practical tips in one book. The book, Understanding Michael Porter: The essential guide to competition and strategy (Magretta, 2012), has a large number of interesting tips, but five stood out to me, in part, because I am currently working on the next step-change strategy for Mindshop. 
The first tip to contemplate is "strategy explains how an organization, faced with competition, will achieve superior performance. The definition is deceptively simple" (Magretta, 2012, p.20). This quote resonates with me due to the focus on performance relative to the competitors. This is a daily measurement that reminds me that we at Mindshop have to have superior performance every day, regardless of what the competitors or markets are doing.
The second tip is "competitive advantage is not about beating rivals; it's about creating unique value for customers. If you have a competitive advantage, it will show up on your P & L" (Magretta, 2012, p.184). This builds on my first thought, that my superior performance may not beat the competitor; this may be due to a multitude of reasons, including that I may want to be a different size to my competitor, or not desire the type of client that they have. The competition is not toe-to-toe, in-the-trenches competition, it is all about superior performance (and values).
The third tip is "strategic competition means choosing a path different from that of others" (Magretta, 2012, p.30). So if you accept that the competitive goal is superior performance, then it makes sense to achieve that performance using methods different to the competitors. I have always done things in a way that others either do not understand, or believe are a good way to operate. Either way I have created a point of difference.
The fourth tip is "the value proposition is the element of strategy that looks outward at customers, at the demand side of the business. The value chain focuses internally on operations. Strategy is fundamentally integrative, bringing the demand and supply sides together" (Magretta, 2012, p.97). What this is saying is that you need to define where you will have superior performance and then back it up with continuously improving the efficiency of your internal operations.
The fifth and final tip is "there is no honor in size or growth if those are profitless. Competition is about profit, not market share" (Magretta, 2012, p.184). This tip serves as a reminder that we need to be the most profitable, not the biggest in top-line revenue or head-count.
Consider these five tips in context of your own organization. What should you do to meet the requirements of all five? Is your current strategy going to work for you in the coming next few years?

For Accountants Only

Accountants are more comfortable talking to clients about financial matters than strategy. If a business has profit and associated cash-flow issues it is a reflection that their strategy is not working. Blaming the economy, the government, competitors, and even poor quality staff, is like blaming the weather, you may be right, but you are still left with low profit and poor cash-flow. A good strategy will take into account all scenarios, and will enable profitability in any situation. So if the accountant is uncomfortable talking strategy, and it is the strategy that makes a company successful, what should we do?

The answer, we need a sleight of hand, we need to convince the accountant that it is their job to provide advice to their client to ensure profitability and a healthy cash-flow. The accountant will normally accept that responsibility. Accountants also like check-lists so if we gave them a process for improving the profit and cash-flow of a business that would also help. Compliance work is fast becoming a commodity, mainly because the clients endure it rather than value it. The client is more interested in things that directly benefit them, and having more money in the bank is an easy benefit to sell. That means profit improvement should be an easier sell than compliance work.

So what if the accountant promoted a service to significantly improve profit in the client’s business, and what if we guaranteed we can show the client how to add pre-agreed amount of money to the bank balance? Notice I said guarantee to show how, rather than guarantee to actually put it there. The accountant cannot guarantee the client’s commitment to the profit improvement process, they can only guarantee their own part of it. At this point most accountants are pondering, what amount of money would I be prepared to guarantee? The answer should be that it depends.

It depends on a lot of factors, such as the size of the business, the level of waste there is, the resources we have available to remove the waste, and how much time it will take? I think you would be safe guaranteeing to find around 10% of the cost of running the business (overheads and variable expenses combined). I may not have to guarantee that much to provide an attractive return-on-investment. For example, if the operating costs were $10 million, 10% is obviously $1 million, I might guarantee $200k, particularly if I thought my cost in doing so was $20k. I have always worked on a ROI rule of thumb of 10:1, even then most clients don’t need a ROI so high if they are confident in the outcome.

The guarantee is one part of the confidence, but it is even better if you can demonstrate how you would save the money. I can normally do that in a two hour workshop. I run that workshop on the basis that if we don’t go ahead the workshop is free. I then use the two hours to walk the client through the seven wastes process and put the outcomes into a one page profit improvement plan. If the client then takes the plan and tries to implement it themselves don’t be concerned, it is highly unlikely that they will be successful, but if they are I have still been of significant value to them. Most clients appreciate that implementation is the key and that they need your help to generate the results. At Mindshop we use eight week cycles with multiple teams to work our one page profit improvement plan. The client learns as we go, but we keep working on issues that become more complex and difficult as we go along, so we are always required.

In time, the low-hanging fruit of profit are addressed, and the client’s attention moves to growth, throwing up issues of marketing, recruitment, pricing, competitor analysis, and leadership, all strategic issues. So what started as profit improvement, has morphed into strategy, as we have built both trust and confidence in the process. Once the accountant knows strategy there is no stopping them. The challenge is to get the accountant to agree to helping clients with cash-flow, then to guarantee their work, and then to keep going no matter what. Mindshop’s backing should give them the confidence to start the process, if it doesn’t there must be some other barriers to unblock. The accountant of 2015 has no choice, all the good ones will be doing this, all the average ones will be working for the good ones or have gone off and got a job in industry! Either way they will be all working more on creating change through strategy than compliance work.

So how do we move forward? Apply the waste reduction process to your own firm, experience it first hand, learning as you go. The next step is to offer the process to some “friendly” clients who need it. The third step is to develop a one page marketing plan for the profit improvement product. The plan should cover issues such as the web-site, events, waste process, training, and pricing. These three steps are all that is required to get sufficient momentum to sustain itself as a valuable service and on to ultimately a specialty in strategy. What’s stopping you from starting?

Change Theory Made Practical

I had a client this week with one of his customers, actually a group of customers, who he perceived had really great ideas but just didn't get around to implementing those ideas. He was frustrated and wanted to get my view regarding how to resolve this. Rather than respond with the general "do a force field and see what it suggests," I decided to share some theory on change management. As it turned out, he went with the force field idea, but my email to him made me realize that we try to change people with little or no idea about the theory behind change, so here it is!
The theory that makes sense to me is the theory of planned behavior (TPB; Azjen, 1991) where he suggested that our behavior that creates a specific change (to reduce our alcohol consumption, stop smoking, or to implement change in our business) is driven directly by our change intentions. In other words if we intend to change something we have a good probability of doing it. So what drives our change intention? According to Azjen there are three things; our attitude to the issue (do we think that the change is a good thing), the subjective norm (what our peers think about the issue), and finally our behavioral control (the degree of difficulty we think we are facing).
In my client's change situation the variables based on Azjen's (1991) TPB he needed to decide where the problem was; their personal atttitude towards change, the groups'attitude to the change, and the perceived degree of difficulty in the task. Once he decided where the blockage was it would be a simple task to develop some specific actions to resolve the situation. For example, if the subjective norm is the issue I would pick a couple of the early adopter members of the group and engineer some change success and get them to talk about it (and publically reward and recognize them for doing so). If the problem was in behavioral control I would give them a coach to help them create and maintain the change.
If all that sounds like too much theory of course you can just do a force field on it (see this link of me doing one http://www.youtube.com/watch?v=GCPlKHuYwRY ) but why not use the TPB and then do a force field on the specific issue that is blocking your change.

Competition - a win-win relationship

I like having competitors, I even admire some, and respect others. I race a car as a hobby and I learn more from my competitors than I do from any other source. I have purchased books and attended driver training courses, yet it has been the analysis of my own performance, in relation to the performance of more experienced and more capable competitors, that has benefited me the most.
I have installed cameras and data recorders in my car so that I can review each race I participate in to see where and how to improve. This is important because I am really competing against myself, striving to continuously improve my skills and improvements. My race car is actually road-registered and has the number plate "KAIZEN" which is a Japanese word meaning incremental improvement. The number plate reminds me that my objective when on the track is continuous improvement, not just about winning. Kaizen is a philosophy, and it includes elements such as, quality, involvement, effort, willingness to change, and communication.
I share my videos and data with one of my competitors, he has emulated my data recording sytem in his car specifically so we can share the data. I am quicker than him on some corners even though we have the same make and model of car, and he is quicker on others, resulting in him being about 3 or 4 seconds a lap faster than me on all the tracks we compete on. I am not improving in relation to him (because we are both improving at roughly the same rate) but in 2012 I improved my average lap time for each track by 2 - 4 seconds.
We at Mindshop have a adopted a similar approach to our business competitors except for the bit about exchanging data. I think the motives and ethics of my race-car competitor are a mirror of mine; so I trust him; I can't say the same about my two main competitors. We can still learn from them, particularly by studying their strengths and using their weaknesses to develop strategies that I know they would find very difficult to copy.
My advice to you is to do a comprehensive competitive analysis of your competitors using yourself as the benchmark, then decide on some changes you need to make to continuously improve your own performance in relation to your current performance. This year, 2012, will be full of opportunities, but you need to be more capable than you currently are to take advantage of them. Your competitors will show you the way to KAIZEN, embrace it as your philosophy for 2012.

The Accounting Profession

I have been a student observing this industry for over 40 years and progress on developing a strategic advantage has been very slow, in part, because there has been little pressure to change. It has been more about fiddling at the edges rather than transformation. In recent months, or perhaps it has only been recently that I have noticed it, there seems to be some acceleration in some parts of the profession.

I have always thought that there were two pressing needs in the typical accounting firm, firstly to develop a production culture with regard to producing compliance reports, and secondly, to introduce value-added services to help clients generate more profit and growth. I have to say the success in both areas has been limited but more effort has been invested in the value added services and sales process.

I know believe it is difficult to do either strategy, and virtually impossible to do a good job of both. The main reason for this is the culture and the processes for production is so different to that required for value-added services. I have observed in recent months an increased amount of mergers (really take-overs) as good firms try to get bigger. The challenge for firms on the acquisition path is to have the leadership needed to manage something bigger. By leadership I don't mean just leaders, I mean the whole leadership structure and processes.

Having said that, the leaders that come front of mind doing this are very capable people, I worry about the (lack of) depth behind them. If they get it wrong divesting will fix it so hopefully no permanent damage done. The real cost will be the loss of confidence to try it again! Then there is the issue of will they step up the production culture or just try harder doing more work using the same inefficient processes they always have?

I think there is a huge opportunity for the smaller firms, I am thinking less than 20 Partners, to become a boutique full-service firm. My vision is $1 of value-added fees for every $1 of compliance fees (for a start at least). What needs to change? Firstly, the majority of Partners need to sign of for it. Secondly, the skills and confidence in delivering value-added services needs a massive step-change. Then we need a better sales process and pipeline. We can throw away time sheets. Sounds pretty exciting to me.

Sure these smaller firm should not be able to match the production costs of the big firms but that assumes the big firms can do it right and I'm not confident about that. The key point is the value-added services that will be the magnet that attracts and retains good clients so the accounting firm can still make a margin on compliance.

Who will have the courage to take this one rather than fiddling at the edges? If I owned an accounting firm, a boutique, full-service, strategy sounds exciting, and, of most importance significant value to the clients.  

Change Management

In September, at the Atlanta Mindshop Facilitator meeting, I will release an innovative new model on change management. I have read extensively on this topic and was not surprised to find that the failure rate of change management programs was around 70%. I decided to review all the (peer-reviewed) literature that has been published on change management. After an investment of around 200 hours, I came to the conclusion that there was a gap in the research, no-one had come up with a model that could be used to determine the "best" way to implement change in each specific circumstance.
The research helped identify the key factors (constructs) that impact on change management, and I selected three to build a matrix; leadership style, change readiness, and the level of investment available. The leadership options are; autocratic, democratic, and transformational, so start thinking about your own style. The change readiness factor is about how well the organization has addressed issues such as; stakeholders beliefs, attitudes, and intentions, and capability to implement the change. Again you need to consider where your organization is in terms of change readiness. The investment level is impacted by the cost of activities such as training, consultants, coaching, kpi measurement, and time available.
I then used the matrix to select which of three change implementation processes were the best for each combination of the three constructs. For example, an organization with a transformational leader, that is at a high level of change readiness, and has a significant budget available to invest in the change initiative, is best to use an "empowered" approach. My paper specifies exactly what should be in this approach, and it includes initiatives such as; a balanced score card measurement, a dedicated web-site for the program, and a full-time coordinator of the program. Similar "menus" are specified for the other two approaches, "directed" and "supported".
All the aspects of the Mindshop Change Management Matrix (CMM) are supported by scientific research which makes this model unique. If you are interested in reading the justification for the model and its content, let me know, and I'll email you the paper. I will be interested in your feedback.

Personal Brand (you already have one, is it the one you want?)

Your personal brand is there whether you like it or not. You have a choice to just accept the personal brand that has evolved or you can take control of your brand. The benefits of controlling your brand include, better and targeted referrals, a reputation to be proud of, and being first in other people’s minds when they have an problem they need help with. You can control what you are known for.

What are you known for?

 Now you are probably thinking about all the groups that you belong to; family, work, clubs, neighborhood, maybe even a political party, and thinking, "well it all depends". Of course it does, but for this example let’s stick to the work sector of your life.

What are you known for at work?

If you are not sure, or even you don't like, what you are known for, then you probably should put some thought into your personal brand. Before we get into any specifics, let's think about what a brand is and then we can consider what this means for you and what benefits the right brand will create for you. A brand like Ford will mean different things to different people as it is a global brand known to many people in different countries. For me, it means conservative, reasonable quality, good value for money, and American-centric. What does it mean to you? What is the Ford management team trying to be known for?

How does Ford develop it's brand? They sponsor things, they advertise on television/print media/radio, and sponsor events to name just a few brand activities. The point is that if they left it to others, they may end up with a brand not to their liking. This lesson is also relevant to you. Why don’t you try applying the below 3 Step process to you:

Step 1: Determine what you ARE known for Step 2: Define what you WANT to be known for Step 3: Take some ACTION to achieve  or maintain your personal brand

For the first step, ask yourself “what are you known for today?” If you are not sure I suggest that you ask people around you questions such as, "what do people say about me?" or "what do people think my strengths/weaknesses are?" This first step is the hardest step to take and will then become easier. 

The next question to consider is, "what do I want to be known for?" if you are thinking that you would like to be known for always doing what you say, for being innovative, and for being very knowledgeable about customer service, then that's what you write down.

We are already at step three! Compare your results from steps one and two. Do they align? Are you already doing well on something? If, for example, you are seen as being innovative, but not as an expert in customer service then do something about it. You could google "customer service" and look for some innovative articles that you could email to other people. If you find more innovative articles on other topics, by all means save them, but for now just send out the customer service articles. You may even offer to speak on customer service during your company "lunch and learn" sessions. Why not offer to coach others in customer service?

Following these three simple steps will start you working on your personal brand. By now you have probably got some ideas for developing your own brand. If you do let's keep going. Why not start a blog on the area that you want to be known for? There is no end to what you can do if you keep working on it and not leave it to chance. The key is to invest the time into a personal branding activity every month and you will find you will become known for something very quickly.

One final thought on your work personal brand is that you may find there are two dimensions to your brand; an internal work brand, and the external work brand. You probably need to work on both, but you should find that the activities will be very similar, if not exactly the same. Good luck with developing your brand.