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Strategic execution- outside the core

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Monday, February 25, 2013

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02.25.13 Blog CoreRecently we covered how too many firms mistake “innovation” for “inventing things in a vacuum” — thus Reinventing the Wheel.

This time we cover how to speed up your execution of your strategy by avoiding another source of mis-innovation: Over-Focus on the Core. Next column we’ll cover the error of Putting People First (the Wrong Way).

Over-Focus on the Core

When I work with senior teams, they share a common bias across firms and industries — they over-value the uniqueness of their industry, firm, or niche, and they over-value innovative changes in their self-identified Core Business. And they fail to put appropriate focus on off-the-shelf innovations available in the non-core processes.

Four Quadrants of Business Processes

You will get a lot of leverage over your processes when you locate them correctly among the Four Quadrants of Business Processes: Core, Nurturing, Table Stakes, and Urgent Support.

Every business process has a certain amount of “mission critical”-ness, and offers a certain amount of “market differentiation.”

Here’s the grid showing the Four Quadrants (inspired by Steve Bell and Michael Orzen’s book “Lean IT”):

Normal (non-urgent) Mission Critical
Market Differentiating “Nurturing”
Example: Recruiting
Strategy: Partner with an Expert
“Core Competency”
Example: Apple’s user interface
Strategy: Continuous Innovation
Supporting “Table Stakes”
Example: Payroll
Strategy: Automate; Outsource or Eliminate
“Urgent Support”
Example: Project Management; ITIL
Strategy: Industry Best Practices; Continuous Improvement

The only place you should innovate in-house, is in that strategic area where your firm is unique (i.e. Apple’s user interface). Every other function should be managed differently – either partnering with a specialist firm (recruiting); hiring a commodity firm (payroll); or being “as good as the best” in your industry (project management).

A process is mission critical if a delay in it would cost you money directly. For a massage therapist, it’s giving massages, and it’s also scheduling. If the scheduling system is broken, clients can’t make appointments. They may give up or go elsewhere.

A process is market differentiating if people seek you out and hire you because of it. For the massage therapist, a market differentiator would be the quality of the massage. But the scheduling software would not be — nobody goes back to get a second massage because the scheduling software was so cool. Scheduling is “Urgent Support” — it’s mission critical but not a market differentiator.

Remember that the examples above are for an average firm. Some firms would put “Payroll” in their Core — firms like Paychex or Time4Payroll. Some would put “Project Management” in their Core — like Bechtel (complex projects) or eCameron (rescuing problem projects). And some would put “Recruiting” in their core — like Korn/Ferry or Kent Employment Solutions.

When a process is both highly Mission Critical and highly Market Differentiating, it’s in your Core.

Knowing Your Core

Make a quick list of 5 processes that you know happen in your business. Then give each two scores — 1 to 5 for how Mission Critical it is (1 means it can wait a few days or weeks; 5 means it must not be delayed even by a few hours); and 1 to 5 for how much Market Differentiation it gives (1 means no customer notices or cares; 5 means this is a primary reason people buy from you instead of your competitor).

Here’s a sample list of five processes and how they might be ranked by a wholesale distributor.

Process Area

Mission

Critical

Market

Differentiating

Manage Supplier Partnerships 2 4
Schedule Product Delivery 5 5
Manage Cash 5 1
Develop Sales Leads 2 2
Handle Inbound Calls 5 5

This list is part of a more comprehensive list of business processes that I use, inspired by the work of John Bernard, who recently wrote Business at the Speed of Now. (You can request the comprehensive list of business processes here.)

The Core for this specific business includes “Schedule Product Delivery” and “Handle Inbound Calls.”

You may disagree with these scores — excellent. What a great conversation to have, to get everyone on the same page about what’s important and what’s urgent.

If you’re leading this conversation, take 4-6 minutes in a staff meeting to have people work silently in parallel, and then pool results and discuss, or compile offline to save group time.

Appropriate Focus on the non-Core

When you over-focus on the core, you neglect the non-core functions. Here’s how to correct that. (This is where your CFO becomes even more strategic.)

Review your top 80-90 non-core functions once a year (the most time consuming and expensive ones, once a quarter). Ask around among your peers and in other industries, and find out how much time and money they spend. If they’re 10% below you or better, ask how they do it. If they’re 20% below or better, ask if you can send one of your people over to visit and learn from them.

The time you invest in finding an off-the-shelf, industry standard, better way to do a non-Core process will repay you many times over.

For example, I am now using Richard Pozen’s approach (from his book “Extreme Productivity“) to planning my articles. My writing is important, but it’s not Core — and Pozen’s approach has cut my writing time in half, while improving quality.

In the final article of this trilogy, we’ll show you how not to Put People First (the Wrong Way).

(You can request the comprehensive list of business processes here.)

Tom Cox is a Beaverton consultant, author and speaker. He coaches CEOs on how to boost performance by building workplace trust. 

 
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