The Three Imperatives of the Effective Executive…Part I of IV

Series written by Ron Wilder:

What does an effective executive do? In my experience, effectiveness as an executive comes down to doing three things well: building the right business model, executing it, and rapidly learning how to close the gap when the business model or execution is not where it needs to be. (In this first article of a four part series, I'll outline the case for the three imperatives. In the next three articles, I'll explore each imperative in more depth.)

There is a phase of my career I like to describe as the tale of two start-ups. An opportunity presented itself for me to leave the consulting firm I was with to join a new start-up in a business development role, working for one of the partners who had been a great mentor to me. I jumped at the chance. In just eighteen months, this company grew to millions of users, acquired and integrated its biggest direct competitor and then sold the company to a major player. It was a whirlwind and a win-win all around. We created a great service that still is widely used today. Along the way, we also created a lot of value for investors, including all of the employees.

After the first company acquisition, I stayed for about six months before another start-up opportunity presented itself. The first start-up experience was terrific, so I was ready to roll the dice again.

Only the second time did not have the same outcome. Instead, it was an extremely frustrating and disappointing experience. The product concept for the company promised to create significant value, yet this concept did not translate into real customers, revenues, and profits. The company struggled to adapt and the outcome was frustrating and disappointing for all involved. After a couple of years of trying to make a difference in the outcome, I decided to leave the company and start my own consulting practice.

I found myself reflecting on the vastly different experiences of these two-start ups. At the time I joined each company, both companies looked good on paper. Big market opportunities, differentiated products, solid technology, and great people. Yet one succeeded and the other did not. What made the difference?

When I considered these two companies and the numerous other companies I had encountered in my work, I boiled it down to one critical factor: the effectiveness of the executive team. Specifically, how effectively could the executive team, led by the CEO, identify the right opportunity, craft the right business model and strategy to capitalize on the opportunity, build the right team of people to execute, and then actually do it?

Since those two start-up experiences, I have had the opportunity to work with many executives in different companies - large/small, high-tech/low-tech, for-profit/non-profit, public/private. I have observed many executives in many situations. The best executives I have had the privilege of working with seem to consistently hold three questions in their mind:

• Do we have the right business model?
• Are we executing effectively?
• If not, what is the single most important thing to focus on to positively impact questions 1 or 2? Once they figure this out, they rapidly learn what the need to learn to get there.

These three questions form the basis for what I call "The Three Imperatives of the Effective Executive". Imperatives are those things which are essential and urgent. In other words, they are your "must-do's" to be effective as an executive.

Imperatives are ultimately about behavior. At the end of the day, it all comes down to behavior. In real estate, the three most important factors are "Location, location, location." For business leaders, a similar mantra applies -- "Behavior, behavior, behavior!"

The three imperatives of the effective executive are:

Executive Imperative Number 1: Building the right business model.

As the leader of the business, your first imperative is to make sure that you have the right business model to survive and thrive in a constantly changing environment. Even if your business model works today, you cannot operate as if your business model will work indefinitely. You must prepare yourself and your organization to shift your business model before it becomes necessary.

Executive Imperative Number 2: Execution.

As the leader of the business, you must make sure that the local behavior of all people in your organization is aligned to achieve global results.

Executive Imperative Number 3: Leading Learning.

As the leader of the business, you must help people learn the new behaviors that are required for success.

How well are you doing on these three imperatives? Do you have the right business model? How well are you executing? If not, do you know what to do about it and are you doing it?

Is agile ERP implementation possible?

Blog posting by Vjekoslav Babi

Agile has been gaining momentum among software development methodologies for past decade or so. Various researches and surveys consistently show that software developed under an agile approach is generally better than the software developed under waterfall approaches.

At the core of any agile approach is an assumption that whatever the requirements might be at the beginning of a project, they won’t be the same at the end of the project. The longer the project, the more truth there is in this assumption. To mitigate this situation, agile methodologies start with smaller sets of requirements, they start small and deliver functionality incrementally in a series of releases. No single release covers all requirements, but every release delivers more than the previous one.

With ERP implementations, we generally don’t subscribe to this idea. And at that, we might be wrong.

We say that ERP implementations are not software development. It’s true, but it might be irrelevant.

We say that with ERP we don’t start from scratch. We must know all the requirements up front because anything we do impacts tens or hundreds of functions. If we just add things incrementally, we might need a lot of rework. So we need a “big picture” up front, we need to design everything in such a way that this huge ERP structure doesn’t collapse.

But no matter what we do, the requirements will change. ERP implementations take 20 months to complete (on average). Do you think your business is going to be exactly the same in 20 months as it is today? Me neither.

ERP implementations start with a fit/gap analysis which detects the gaps between your requirements, and system standard functionality, and then specify how these gaps will be closed. If the specifications are cast in stone, and if you stick to it, after 20 months you’ll might get a system which is not fit anymore.

Recent Panorama’s survey shows that only one out of five companies have realized more than half of expected benefits of the ERP implementation. More than half companies who have implemented ERP have experienced operational disruptions after go live. This is devastating.

From my experience, this has a lot to do with requirements lifecycle.

On the other hand, Standish group’s research over past fifteen years has shown a steady trend towards more predictable and successful software development projects. In 1994, average software project cost overrun was 180%; in 2004 it was 56%. In 1994, average time overrun was 164%; in 2004 it was 84%. In 1994, only 16% of projects came in time on budget; in 2004 it was 29%. Standish group attributes this improvement largely to increased adoption of agile methodologies. Yes, sure, ERP is not software development. But yet…

Where are we with ERP? Still rowing up the waterfall. With today’s turbulent economy, it’s more like rowing up the Niagara Falls. Today, you can’t tell for sure what you are going to do or need in 2 months, let alone 20. Plus, with liquidity issues everywhere, you must make sure that your investment is sound, and that it delivers the expected return; you can’t gamble with 20% chance of achieving 50% of expected benefits.

Adopting an agile approach in implementing ERP might be a solution.

On Customer Intimacy...

Article by José Campos (Coauthor of 'Capture and Use the Voice of the Customer for Product Development'):

How many hours have you spent in contact with your customers in the last 90 days? If you are typical of the industry, probably no more than 14 hours or 2 to 3% of your time. Most of us spend little time with our customers. Nor do we spend enough time talking about our customers with others in our organization in order to understand the very people who provide our profits.

Customer Intimacy is the ability to understand and then internalize customer needs in order to generate new value in the form of new products and services. "Value" is always determined by your customers, i.e. nothing is valuable until a customer says so.

Thus, customer intimacy improves profits. Given that it takes purposeful interaction with customers to internalize customer needs, rethinking this time allocation can contribute significantly to creating new value — and by the way, spending only 2% of your time doing it will not work — much more is needed.

Investing the right amount of time with customers is the key to successful new product development. Measuring the outcome of the time spent is also important to track your commitment and progress. It also helps to develop baselines for planning purposes, i.e., how much time you will spend with your customers in the future.

Organizations should measure the outcome or results of interactions with customers, for example, identifying the number of new features, benefits, and key insights discovered from customer interactions. And although operational distractions, such as “fire fighting,” or the lack of clear customer-centric organizational values can keep you from it, the single most important thing you must do is develop customer intimacy to internalize current and future customer needs.

WAYS TO SUPPORT BETTER CUSTOMER INTIMACY

#1 Develop a customer-centric culture.

Having a customer-oriented culture is critical. A culture is more than a set of values listed in a document — it is the observable and rewarded intention and behavior of the company at all levels, from top management on down. It is a vision that is more than another platitude. It is a guiding force that rallies the entire team. A customer-centric culture is one that relentlessly pursues superior value for the customer.

Consider the following ideas:

• Do the stated and observable values of your organization recognize the importance of the customer?
  

• What customer-oriented actions are celebrated? For example, when was the last time someone was recognized for spending lots of time with customers or uncovering a high-leverage customer need?
  

• How often is there a team retreat focused solely on talking about your customers, their needs, and their environment?

#2 Establish an effective system for collecting and processing customer knowledge.

Every organization needs a framework for requirements gathering, then interpreting and incorporating customer input and innovating from it (see Table 1). You must be able to understand what your customers are saying—and what they’re not saying—and interpret and internalize the messages. Then the ideas must be incorporated into your company's product development projects.

Investigating is the initial process of requirements gathering. Typical activities include selecting the customers to be contacted, then identifying who will make the contact and what information is needed.

Interpreting involves spending quality time processing the input until clear messages are identified. The amalgamation and integration of the input from many customers will result in clear patterns of customer needs.

Innovating is the ability to go beyond an intellectual understanding of customer needs to an almost visceral belief in them. As someone said, being customer-driven is the ability to see the world as your customers do. In this phase, the intent is to turn your customer input, now that you understand it from the previous phase, into innovation.

Incorporating is accessing the skills, knowledge, and abilities needed to translate customer needs into product design requirements. Here’s where you will convert the innovation into documented new product definitions that drive the product design process.

There are many proven methodologies for product definition available, such as Quality Function Deployment (QFD), KJ, and Hoshin. It is essential to make a long-term commitment to the methodology your organization adopts as most appropriate for itself. In our experience, it is best to start slow and take 2 to 3 years weaving the methodology into your organization. It is, after all, a change in your culture. The new methodology, by definition, will force your team to do things differently through new processes and approaches. Reinforcing the values and desired behavior is critical to achieving true customer centricity — no easy task, but achievable.

The Four I’s Framework for Successful New Product Development

Simply visiting customers is not enough to ensure the incorporation of customer needs into new products. Customer-driven companies have a systemic approach to requirements gathering and processing customer input into useful information that the product design team can apply to product development projects and the creation of new value.

Investigate	Interpret	Innovate	Incorporate
The disciplined approach to requirements gathering and documenting articulated and unarticulated customer needs through a variety of techniques that always include in-depth interviews and some level of observation of the customer’s world. _____________________ Output At the end of this phase you should have captured the voice of the customer—the raw data from each of the interviews that you and your team conducted. Documentation This should be in the form of notes, photos, video and audiotape, plus the vivid memories that you and your interview teams captured.	The process of organizing the customer data and processing it into a set of prioritized and documented requirements that clearly express customer needs. _____________________ Output At the end of this phase, you should have a clear, prioritized and approved list of customer requirements. Documentation Generally, this list is relatively short, between two and ten. In some cases it may be longer, but we encourage prioritization to reduce the number of the requirements, which capture the value expressed by your customers.	The process of transforming requirements into one or a few product concepts that will address the articulated and unarticulated customer needs. _____________________ Output At the end of this phase you should have innovative solutions that address the requirements expressed by your customers. This phase is where engineering and marketing collaborate to find the solutions and to innovate. Documentation The documentation should be a prioritized list of solutions, or a collection of product features that in aggregate (cumulatively) provide a solution.	The disciplined refinement of the product concepts into a single one validated by customer feedback, and its full articulation into a set of features and specifications ________________________ Output Naturally, the desired output of this phase is a profitable product. Documentation On the more practical side, the output of this phase generally is an engineering document, which takes into account the technical trade-offs, the timeline, product design costs and other parameters. Engineering and marketing collaborate to ensure that the customer always wins, that is, that the product has maximum value.

Table 1

#3 Ensure a common purpose by meeting face to face with your customers.

Every one on the product development team, from Marketing to Engineering to Management, must share the same vision of the product. In fact, a team is not a team until there is visible commitment to a common purpose, and the customer is the best point of convergence. Customer focus helps a team rise above functional and corporate barriers. Having all players meet with your customers to share ideas and concerns can solidify the buy-in of each member.

#4 Include all players during the "fuzzy front end."

The period at the beginning of any development project, when there are more questions than answers, often creates considerable confusion. This “fuzzy front end” is a crucial time to bring all team members—including your customers—into the picture because it’s the most convenient and cost-effective time to make and get approval for changes. Once true implementation begins, change becomes painful and may cause severe delays in your schedule.

The Fuzzy Front End, as shown above, occurs at the beginning of every product development project when confusion, mystery, and questions abound. This natural phase is an opportunity to connect with your customers. Also shown are two other important milestones: time-to-market and time-to-profit.

For example, speed of new product development makes it imperative that your product design team has the opportunity to internalize customer needs by interacting directly with them, without our customary filters. These filters, such as design experiences or preference for a particular technology, might make us favor one approach we’re familiar with over another that could better solve the customer’s problem or might encourage us to ignore the wishes of the customer.

Seeing customers in their environment and dealing directly with their problems enhances your engineers’ creativity and helps channel their innovation in the right direction. In fact, your engineers will identify customer needs that marketing can’t—no matter how good your marketing organization might be. Why? Because engineers and other technical personnel view the customer through a different frame of reference. And in a collaborative relationship driven by the mission to provide unprecedented value to the customer, engineering and marketing can create a most helpful “stereo vision” of your customer.

As you involve your product design team, consider the following skills for successful customer interaction:

• How to select the right customers for interaction
  

• How to frame high-value questions, ones without filters and biases
  

• How to listen without filters
  

• How to translate vague and subjective input into clear design ideas—and constraints
  

#5 Learn what is missing by talking to your “non-customers.”

We tend to talk to our customer “friends and relatives,” i.e., those customers who are mostly satisfied with our products. In some cases, these customers are the sales team’s favorites and are already well taken care of. While talking to these happy customers is important—it only provides one-dimensional feedback. Talking to other types of customers can provide a fuller picture.

Try talking to some of these customers:

• Customers you’ve lost

• Competitors’ customers

• Future customers

• Unhappy customers

• New customers

• Customers buying much less

• Customers buying much more

• Customers who’ve stopped buying altogether

• Customers who are the most profitable

#6 Measure the right things.

What measures do you currently use to track your level of customer intimacy? Start by tallying the hours you and your team spend in conversation with customers. This simple measure, which can be easily extracted from your calendar/planner, will give you a base line of your organization’s investment in customer intimacy. This will also enable you to set goals to improve your understanding of customer needs. For example, rarely does a 15-minute meeting yield key insights. Plan to spend 2 to 3 hours in dialogue with your customers. This may be hard to do, but the payoff is enormous!

Naturally, measuring the number of hours spent with customers does not guarantee success. You should also track the number of outcomes, the concrete results that can be attributed to customer interaction that enable you to increase the value you provide to them. For example, track the number of high-leverage needs that have been identified, the number of new product features that come out of customer interactions, the speed of decision-making in your organization, and the number of competitive advantages. You decide what to measure, but make sure they are results, not just activities.

#7 Know where you are going.

To transform your organization into a customer-centric team, an overall plan of action is essential. Your commitment to a customer-centered approach should include a master plan, or road map, that outlines the why, how, when, who, and how much. Smaller, more individual action plans can guide easy actions that can be quickly implemented. Create an approach that facilitates small improvements, while you develop and implement your long-term plan.

By making a commitment to incorporate at least one of the ideas above in the next three months, you and your organization can take a significant step towards better customer understanding and improving your ability to meet customer needs. And by focusing on immediate steps and a commitment to customer intimacy for the duration, the time and energy invested can pay off in visible results and a healthier bottom line.