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Re-telling the business model narrative to capture new value: the CEO as revisionist narrator

In Uncategorized on May 31, 2019 at 1:01 pm

WWII is high up the media schedules with this summer’s 75th Anniversary of D-Day. Listening to British journalist Richard Dimbleby reporting during the early hours of 6th June 1944 as British 6th Airborne Division aircraft take the first paratroops into action is breathtaking sound and text. The story of that war remains up for re-telling. And how little at times we know about our own history. The 2017 film re-telling of Dunkirk for me caught the truth of a nation unprepared. It forcibly reminded Britain was hours from being knocked out of the war at its outset.

Politics had gambled and lost leaving young lives to pay. Christopher Nolan’s version was intellectually more honest than 60s’ Hollywood. So honest I had to see it a second time as the first viewing leaves you wrought. I argue that these better re-tellings are due in part to courageous British historian A. J. P. Taylor. Taylor dented the Nuremberg Thesis on WWII origins in his masterpiece The Origins of the Second World War. Long story short, Germany was no different from other Western Powers in their aspirations for power. WWII grew out of the Western power struggle rather than nefarious and cunning planning by Hitler. Dry reasoning maybe. Such as the inadequacy of the Versailles Treaty in neither crushing nor successfully re-building a settled society. Taylor offered these awkward nuances contrary to the popular narrative of a demoniacal Fuhrer. (I and my family happened across A. J. P. Taylor’s son, no less, and family whilst on a holiday campsite in France many years back and we joined together to form a pub quiz team one night. Not one history question! Not one!)

Taylor annoyed popularists by re-telling WWII in the necessary and ongoing work of revision. Narratives surrounding markets and industries require similar re-telling. Often opening up new revenue streams based on established capabilities.

But Taylor-Snr’s work arrested popular myth and invited a new search for critical meaning. It’s this ability to re-tell and concentrate narratives which appear critical to strategic leadership as we balance industrial and post-industrial strategies in the UK’s new economies. And this is particularly critical for the North West, which has diverse revenues. From tourism, via its rural expanses, to world leading major global manufacturing and chemical production. Not forgetting the biggest media hub outside of London. And especially not forgetting the micro-businesses who possess growing confidence. (And who are taking to education via new programmes of study aimed at their type of business.)

Companies in this region have built on core competencies in engineering, chemicals, textiles and shipping by diversifying into modern high technology industries. Due strongly to senior leadership being able to offer narratives about change. These have travelled well through organisations and sectors. Good narration creates intellectual handrails for investors and stakeholders to see how any new business will evolve. And how core competencies can stretch onto new markets in the next season.  Thereby a business model is a combination of appropriate goals and objectives, but, critically, articulated as a narrative that investors can believe in.

This is not to deny old sources of senior leader authority such as personal charisma, position-power, experience, qualifications, support by the masses, an acute assessment of reality, a richer ‘big picture’, and gifted language use. However, in shifting a business model both good numbers and articulation remain key tools for CEOs.

Furthermore, in the new economies, the CEO must be willing to position their change strategies into a much wider pool of meaning. Not unlike Taylor’s revisionist history the board can and should change its narrative when needed. Headline thinking must be followed by diligent attention to subtle shifts in trading landscapes. A poor business plan will miss critical signals. Markets are not bounded entities in the way traditional demographic analysis used to infer. Take the staggering losses of the American car industry. It’s possible to see now how poor interpretation hamstrung this industry’s evolution, potentially for decades. Grabbing a window of change is the board’s key role, and its CEO is there to enable early adoption of difficult narratives. This is no longer the realm of the ‘how to’ airport text but of working in the ‘difficult middle ground’ between competing company visions. The CEO works between her directors’ complex and often contradictory needs, and searches for common ground that facilitates competing elements of an organisation’s activity. Of course the CEO can overpower all, necessary sometimes in a crisis, but often deeply destructive of value when a mature business needs revision during key periods in its lifecyle.

Taylor’s role now in the WWII narrative is one of iconoclast. Criticised for relying on German emigrees for his thesis. However, his assault on the sacred ground of WWII origins opened the door to a more grown-up debate. We accept now that the Soviet Union was the only coalition capable of depleting Axis power. It puts the West into a more honest frame of mind. Plus a quandary. Stalin was our ally.

Lighter business models are innovative strategic leadership response to both the 4th Industrial Revolution and increasingly mobile consumer

In Uncategorized on May 17, 2019 at 12:38 pm

UK businesses responded to the 2008 global economic crash with admirable flexibility. Re-structured working arrangements avoided knee-jerk redundancies typical of market down-turns. I put this down to three things: a) better business-educated UK management, b) willingness to collaborate across the workforce and c) the shift to what I term ‘lighter business models’*. Management education and workforce collaboration are well rehearsed conversations. They are necessities not choices. But the notion of operating a lighter business model however is only now moving to the front of our consciousness.

And this does not necessarily mean capital-asset lightness. To consider business model reform in the current season means recognising lightness is situated in the uniqueness of your business and the first step to lighter business models is avoidance of prescriptive best-practice. It is a willingness to work at the level of the conceptual with sometimes fuzzy meanings that only later cohere into concrete action. This sort of discussion feels a little like being in the 2013 Sandra Bullock/George Clooney film Gravity. To survive you have to let go of the umbilical cord that straps to heavy language as well as structures.

The first thing to jettison is the language of solid certainty, with all its comforting scaffolding that held us tight. Saying “I know” looks increasingly precarious but can be replaced with “What do you think?”

What do we mean by ‘light’? Well, as Cliff Richard, Britain’s answer to Elvis Presley put it, Travelling Light is: “Got no bags and baggage to slow me down I’m traveling so fast my feet ain’t touching the ground”. Lightness has all sorts of implications and when coupled with the advent of 5G (China or non-China supplied!), Artificial Intelligence, big data sets, robotics and other manifestations of revolutionary turns in global business we need to consider their combined impact on the business model concept.  This affects everyone and some are more resistant to change than others. Airline, car and retail industries have all seen heavy business models resist transformations. Leading UK retail brand names have missed major social restructuring, with communities for some time increasingly ambivalent towards the high street. The car industry assumed its mass market data sets were reading consumer taste accurately. Major airlines got too close to regulatory bodies creating unwieldy structures that are now being prised open.

Of course the structure of global trade has been shifting quite subtly over the past thirty years. Deregulation of the banking sector made UK PLC a lighter business model in itself. With owners of Capital privileged above smoke stack Labour reliant industry. Labour is increasingly seen as part of the heavy architecture of our solid industrial past. Not that heaviness is going away. Re-nationalisation makes Institutionalised and thereby heavy structures more probable. But Institutions are substantially different here to a commercial organisation. Institutional heaviness and stolid mood are required as unmoving objects to allow a nation-state to function with a comforting machine-like thrum and burble. They’re necessary pillars. Commerce however is different. It can’t afford to Institute all its practices without excessive risk so rightly it pursues a low-baggage policy.

For a commercial entity to re-shape its business model is not just to manage the relationship between Capital and Labour, but to consider the whole of its activity. What is termed a ‘whole life economy’ of organisation. If we ask our Finance Director to bump up this year’s profits Labour remains the easy target. And it is an easy win to slash overheads. All savings go direct to the bottom line. But since we’re ‘business modelling’ as strategic leaders we must very quickly ask the FD the impact on the value of any overhead reduction. What is such a saving going to cost my business in real terms and over what period? The unreconstructed and often Alpha Male CEO might win kudos for slashing and burning seemingly unprofitable elements. But any activity is interdependent on others. It would be easy to identify a 20-mile stretch of rail line between the new London to Birmingham High Speed rail link as unprofitable. Removing it will indeed save costs… but!

The root of heated CEO-FD tennis matches is this. Do all those around the board table understand the business or businesses’ source of value? It is quite possible much of the MD or CEO’s time is spent internally communicating sources of company value. She wrote the business plan so knows how value is made and shaped; and understands the relationship between different revenue streams and why a weak or heavy business activity might still be a key component in the overall mix. However, CEOs do lose sight of value. The hubris that drives leaders is often their Achilles’ Heel when admitting a business model is flawed.

But if we’re considering the whole activity through the lens of the Capital-Labour relationship we want to include quite a range of senior staff. This mitigates the CEO’s drive on occasions. Asking what we offload over the side of the ship, or take on board in the coming years, should become a healthy and stimulating debate. Importantly, and crucially, this discussion is driven by the increasingly fluid end users’ (consumer) nomadism. Like the film Gravity our end user is travelling light like never before and floats away with a greater confidence. They are hunting for new relevance as Information Masters (hyper informed citizens, hungry for exercise of their new worldly knowledge). The expanded middle-class across the world are wont to assert their forms of freedom, which include using their increased product knowledge to justify lighter relationships with the world in general.

The end of the Joshua Environment (Modernity as a purposeful destination) at around the time of the end of the Cold War marked an interesting moment in global structures. And evokes a discussion about boundaries. Cities being the operative metaphor. And thereafter nation states, and then supranational structures like the EU. But let’s not go to BREXIT just now. Cities are increasingly the most popular (or inevitable) place to ‘do life’ in the 21st century. They were the place where our Modern Western existences were conceived. And for Modern read Globalised. The Capital-Labour nexus is understood through a modern globalising of life. That is, we left behind Tradition as a natured communal existence. To restore tradition into city life is to arrest what from the 1800s was a radical New Civilisation. For existence took a rapid turn from the heavy rhythmic objects of the Altar/Throne/Nature to subjectivity, relativity and The Self. The consumer became a self, set apart from her community. Armed with a mobile device, scanning 350,000 tweets per minute, she represents now a hyper form of already hyper-individualism.

This radical New Civilisation is driven by the ‘citizen of the polis’, a free-wheeling character at large, the flâneur, with leisure time to observe and graze onwards. This person then met a key moment in the period of late-capitalism. Be it through Thatcher’s home ownership, share-owning, loadsamoney debt society of 1980’s Britain (a deliberate distribution of risk), or the nouveau riche inheritors of a property windfall since the early 90s, due to UK land rents rocketing, owners of personal capital are presented with a modern (relentlessly new) society that won’t ultimately cohere to the original and heavy New Town and Metroland planner’s dream of sub-urban bliss. The increasingly precarious consumer rather now experiences their version of Modernity quite differently from the previous generation. The socially mobile post-war consumer made not just one leap into the middle but several. This advancement has slowed and they have turned inwards towards the structure of lived-life and its relationship with commerce. Escape and movement is not found in acquisition of ‘the heavy’. Meaning is being sought but beyond material experience with a shift towards networks of relationships: An Age of Sharing.

Late-modernity/late-capitalism is offering a highly fluid landscape for our end user, such that politics is offering new boundaries in the form of popularist claims to restore the old handrails of nationalism, and often hiding in the respectable clothes of tradition. Conservative parties across Europe are divided between liberalising tendencies and reactionary forces, leaving some voters looking for single cause parties as an alternative. Or just to cool down their confusion.

Also, the nation state is up for debate. Is it a place of common ownership and shared ideals anymore? Of course this works horribly against what businesses always prefer and that is certainty. With the hope that business models will be coherent and stable over time. And, containing a steady outworking of the Board’s vision, mission, strategy, goals and objectives. But it’s this linear planning that is now being eroded by the volatility of the end user. Many of whom have accepted a Risk Society is going to spread. So they react accordingly.

So, planning processes that saw capital-P Planning (heavy hard system led development) as arresting market chaos are themselves requiring revision. Some of the dominant management theories of the 20th century were largely inserting linear models into messy changing markets. With mixed results. The ability for the CEO or MD to stimulate such a complex discussion places increased pressure on their own intellectual capacity. The classic pragmatism of the UK boardroom won’t go away but it does need to increase its capability to look at the subtle nuances of unbounded consumer lives. Creating lighter business models that recognise Labour will need to be able to flex to new skills might mean considerable workforce re-alignment and/or investment.

But it’s the right discussion to have. The boundaryless end user is unlikely to do anything other than exercise their right to convert their precarious lives into unfaithfulness to heavy business. If business is spreading Modernity (constant novelty, fleeting experience) then it might be business will pay the price ultimately for end user ambivalence to their brand offering. Business then has to respond by recognising what forms of leadership are required in the coming economies.

Leaders educated and socialised to create heavy businesses as places of certainty and stability that offer repeated patterns of business life are under scrutiny. Willingness to debate business model reform comes increasingly from an orientation towards a discursive and digressive boardroom. The tendency to acculturate middle-management into adopting heavy business cultures is less likely to invite their flexibility as they climb the promotion ladder. They will be adept at regurgitating heavy cultures at the price of the speed of change. Letting middle-management find their voice in the boardroom is vital to considering lightness.

Traditional company structures persist of course but often these recognisable frames can be places of considerable business model innovation. An old shell can rather brilliantly and paradoxically contain new conversations about how value will be generated from the changing end user. These are probably very unsatisfying and confusing boardroom discussions, but vital. Allowing the academic or abstract to compete with the pragmatic or utilitarian modes of business debate is an appropriate response to the volatile ecology of 21st century markets. This means taking an in-depth look at the alignment between Human Resource strategies and future horizons. It might also mean considerable facilitation by outside agents to enable a board whose picture of value is difficult to shift.

But this struggle to see how a structured and ordered Modern global trading environment has shifted towards a fluid network society could pay considerable returns. If lighter business models mean faster responses to end user movement this reduces restructuring costs. The heavy process of re-skilling Labour is potentially replaced by subtle movements that may not even be noticed as a light business model prefers leadership to be much more deeply embedded through all layers of the organisation.

*A business model is seen here as the sum of all decisions.

Long-term value: Improving your board’s strategy processes in 2019

In Uncategorized on January 2, 2019 at 2:40 pm

UK senior leaders with a genuine concern for long-term sustainable value will not be surprised to find boardroom discussion being dominated by strategy considerations in the next few weeks. Not just because access to European markets is uncertain but because globalisation offers interesting opportunities.

Boardrooms are often referent to their organisation’s concept of ‘the strategic’. Founding principles cast long shadows over senior practice and even the most mature company finds it difficult to adjust deeply persistent perspectives about value creation. Companies that collapse or lose touch with market changes can often trace the start of strategic drift to the board’s ability to give voice to early signs of consumers’ unfaithfulness. Directors wishing to signal more fundamental movements in markets will often be alert to their senior board’s ability to receive unpalatable news.

Creating a board culture that is not fragile is a matter of skilful leadership. Mature Chairpersons and CEOs will shape a strategy climate that enables early engagement with any faint signs of change. Of particular challenge is receiving signals that hint at possible changes to the structural make-up of the organisation. Again, senior figures are quite often adept at extrapolating the implications of external factors. If a closed communication culture persists it will limit important conversations and their ability to reach the board with sufficient speed for timely action.In practical terms this means boards should assess the ‘strategy processes’ that foster a high functioning board activity. Boards are often focused on ‘strategy creation’ from within the normal agenda of regular board meetings. With the challenge that strategy dialogue can be eclipsed by the operational demands of the trading cycle. Current events put pressure on the board’s capacity to explore creatively the more subtle elements of strategic conversation.

Whether boards separate ‘strategy creation’ from ‘the business agenda’ becomes a consideration. This is dependent on the needs of the organisation but increasingly creating an open space with a different texture for strategy conversation offers the potential for spotting and protecting long-term value. This may also include pulling in a wider pool of leaders from across the organisation, including middle-management. Middle managers are acutely aware of the organisation’s change pressures but can be either enabled or restricted by their chain of command and quality of departmental/divisional communications. Giving middle-management the opportunity to ‘speak up’ within a more broad-ranging strategy process offers early insights on both internal and external factors. The assumption that regular data gathering within the organisation will provide the board with an accurate picture should be regularly tested.

The Chair has an important if not critical role to enable the CEO to create dynamic strategy processes. If the CEO becomes too intimately involved with some elements of the cycle it may restrict the quality of engagement by the wider team. Allowing line management and support staff to influence the process has value given the interdependence of organisational functions. The possibility, say, for IT strategy to more closely align to the coming demands of future trading can only be of critical concern.

Creating and enabling the above requires patience and determination by Chair and CEO. Their relationship emerges as increasingly important as global markets shift in 2019. It is possible to foster effective Chair/CEO relations that then filter down into the strategy environment. The increasing need to be both sensitive and resilient to change signals grows as markets behave with greater discontinuity. The emphasis is thrown back onto ‘strategic leadership’ and its ability to nurture a senior board who share a sincere concern for the long-term in the face often of significant short-term pressures. But these pressures are also a catalyst to set-up good strategy processes (architecture) that gives real capacity to a busy senior team who need reassurance that their insights will feed into future direction.

If you are a senior director interested in talking further about strategy process then call me on 07544 581601