Change: Opportunity or Agony

jenga“Embracing change” is a common mantra. However, experiencing change is a certain reality. With it comes a series of choices for everyone involved. Perhaps, the game of Jenga(tm) demonstrates these choices. As you may know, Jenga consists of wooden blocks shaped like tiny beams. The game starts with the beams stacked tightly, three per layer, alternating them vertically and horizontally. The object is to manually dislodge any block from the tower and place it on a new layer at the very top; expanding the tower upwards until it topples from lack of support below or is blown by a strong gust of wind.

Like Jenga, a business also grows using its assets, strengths and opportunities to build customers and market share.

To continue comparing Jenga to running an enterprise, perhaps you could use two different perspectives. The player of the game is like the executives of the organization, moving around structural blocks to expand the organization. This executive has a 360 degree view of the tower with the ability to stress test the blocks before dedicating them for the move; and can scope the environment for threats to the construction such as a shaky playing table or strong winds.

The contrasting view is that of the employees impacted by the move within an organization; perhaps visualized as tiny ants clinging to the moved block. These individuals have an intimate knowledge of this specific block. They know each dent, scratch and slight change in color. They know how snugly it fits against the neighboring blocks (the nitty-gritties necessary to accomplish a job) and how it informally interacts with others. But this internal perspective lacks the comprehensive view. From within the safety of the tightly-built fortress, workers may not sense the unstable foundation or feel the gusts.

As a block is selected those associated with it can be hurled into significant change. One’s first reaction at the vibration may be to grab on as hard as possible to the comfort of the block. Despite the desperation, it takes very little time to see that the forces are overpowering and a significant change is imminent. At this point, there are really two broad choices: resist or cooperate.

The consequences of the first choice, resistance, can lead to demise. To explain this, let’s consider the two forms of resistance – denial and defiance.

Denying the seriousness of the changing forces will severely cripple the industry. Current examples of underestimating the impact of an impending change are seen with traditional media. After reluctance, newspapers, magazines, local broadcast television and radio eventually adopted the Internet. Through applying their respective traditional medium’s paradigm to the Internet forum, they used it as the broadcasting and publishing vehicle. Newspapers, for example, started by replicating their publication online and updating the sites daily after street publication. Internet users expecting more immediate news discontinued their subscriptions to the physical newspapers and started viewing news on new Internet news sites that refreshed content frequently.

The other form of resistance, defiance, could cause alienation with peers who tire of negative attitudes. Excessive defiant behavior could lead to dismissal from those who perceive it as obstructive.

In contrast, the option of cooperation, could lead to quite different outcomes. If the change is from competitive or industrial pressure, adapting to the changes’ new opportunities could put you in the driver’s seat. Those Internet sites that enabled the viewer to customize content offer an example of seizing the opportunity to lead the industry. In Jenga, a beam moved to the top is exposed to uncomfortable drafts, unfamiliar elements and added visibility. The gusts and vulnerability could be threatening. Also, the fall is farther if knocked off. However, the experiences gained are the essence of leadership.

Another recent example is the trend to stop travel expense. Geographically dispersed employees, trainers and consultants can overcome this obstacle by mastering the various technologies to be productive remotely. As organizations adopt these methods, the paradigms of phone etiquette, correspondence and meeting presentations will morph into new standards. Those of us who have adapted will benefit professionally.

Other gloomy headlines tout that many companies have fallen, or as in Jenga, the towers have toppled. Those who have fallen into the heap are left with the challenge to adapt to a new reality. After some brushing off, skills can be applied to participate in a new tower. Existing knowledge and tools will be augmented by wisdom for the next cycle of industrial changes.

As professionals, we need to recognize that external forces will cause us to make some hard decisions. To react with leadership, we should seek opportunities in the changes, communicate the realities and urge others to accept them.

Budgeting from the trenches

Have you ever noticed how text books understate the budgeting process? They tend to gloss over the topic as four steps:

  1. Determine revenues
  2. Forecast expenses
  3. Adjust
  4. Communicate

Some text books suggest that that the process has iterations. This general outline of the process rings true, but its oversimplification makes the budgeting process sections meaningless when it comes time to map one out. I have found that undertaking the budgeting challenge is different between organizations. The process design is similar to perhaps how Generals draw up battle plans.tactics_image The available personnel, supplies and equipment are assessed and the desired outcome is clear. However, the details of the approach are dependent on the specific terrain and rely on the latest tools and information. For this reason, organizations tend to see its budgeting strategy as unique.

Strategy is a fair term to use in budgeting as its outcome has a great deal at stake. Every staff member submitting input for calculations or making a request for funds has credibility on the line. Without complete information the profitability of a product, service, region or division is at jeopardy. And, day-to-day performance of the organization can be besieged from the pressure and time consumption when gathering intelligence from the field.

There is a point where this analogy between a battle plan and a budgeting process falls apart: That is, a battle will end and budgeting does not. A budget plan will play itself over and over. This exposes a point of vulnerability in the budgeting process as it was designed for a set of conditions that most likely has changed. It may no longer be sufficient to budget annually. Reporting requirements may change. Consolidations in the industry confuse the financial results. Or, new competitors, products, clients, regions and staff render the plan obsolete. When there is such a difference between the framework and reality, the budgeting framework cannot be trusted for strategic forecasting.

In the wake of the global financial crisis as organizations seek to maximize cash reserves, evaluate expenses and eliminate risk; the budget process surfaces as a key strategy. Those giving strategic input and making decisions have unprecedented pressures to assure accuracy and agility in cost cutting. Those who need to find opportunities for revenue are at a loss for validating an option’s viability. An organization is likely to forgo an opportunity without the ability to articulate its profitability, avoiding the risk of catastrophe.

Today’s battlefield is dynamic and most participants are deep in the trenches. We know that this gloomy economy will end and we intend to abandon the trench to take new ground. Our challenge is timing and selecting the method to move forward. While we are trenched, let’s review the budgeting tools and design a system giving us the agility to adapt to the changing markets, locate opportunities and operate effectively.

Cutting costs should not mean cutting revenue.

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Image courtesy of BusinessWeek 9/25/08: "AmerisourceBergen's Scrimp-and-Save Dave"

The financial panic of late has caused a lot of attention on cutting costs – from frivolities like pens at customer service counters to headcount – organizations are slowing spending. Bad times force management to review every expense, and in these times obsess with them. Financial peace however has two sides – expense and revenue.

A side effect of cost cutting can be stunted revenue, over both the short and long terms. It is easier to evaluate costs than to uncover revenue opportunities, such as determining  truly profitable offerings and adapting your strategies to maximize sales. Also as difficult to quantify are the true loses in unprofitable transactions, and competitive strategies that can negatively impact your competition.

The answers to many of these questions can be  unearthed from data scattered around an organization, groking customers and instantly shared knowledge between disciplines. For example, by combining:

  • customer survey data;
  • external observations;
  • clues left on web visits;
  • and other correspondence within the corporation;

…an organization can uncover unmet needs to satisfy before the competition, and at reduced investment cost.

When external factors, like a gloomy job outlook, cause customers to change behavior, it is time to use all information at your disposal. Those prospects changing preferences for your offerings can provide golden intelligence about the competition or unmet needs.

Pumping information like this is the heart of business intelligence. Marketing and Sales can uncover the opportunity; however, it is up to the enterprise to determine how to execute a timely offering. Financials, human capital planning, and operations, work in concert to develop the strategy which requires forecasting data, operational statistics and capacity planning data to line up.

A good strategist views all angles, not just reducing cost.