Three Big Mistakes Companies Make Over and Over in Search of Business Agility [and IT Agility]

Companies mostly suffer from self-inflicted barriers to growth resulting from standard operating procedures that might have made sense once but are no longer effective. “Growth is hard. Growth opportunities are everywhere, but often missed. If you can get just a little better at finding and responding to these opportunities, growth will happen.” said Rita Gunther McGrath, author and associate professor at Columbia University Graduate School of Business.

Her presentation at the recent CFO Core Concerns Conference was titled “Tapping into Discovery Driven Growth”. She made the point that now more than ever companies need to keep probing into new markets and responding to new opportunities because product life cycles are short and companies that can’t keep up with the pace of change get left behind. But companies are so clumsy when it comes to exploring new opportunities. They keep making the same mistakes resulting in the same expensive flops.

Rita’s work is presented in her new book, Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity, and it shows how business flops result from three big mistakes that companies make over and over again:
1. Untested assumptions that get taken as facts
2. No low risk way to test assumptions and explore possible options
3. Following plans without change over time
 
Companies need new standard operating procedures that help them avoid these three big mistakes. Here’s an opportunity for business leaders to do something we all intuitively know to be the right thing and now there’s research to prove it (and bureaucracy being what it is, you’ll need all the research you can get to back you up in the countless meetings that will be required).

[ I do lively presentations on this and related topics - mhugos@yahoo.com ]

New Standard Operating Procedures for the Real-Time Economy

By definition, new businesses and new products have to start out with more assumptions than actual facts because they are new (how can you argue with that?). So we need to get good at constantly checking our assumptions to see if they are valid in light of new experience and new information that comes to us as we explore an opportunity.

Rita suggests companies should adopt standard operating procedures that incorporate a handful of rules to guide their new ventures. First, begin a venture by defining the prize; describe what success looks like before you start. Get agreement on a small set of objective measurements that define success (profits, market share, etc.). It’s the only way to track whether a venture is moving toward its desired destination or not. So many companies don’t do this and then have a hard time figuring out if their new venture is making progress or not.

Once you have defined success then impose market and competitive discipline. Look at what market prices and operating costs are and look at what customers want. Accept the challenge of delivering what customers want (or what you think they want) at prices the market will support. Look at what market prices are for similar products and make realistic estimates of market demand and revenue levels for your new venture.

Next lay out clear operating specifications. How many units do you have to sell to achieve desired profits? Then figure out if you can hold operating costs to levels necessary to deliver the profits you want (if you have to fudge the numbers and make wishful estimates that’s a bad sign).

Then, before you forget, document the assumptions you made in the above calculations and recognize them as assumptions. Rita said that in her

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