Business Concepts, Techniques and Terms

A selection of interesting and useful business techniques and tips for creative businesses.

This is a jargon-busting guide for design, media and technology businesses in the creative industries, cultural industries and the creative and digital sector.

See detailed descriptions below for these terms:

  • 3 Ms of Marketing (see article)
  • Ansoff’s Matrix / Ansoff Matrix (see article)
  • Balanced Scorecard
  • Belbin’s Team Roles
  • Blue Ocean Strategy (see article)
  • Boston Box
  • Change Management
  • Charting your Competitive Strategy
  • Competitive Advantage (see article)
  • Co-opetition (see article)
  • Creativity [a-Creativity and i-Creativity] (see article)
  • Emotional Intelligence
  • E-Myth (see article)
  • Environmental Analysis or External Audit (see article)
  • Exponential Growth Business Model (see article)
  • Five Forces of Competition (see article)
  • ‘Freemium’ business models (see article)
  • Hedgehog Concept (see article)
  • ICEDRIPS checklist (see article)
  • Internal Analysis / Internal Audit (see article)
  • Level 5 Leadership (see article)
  • Pareto Principle – or 80:20 Rule
  • PEST Analysis (see article)
  • Porter’s Five Forces of Competition (see article)
  • PRIMEFACT Checklist (see article)
  • Ringi
  • Six Leadership Styles (see article)
  • Six Thinking Hats
  • Strategic Marketing (see article)
  • Strategic Planning Framework (see article)
  • Strategy (see article)
  • SWOT Analysis (see article)
  • Total Quality Management
  • Triple Bottom Line
  • Virtual Organisations
  • Vision, Mission and Values

The Balanced Scorecard

Measuring all aspects of performance with the Balanced Scorecard

The ‘Balanced Scorecard’ provides a methodology for translating an organisation’s mission statement and overall business strategy into specific, quantifiable goals and to monitor the organisation’s performance in terms of achieving those goals. Too often, easily measured financial data is used too readily to monitor performance, whereas any business needs to keep an eye on other aspects of performance and development.

The Balanced Scorecard methodology examines performance in four areas:

  1. Financial analysis, the most traditionally used performance indicator, includes assessments of measures such as operating costs and return-on-investment.
  2. Customer analysis looks at customer satisfaction and retention.
  3. Internal analysis looks at production and innovation, measuring performance in terms of maximizing profit from current products and following indicators for future productivity.
  4. Learning and growth analysis explores the effectiveness of management in terms of measures of employee satisfaction and retention and information system performance.

Belbin’s Team Roles

Creating a balanced team using Belbin’s Team Roles

Following research at Henley Management College, Dr Meredith Belbin concluded that the most effective teams contain within them a range of nine skills and behaviours, or ‘team roles’. Belbin defines a team role as “a tendency to behave, contribute and interrelate with others in a particular way”.

The nine Belbin team roles are as follows:

  1. Plant. An ‘ideas person’. Thoughtful, creative, brilliant, radical. Better at thinking than communicating, though. Not interested in details.
  2. Co-ordinator. The ‘chairperson’. A good team captain. Involves all team members and plays a mediator role in discussions. Co-ordinates work rather than does it.
  3. Monitor Evaluator. The ‘critic’. Evaluates everything carefully, seeing both sides of every argument. Cold and objective. Can be perceived as negative and/or unenthusiastic.
  4. Implementer. A ‘doer’. A reliable worker who puts ideas into action and gets on with it. May not be very imaginative or flexible.
  5. Completer Finisher. The conscientious details person. Pays attention to detail and completes the job, ‘dotting the i’s and crossing the t’s’. Can be a worrier.
  6. Resource Investigator. The ‘networker’. The group’s ambassador and detective, making friends and tracking down information and resources. Initial enthusiasm can fade before the project is completed.
  7. Shaper. The ‘driver’. Pushes through ideas and keeps projects moving, enjoying the cut and thrust of the action. Can upset others as they do this.
  8. Teamworker. The ‘peacemaker’. Lubricates the team with diplomacy and helps keep the team working effectively. Everybody’s friend. Can be indecisive.
  9. Specialist. The ‘expert’. Provides technical or other specialist knowledge to the team. Input is usually restricted to their own specialism.

Blue Ocean Strategy

Instead of competing within an industry, invent a new industry

Competitive strategy traditionally focuses on competition within an industry with corporations competing for market share. Chan and Mauborgne refer to this as ‘Red Ocean Strategy’, ie a blood-filled ocean of competitors fighting one another. Instead of competing within an industry, some firms have successfully invented new industries away from traditional competition. For example E-bay invented the online auction industry and in its time the Body Shop created a new industry rather than compete in existing industries.


The ‘Boston Box’

Managing your portfolio with the Boston Consulting Group’s Growth-Share Matrix

The Boston Box, or more accurately the ‘Boston Consulting Group’s Growth-Share Matrix’, provides a useful tool for analysing an organisation’s portfolio of business units, product lines, offerings or activities. It helps businesses to identify which products to invest in (and which not to invest in) depending on their relative market share and the growth rate of the markets they serve.

For example,

‘Cash Cows’ [3] are those products which have a relatively high share of the market, but in a low-growth market. The high market share is good for cash generation, yet the low market growth rate means that investment in promotion is probably not required, thus these products bring in more cash than they use. This cash can be used elsewhere in the business, perhaps in promoting Stars.

‘Stars’ [1] are those products (or business units, or activities) which command a high market share in a fast-growing market. Investment here should bring about good returns.

‘Dogs’ [4], on the other hand, are products with low market share in a slowly growing market. Consider divestment.

‘Question Marks’ [2](sometimes referred to as ‘Problem Children’) are those products with a low market share but in a fast-growing market. The question, or problem, is what to do with them. Will they become Stars – or Dogs?

The Boston Box can also be used in relation to the notion of Product Life Cycle. It may well be that Cash Cows were once Stars, ie good products but the market is past its peak. Milk the cows for cash, but remember that they won’t go on forever. Stars will become cash cows in time and repay the cash which was invested in them as they rose up through the growth phase.

Remember that Market Growth Rate and Market Share are both relative (to other products and to competitors). Using the Boston Box is a matter of art as much as of science. The Boston Box is a tool to be used to help understand the different roles of each of the products in the portfolio, and to provoke debate about devising strategies for dealing with each of them in the context of the organisation’s wider portfolio of assets.


Change Management

The Ten-Stage process of leading and managing organisational change

This ten-stage process is developed from the work of John Kotter, recognised as one of the leading gurus in Change Management. It provides a useful model for those responsible for leading and managing organisational change. The ten stages are:

  1. Taking Stock: Internal and external audits.
  2. Business Strategy: Playing to your strengths.
  3. Create a sense of urgency.
  4. Get the right people on board.
  5. Clarify the Vision.
  6. Communicate!.
  7. Inspire and empower people.
  8. Move quickly.
  9. Manage the corporate culture.
  10. Review and realign.

The management of change can be successfully implemented by leaders of businesses and organisations using the model above and interpreting it appropriately using judgements about your own industry or sector, combined with experience from elsewhere.


Charting your Competitive Strategy

Analysing Competitors and Charting your Competitive Strategy

This technique of ‘charting the competition’ is extremely effective in analysing competitors’ strengths and weaknesses in relation to your own business. Using clearly understandable charts, it dramatically illustrates the competitive landscape. Most importantly, however, it allows executives to develop competitive strategies which will beat the competition and from which clear and realistic action plans can be derived.

The methodology is as follows:

  1. Decide the ‘factors of competition’, ie the things a customer takes into account before deciding to buy from your business (eg location, price, reputation, service, etc). Of course these will vary according to the industry you are in.
  2. Give every competitor a score (out of 10) for each factor of competition. Plot these scores on a chart (graph) to give a distinctive ‘profile’ for each competitor. (Ideally this process should involve extensive research, but can work well using the existing knowledge of experienced company staff.)
  3. Score your own business against the factors of competition. Evaluate the current position honestly. Plot the chart.
  4. Looking at all the charts together, decide the profile your business needs to have in order to compete successfully. Remember that you need not (and indeed cannot) be the best at everything. Choose the factors of competition at which you can excel, and which will give your business a clear market position. Plot the chart.
  5. Now remove competitor data to clearly see the gap between (a) where your business is now, and (b) where you need it to be.
  6. Draw up action plans to close the gap for each factor of competition.

Co-opetition

Business Strategies for Competition and Co-operation

Co-opetition is a business strategy which combines co-operation and competition, based on the concept that business competitors can benefit when they work together. The co-opetition business model is based on games theory, a scientific approach to understanding various strategies and outcomes through specifically designed games. Businesses succeed by combining cooperative strategies with competitive strategies. Other businesses do not have to fail for others to succeed. They cooperate to enlarge the pie and compete to divide it up. Traditional business philosophy translates to games theory’s zero-sum game in which the winner takes all, and the loser is left empty-handed; whereas the co-opetition approach leads to a plus-sum game, in which the sum of what is gained by all players is greater than the combined sum of what each of the players started with.


Emotional Intelligence

Emotional Intelligence for leaders and managers

Emotional Intelligence is an ability to manage ourselves and our relationships with other people effectively, by understanding our own and other people’s feelings, recognising that we human beings have an emotional as well as a rational side to our make-up.

Emotional Intelligence is made up of four competencies which relate to ourselves and our relationships with other people, not least our relationships at work. The four fundamental elements are:

  1. Self-awareness. An awareness of one’s own feelings (as well as thoughts and actions), an understanding of the drivers of these emotions, and the effect that these emotions can have on decisions, actions and other people. Also a knowledge of one’s own strengths and weaknesses.
  2. Self-management (or self-regulation). The ability to control emotional impulses which may not be appropriate and to think before acting, taking into account the potential impact on the situation and other people. Also, the ability to ‘direct’ oneself to take on different roles and leadership styles as the occasion demands.
  3. Social awareness. On an interpersonal level, this means ’empathy’, or the ability to perceive and understand other people’s emotions in a particular situation and their emotional ‘style’ generally. The ability to take account of other people’s emotional reactions and to adapt one’s own actions accordingly. Also, on a wider level, an awareness of organisational politics and corporate culture as well as customers’ and stakeholders’ perspectives.
  4. Social skills. A range of interpersonal skills, used consciously and appropriately, to lead, inspire, guide, negotiate, establish rapport, build teams and maintain good relationships. Crucially, these skills include listening to, and helping to develop, other people.

Since leadership is about leading people, not machines or processes, effective leadership requires a great deal of emotional intelligence. There are six different leadership styles, each suited to different circumstances, which draw on the four elements of emotional intelligence, each in a different measure, according to Daniel Goleman.

Read more about the Six Leadership Styles associated with emotional intelligence.


The E-Myth

The Entrepreneurial Myth and working ‘on’ not ‘in’ a business.

Michael E Gerber, in his book on the E-Myth, points out that there is a fundamental difference between knowing a technical skill or trade (eg as a designer, mechanic, chef) and running a business based on that skill (a design agency, a workshop or a restaurant). Many would-be entrepreneurs who break away from paid employment to set up their own businesses become trapped, not liberated. They end up working as a cog in a machine of their own making, rather than setting up a money-making machine that they are in control of.

Many people have a dream of building up a business so that they can eventually sell it and secure a significant financial reward, maybe for retirement or reinvestment. In order to be able to do this, however, the business must not be dependent on the owner. Many businesses become virtually worthless once the owner retires and therefore have no value to a potential buyer.

A true entrepreneur will work ‘on’ a business rather than ‘in’ it. In other words, will set up money-generating business, based on systems, which ultimately can be run by other people and makes money for the owner without his/her direct involvement.

Franchising is one model that a true entrepreneur can develop, ie a systematic business which can be licensed to other people who then set up their own businesses and generate profits for themselves – and the franchisor.

In short, the ‘acid-test’ question is this: have you set up a business which can be sold as a machine/system that can generate profits even without your direct involvement?


Environmental Analysis or External Audit

Understanding the Business Environment using PEST or ICEDRIPS Checklists

All businesses and organisations operate in a changing world and are subject to forces which are more powerful than they are, and which are beyond their control. Just as a ship at sea is subject to powerful natural forces of which it needs to be aware and deal with, organisations are influenced by forces in their external business environment. Any business strategy needs to take account of all these forces so that opportunities and threats can be identified and the organisation can navigate its way to success by matching its internal strengths to external opportunities. (A SWOT Analysis can help here.) As an aid to identifying all these external forces, a couple of acronyms come in handy.

A PEST (or STEP) Analysis invites you to list all the relevant external forces using four headings: Political, Economic, Sociological and Technological. These are useful headings; it doesn’t matter that some items might be both political and economic (eg taxation and exchange rates).

However, to look in eight rather than four directions, use the ICEDRIPS checklist:

Innovation including new technology and the internet (of course) but other innovations too which may be particular to an industry.

Competitors. Not only direct competitors but threats from substitute products etc .

Economic factors such as inflation, exchange rates, downturns in the industry, public spending etc.

Demographics. The relevant statistics of age, gender, geography, social class etc, and changes in these.

Regulatory environment, ie laws, regulations, agreements and conventions.

Infrastructure such as telecommunications networks, transport, public services and utilities.

Partners. Strategic alliances with other companies or organisations.

Social trends, including acceptance of technology, use of leisure time, fashions and changing beliefs.

NB: The factors above are not in order of importance, the checklist merely provides an easy to remember acronym.

Tip: the best way to use ICEDRIPS is to jot down lots of ideas quickly – maybe in a group – and without pondering or challenging them at first. Afterwards you should sift through them to identify the important few factors from the trivial many. (According to the Pareto Principle, it is likely that about 20% of the factors will represent 80% of the potential effect on your business.)


The Hedgehog Concept

Identifying your World-Beating Speciality

The fox, renowned for his cunning, has many strategies for killing the hedgehog. On the other hand, the hedgehog has only one strategy for defending itself. Whenever the fox attacks, from whatever direction, the hedgehog rolls itself into a ball of spikes. It works every time. The hedgehog is supremely good at one thing, and it survives by sticking to its winning strategy.

In a study of the most consistently successful companies, Jim Collins identified that each of these companies uses the Hedgehog Concept. They have identified the one thing at which they can be world-beaters. And then they have focused on this speciality to consistently beat the competition.

Identifying your own organisation’s Hedgehog Strategy flows from a thorough and objective understanding of:

  1. What you can (and cannot) be best in the world at (not what you would like to be, but CAN be best at).
  2. What ‘drives your economic engine’, ie how value is created. Ideally this should be crystallised into a single financial measure.
  3. What you are deeply passionate about. (Not what you would like to be passionate about, but what innate passion can you draw on.)

Your Hedgehog Strategy is derived from the intersection of the three factors above.


Internal Analysis (Internal Audit)

Internal Analysis or Internal Audit using the MAPSCARE and PRIMEFACT Checklists

When devising a business strategy, organisations need to be aware of their own strengths and weaknesses as well as the opportunities and threats in the external environment, and this is often achieved by using a SWOT Analysis. Whilst an External Audit might use an ICEDRIPS Analysis, a useful tool for undertaking an internal audit is provided by the acronym MAPSCARE.

MAPSCARE invites us to assess the strengths and weaknesses of our own business or organisation using eight headings as follows:

Money, ie Financial Resources. How much do we have to invest?

Agility (or Nimbleness or Changeability). Are we able to change our strategy and/or culture easily, or are we unable to change?

People. Our staff, employees, directors, members and other stakeholders.

Skills – and the ability to learn new skills. What skills do we have and not have? Are we a Learning Organisation?

Customers, or Customer Base. What size of customer base do we have? Do we have the right customers?

Alliances, Partnerships and Networks. What are the strengths and weaknesses of our associations with other businesses and organisations (including government)?

Reputation (or Brand). What are the strengths – or weaknesses – of our brand or brands?

Ethos (or Culture). What is the nature of our organisational culture?

The PRIMEFACT Checklist is particularly suitable for businesses in the Creative Industries.

Tip: the best way to use MAPSCARE is to jot down lots of ideas quickly – maybe in a group – and without pondering or challenging them at first. Afterwards you should sift through them to identify the important few factors from the trivial many. (According to the Pareto Principle, it is likely that about 20% of the factors will represent 80% of the potential effect on your business.)


Level 5 Leadership

The best leaders are not always charismatic

“Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves.” – Jim Collins. Good to Great. 2001.

Jim Collins researched leadership styles in companies that had performed the best over the long term and found a special kind of leader – a leader that usually nobody had heard of. That is to say, these companies were not led by people who were ‘well known’ for their leadership, well publicised, and fitting the stereotype of the ‘strong visionary leader’. Instead they were hardworking, modest team-workers who didn’t conform to the classic leader image.

According to Jim Collins, a Level 5 Leader “builds enduring greatness through a paradoxical blend of personal humility and professional will.” Every one of the corporations that Collins identified as transforming itself from ‘good’ to ‘great’ had level 5 leaders in the critical transition phase. None of the comparison companies did. Furthermore, the colourful, dominant, celebrity leaders, are effective in the short term but do not achieve ‘good to great’ status for their companies, according to his research.

He describes Level 5 leaders as being timid and ferocious, shy and fearless and modest, with a fierce, unwavering commitment to high standards. Characteristics common to Level 5 leaders include: humility, will, ferocious resolve, and the tendency to give credit to others while assigning blame to themselves.

Andrea: Unhappy the land that has no heroes.

Galileo: No, unhappy the land that needs heroes.

– Bertolt Brecht. The Life of Galileo.


The Pareto Principle or 80:20 Rule

Distinguishing the Important Few from the Trivial Many

Vilfredo Pareto was an Italian economist who observed that in the Italy of his day, 80% of the wealth was owned by 20% of the population. The Pareto Principle states that 80% of results flow from 20% of their causes. Though the percentages may not always be exact, there is often a disproportionate effect by an ‘important few’ causes.

So, for example:

80% of sales come from 20% of product lines in a supermarket (or warehouse).

80% of wear (and dirt) on a carpet is in the 20% of surface area nearest to the door.

80% of profits come from the best 20% of customers.

80% of headaches are caused by those few 20% of your colleagues(!).

etc…

The point is that if you can distinguish the ‘important few’ from the ‘trivial many’ then you can focus on where attention is most needed – on the positive side those few profitable customers, on the negative side, the few causes of most of your problems.


PEST Analysis

A PEST (or STEP) Analysis invites you to list all the relevant external forces using four headings: Political, Economic, Sociological and Technological. These are useful headings; it doesn’t matter that some items might be both political and economic (eg taxation and exchange rates).

However, to look in eight rather than four directions, use the ICEDRIPS checklist,


Porter’s Five Forces of Competition

Understanding the Wider Competitive Environment

“The danger in today’s environment is that the competition may not attack you head on, but eat away at growth opportunities over time until they have made you irrelevant.”

– Gary Hamel

Michael Porter’s model of competition relates to five different forces.

  1. 1. Firstly there is competition from one’s immediate rivals, ie companies in the same business. Porter refers to this rivalry as ‘jockeying for position’ between these obvious competitors.However there are four further forces of competition which are less obvious:
  2. Competition from New Entrants to the market. (eg Online Banks challenging high street banks)
  3. Competition from Substitute Products. (eg Email as a threat to the fax machine, or apartments as competitors to hotels)
  4. Competition from the Bargaining Power of Buyers. (eg Supermarkets’ increasing power in relation to suppliers)
  5. Competition from the Bargaining Power of Suppliers. (eg Crude Oil suppliers or Trained specialists required by an industry)

In conclusion, it is a dangerous mistake to focus only on your immediate competitors.

Instead, look around you at the changing world and the threat from new directions.

(See the ICEDRIPS Checklist for how to do this systematically.)


PRIMEFACT Checklist

Internal Analysis or Internal Audit using the PRIMEFACT Checklist

When devising a business strategy, businesses and organisations in the creative sector need to be aware of their own strengths and weaknesses by conducting an Internal Analysis or Internal Audit.

(To undertake an External Audit of opportunities and threats, use the ICEDRIPS Checklist.)

A useful technique for undertaking an internal audit is to use the PRIMEFACT Checklist.

PRIMEFACT invites us to assess the strengths and weaknesses of our own business or organisation using nine headings as follows:

P People. What are the strengths and weaknesses of our people? Employees, directors, members, associates, advisers and other stakeholders.

R Reputation (or Brand). What is our reputation with our target customers? What are the strengths – or weaknesses – of our brand or brands?

I Intellectual Property. What intellectual property do we have? How is it protected? How easily can it be turned into income streams?

M Market Information. What information do we have about market segments and market trends? What do we know about individual clients and their specific needs?

E Ethos (or Values or Culture). What is our ethos, our values and our organisational culture? Do all stakeholders subscribe to this same ethos?

F Finances, ie money. What is the current state of profitability, cashflow and assets? How much money do we have to invest or can we borrow?

A Agility (or nimbleness or change-ability). Are we agile enough to seize new opportunities. Are people prepared to change and ready for change? Or are we unable to change?

C Collaborators (Alliances, Partnerships and Networks). What are the strengths and weaknesses of our associations with other businesses and organisations?

T Talents (competencies and skills). What are our core competencies. What skills do we have available and what gaps are there? Are we able to learn new skills?

Tip: the best way to use the PRIMEFACT checklist is to jot down lots of ideas quickly – maybe in a group – and without pondering or challenging them at first.

Afterwards you should sift through them to identify the most important few factors from the trivial many. (According to the Pareto Principle, it is likely that about 20% of the factors will represent 80% of the potential effect on your business.)


‘Ringi’

A Japanese process for reaching decisions by consensus

‘Ringi’ is a process used in Japanese organisations which ensures that all people who will be involved in implementing a decision have a say in making that decision in the first place. Ringi is a collective decision-making process involving the circulation of a document (the ‘ringi-sho’). This document is annotated and amended as it circulates, and continues around the decision-making loop until everyone signs up to it using their own stamp.

The process is usually begun by middle managers who circulate the proposal to all relevant departments and colleagues. This ‘bottom-up’ process means that by the time the document rises to the ranks of the senior executives, it already has the support of all those whose agreement is needed and who will actually make it happen if it is approved. The function of senior management is to decide at a strategic level which of the proposals is most important to the corporation.

Obviously this is a meticulous and slow process, and does not appeal to the ‘action-oriented’ western manager who wants to see results quickly. However this Japanese process can be quicker in the long run by ironing out any potential problems at the beginning of the process and building commitment to the project. Whereas the western model is slowed down by solving problems as the project proceeds, the Japanese method results in rapid and smooth implementation after detailed planning.


Six Leadership Styles

Using the right leadership style at the right time

According to Daniel Goleman, there are six leadership styles which are associated with the various elements of emotional intelligence in different combinations.

The art of leadership is to master all of the styles and use each style appropriately as the circumstances demand, just as a multilingual person would speak in the language appropriate to the country or audience.

Goleman’s six styles are as follows – and I have added my own name to describe each style in vivid terms:

The Coercive Style of Leadership

‘The Dictator’

This is the dominant ‘macho’ leadership style. It is appropriate in emergencies and severe situations, but otherwise will tend to disempower and disillusion subordinates.

The Authoritative Style of Leadership

‘The Visionary’

This style focuses on the goal or vision of the future and inspires others to follow. This is appropriate when a new direction is required or a clarification of the goals to be achieved.

The Affiliative Style of Leadership

‘The People Person’

Here there is a focus on people, teambuilding, bonding and forging alliances. This style is useful in creating teams or for healing dysfunctional relationships.

The Democratic Style of Leadership

‘The Listener’

This is a useful style to adopt when attempting to involve a wide range of people in decision making or building a consensus.

The Pacesetting Style of Leadership

‘The Superman/Superwoman’

Using this style, the leader sets an example by working to extremely high standards of performance. This is useful to raise the stakes when a competent and motivated team is working well.

The Coaching Style of Leadership

‘The Nurturer’

This style focuses on helping to improve people’s strengths, and is especially useful in building skills to develop managers and future leaders.

Most people will tend towards one particular style as their ‘natural’ or ‘default’ style, but be comfortable and competent in two or three different roles. The complete leader, however, will be ‘fluent in all languages’, a master of all six, using them skillfully as appropriate, being one minute a ‘dictator’ and later a ‘listener’ as events require.

All of these styles are useful at different times, but used at the wrong time they can be disastrous, for example, too much listening when immediate action is required, or only providing a vision when a team needs building or rebuilding.

Four of the styles will consistently improve the ‘climate’ of an organisation, (ie people’s commitment, confidence, creativity and clarity of purpose), whereas two are potentially damaging to this climate and must therefore be used sparingly. The two potentially negative styles are the Coercive (Dictator) and Pacesetting (Superman/woman) styles.

Research has shown that it is the Authoritative [Visionary] Style of leadership which has the greatest consistently positive effect on the ‘climate’ of an organisation.


The Six Thinking Hats

Six Ways of Thinking as a Team

There are many different ways of thinking, and each of us is capable of thinking in different ways about a particular matter. In groups, for example a Board of Directors, each person can look at an issue from several points of view, and each of those points of view is valid. However, unproductive disagreements can occur between individuals who are thinking in different ways (ie from a different perspective) about the same thing at the same time. It is not a matter of one being ‘right’ and the other one ‘wrong’; they are simply communicating on ‘different wavelengths’ or ‘talking different languages’.

Edward de Bono suggests that creativity and effective decision-making are more likely to come from a group of people who are thinking in the same way at any particular point. He uses the imagery of ‘wearing different hats’, so for example the Chair of the meeting might say “Let’s consider this wearing our Red Hats”. (Of course coloured hats are not needed if everyone understands the concepts!)

De Bono’s Six Thinking Hats can be adapted to different situations (see below), but his original six are:

  1. White Hat. ‘White Hat Thinking’ focuses on the data, facts and information available.
  2. Red Hat. Wearing a red hat invites people to think about their emotions, feelings and hunches about an issue.
  3. Black Hat. Cautious thinking about the risks and possible negative outcomes.
  4. Yellow Hat. Optimistic thinking about the best possible (realistic) results.
  5. Green Hat. Creative thinking about what may ‘grow’ or develop, from one idea into another.
  6. Blue Hat. Considering the process of thinking and control of the meeting (usually done only by the meeting’s Chair).

I adapted this idea, creatively, when working as a consultant with a Board of Directors who needed some help in team working and effective decision-making. The Directors had several responisbilities in relation to the company and I identified that part of the problem was that they were looking at issues from different perspectives at the same time. For example one director was thinking about the long-term interests of the company and another one about short-term solutions, at the same time, which gave rise to conflict even though each argument was valid. I suggested that Six Roles should be agreed so that directors could work together more effectively by thinking from the same perspective at the same time.

In that case the Six Roles were as follows (though in different circumstances different roles/hats may be more appropriate).

  1. Guardian of Values. The directors’ role of protecting the core values and ethos of the business.
  2. Spokesperson for Stakeholders, including shareholders and employees.
  3. Employer. The responsibilities of the company as employer and relationship with employees.
  4. Long-term Strategist. The long view of strategy and where the company was heading.
  5. Short-term Tactician. The requirement to solve immediate problems.
  6. Colleague and Friend. Thinking about loyalties within the group and the mutual respect and trust needed to work together well.

By clarifying in which ‘mode’ a person was thinking and speaking, and by encouraging others to think in the same way at that time, the Board was able to avoid the conflict arising from ‘talking at cross purposes’ with each other and focus on matters from each of the necessary perspectives at the same time, bringing about much more effective decision-making.


Strategic Marketing

Aligning the Whole Business to Customers’ Changing Needs

“Marketing is not only much broader than selling, it is not a specialised activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.”

– Peter Drucker.

The term ‘Marketing’ is widely misunderstood. Many people think of marketing simply as advertising and promotion. This is merely one aspect of marketing, ie ‘operational marketing’.

At a much more fundamental level, Marketing is about aligning your whole business or organisation to the needs of customers. ‘Strategic Marketing’ is not about producing brochures but asking the serious and difficult questions, such as ‘What business should we be in?’; ‘What do customers really want?’; and ‘What can we excel at in a competitive marketplace?’

As David Packard of Hewlett Packard said: “Marketing is too important to be left to the marketing department.”

In short, Strategic Marketing requires a complete change of thinking, from:

‘How can we sell what we want to produce?’ to

‘How can we use our skills to produce what the market wants?’

This requires both an accurate understanding of market needs, and a willingness to shape the organisation and its products around customer needs (instead of trying to shape the customer to fit the organisation’s products and services.)

“To satisfy the customer is the mission and purpose of every business”.

– Peter Drucker


Strategy

Strategy – your Road to Success – in Five Steps

  1. Know where you want to go.
  2. Know where you are now.
  3. Know what you have to do to get from where you are now to where you want to go.
  4. Do it!
  5. Stick to it.

The above can be used for business, non-commercial and personal objectives.

Translating it into business terms:

1. Knowing where you want to go

is your Vision of where you want your business to be in the future

(at a particular point in time, say 5 years hence).

2. Knowing where you are now

means knowing your business/organisation, and the world around you,

using the ICEDRIPS checklist and Internal Audit.

3. Knowing what you have to do to get to where you want to go

is your strategy, ‘masterplan’ or high-level action plan.

4. Do it!

means work out your detailed action plans, and implement them.

5. Stick to it.

means ‘Don’t do things that are not part of the strategy’, that is, know when to Say No and don’t be side-tracked.


Total Quality Management

Satisfying the ‘Internal Client’ to Delight the Customer

Total Quality Management refers to a philosophy of achieving perfection (‘zero defects’) by ensuring quality at every stage in the process of manufacture, or delivery of a service, rather than merely carrying out ‘quality checks’ at the end of the production line or customer interface. This therefore involves a commitment to quality througout the organisation and is achieved by ‘continuous improvements’ at all levels to eliminate errors and get it ‘right first time’.

Total Quality Management begins with the customer’s point of view and then works backwards through the system to improve every process which leads to satisfying the customer – and ultimately ‘delighting the customer’. As W Edwards Deming said: “The customer is the most important part of the production line.” So for example a problem in achieving customer satisfaction may be traced back to a process several steps before delivery to the customer. This ‘customer focus’ philosophy is adopted throughout the process so that colleagues are regarded as ‘internal clients’ or ‘internal customers’ and so one department should strive to do all it can to serve other departments well, as if they were customers.

Total Quality Management was adopted in the West from Japan, where Total Quality helped in the growth and success of Japanese manufacturing. Unlike in the West, where Quality was only the concern of quality inspection engineers, in Japan Quality was the concern of senior executives. Ironically it was an American, W Edwards Deming, who influenced the Japanese with his emphasis on Quality during the rebuilding of Japanese industry following the Second World War. Whereas Deming focused on Quality as engineering, Juran emphasised the human relations aspects of Quality.

“The impact of Juran, and of Deming as well, went far beyond quality. By drawing the attention of Western managers to the successes of Japan, they forced Western managers to challenge some of their most basic beliefs about the capabilities of their employees and the expectation of their customers.”

– Gary Hamel


SWOT Analysis

Analysis to assess internal strengths and weaknesses and external opportunities and threats

SWOT Analysis is often used early in the business planning process to help identify and assess:

Strengths of the organisation (internal)

Weaknesses of the organisation (internal)

Opportunities in the environment (external); and

Threats in the environment (external)

An internal audit of strengths and weaknesses can best be undertaken using a MAPSCARE Analysis.

An external audit of opportunities and threats can best be undertaken using an ICEDRIPS Analysis.

Strategy is then formulated by matching the business strengths to opportunities in the environment, whilst avoiding the threats and weaknesses.


Theory of the Business

Fitting together Mission, Core Competencies and Business Environment

Management guru Peter Drucker has written that a ‘Theory of the Business’ must make assumptions about

  • the business environment,
  • the specific mission of the company or organisation, and
  • the core competencies needed to accomplish the mission.

Assumptions about the business environment, society, the market, customers and technology define what customers want and what the company is paid for.

Assumptions about the specific mission of the company define what should be considered meaningful results.

Assumptions about the core competencies needed to accomplish the mission define what the organisation needs to excel at in order to maintain leadership.

The specification of a VALID Theory of the Business is as follows:

  1. Assumptions must fit reality.
  2. Assumptions in all three areas must fit each other.
  3. The Theory must be known and understood throughout the organisation.
  4. The Theory of the Business must be tested constantly.

The Triple Bottom Line

Measuring Profitability, Social Impact and Sustainability

Many companies have extended their traditional focus on profits, the ‘bottom line’, into a wider perspective which measures three aspects of the corporation’s activities. These are:

  1. Financial. Measures profitability and other financial measures such as turnover, growth, and market share.
  2. Social. Measures impact on people’s lives, particularly stakeholders such as employees, the local community, suppliers etc.
  3. Environmental. Measures the effects of the company’s activities on the environment with a focus on sustainable development.

In contrast to commercial sector businesses, organisations operating in the public sector and the nonprofit ‘third sector’ have always operated with a focus on social impact, ie delivering services to the general public or a specific client group. Measures of success in these areas are clearly not just about profit.

Companies in the commercial sector which are committed to Corporate Social Responsibility increasingly express their results in terms of a ‘Triple Bottom Line’.

Unlike financial measures, which have been developed using accounting standards, there are no universally accepted measuring systems for social impact or environmental sustainability. These measures are currently being researched by various organisations and provides an opportunity for corporations to pioneer new measures of their corporate social responsibility.


Virtual Organisations

‘Invisible’ Businesses

We hear of the ‘Virtual Organisation’ which forms quickly for a particular purpose from a number of individuals and organisations in a network. The virtual organisation can be ‘invisible’ insofar as there is no identifiable headquarters; its members might be geographically remote and connected through the Internet. Often the majority of its work is subcontracted to associate companies. The virtual company co-ordinates this work and controls the intellectual capital  and other intangibles such as branding. Publishers have always delegated production of books to printers and used manuscripts from outside their organisation; they neither write nor produce nor distribute their books. The virtual organisation can disappear as soon as the job is done, yet its individual members can rapidly reform in a different combination giving rise to a new virtual organisation.

Davidow and Malone have written: “to the outside observer, it will appear almost edgeless, with permeable and continuously changing interfaces among company, supplier and customers. From inside the firm, the view will be no less amorphous with traditional offices, departments and operating divisions constantly re-forming according to need”.


Vision, Mission and Values

Vision, Mission and Values as a focus for action

  • Vision describes where we are going – the ‘promised land’.
  • Mission describes what we are going to do to get there.
  • Values describe how we are going to conduct ourselves along the way.

An organisation’s Vision sets out its aspirations for the future. The Vision is the ‘dream’ of the future, a picture painted in words, which is intended to inspire people by appealing to the heart as well as the head.

“To achieve great things, you must first dream great dreams.”

– Conrad Hilton. Founder of the Hilton Hotels chain.

For example, Westin Hotels and Resorts has the following Vision Statement:

“Year after year, Westin and its people will be regarded as the best and most sought after hotel and resort management group in North America.”

Babcock International Group plc has the following aspiration:

“Our vision is to become the partner of choice for supporting the outsourcing needs of government and private sector customers who have exacting technical and operational requirements.”

“A vision says something that clarifies the direction in which an organisation needs to move.”

– John P Kotter. Harvard Business Review.

A Mission Statement is a more specific description of what the organisation actually does – its contribution to the world and society – so that employees, customers and other stakeholders know what the business needs to excel at.

“Mission and Philosophy is the key starting point in business. A business is not defined by its name, statutes, or articles of incorporation. It is defined by the business mission. Only a clear definition of the mission and purpose of the organisation makes possible clear and realistic business objectives.”

– Peter Drucker. (see also Peter Drucker’s Theory of the Business.)

For example, McKinsey Consulting Group’s Mission statement is:

“To help our clients make positive, lasting and substantial improvements in their performance and build a great firm that is able to attract, develop, excite and retain exceptional people.”

And the Mission Statement of Pitney Bowes reads:

“Pitney Bowes will deliver shareholder and customer value by providing leading-edge global, integrated mail and document management solutions for organizations of all sizes.”

Values or Core Beliefs underpin the Vision and Mission by saying how we work towards our goals.

For example, Siemens Automotive Systems ‘Values Statement’ is:

“A challenging, safe working environment promoting: trust, honesty, communication, empowerment, accountability, teamwork, mutual growth of our employees and our business, active participation in community programmes.”

Art Shape has the following Values:

“Art Shape is committed to creativity and imagination, equality and access. Art Shape recognises individual value and worth built upon mutual respect, warmth and integrity.”

What is important is that the organisation, business (or individual) understands and builds on its core beliefs and values to set out clear goals as a focus for action internally and to communicate its purpose to the external world.

The Vision Statement and Mission Statement should be short and clear, easily understood, and frequently communicated.

One of the leader’s main functions is to inspire people towards a vision. (See Inspirational Leadership.) Equally important though, is that everyone involved in an enterprise should be involved in clarifying and shaping the vision and  mission.

The process of clarifying the organisation’s Vision, Mission and Core Values, is a crucial starting point for any business strategy or business plan. It is also useful in so far as it explores what is at the heart of the organisation, reveals the Core Competencies of the business, which then can lead to seeing new opportunities based on those skills, often in unexpected directions. Furthermore, the organisation can more easily decide what it should NOT do (see Saying No).

The corporate Hedgehog Concept can be found through this process also.


These concepts and techniques are used – as and when appropriate – in management consultancy projects, training workshops, business advice sessions, training courses, seminars, presentations, lectures and keynote speeches by David Parrish in his capacity as a creative industries management consultant, trainer, mentor, coach, lecturer and conference speaker.

Contact David Parrish’s office for details of training workshops, presentations, speeches and consultancy advice using these and other techniques to help businesses and organisations become even more successful.