StrategyDriven Podcast Receives Top Honors in August
The StrategyDriven Team would like to thank you, our listeners, for helping us achieve the third place ranking for the StrategyDriven Podcast from among the over 2,900 business podcasts listed on Podcast Alley in August! Additionally, the StrategyDriven Editorial Perspective Podcast placed fourth among all business podcasts in only its third month.
In each episode, our co-hosts and their guests present a richer and deeper exploration of the principle, best practice, and warning flag articles found on the StrategyDriven website. Their discussions identify benefits, define implementation methods, and provide examples to help leaders increase alignment and heighten accountability within their organizations.
The strength of our community grows with the additional insights brought by our expanding member base. With your support, our community of listeners and readers has grown tremendously in the past several months. Please help us continue to grow by recommending the StrategyDriven Podcast to family, friends, and colleagues who you believe will benefit from listening.
Additionally, please consider voting for us monthly on Podcast Alley by clicking here. Casting your vote for the StrategyDriven Podcast improves our monthly ranking and helps us attract new listeners which, in turn, grows our community.
Thank you again for listening to and voting for the StrategyDriven Podcast!
Multiple Action Thresholds
Recovery from a significant event is costly and disruptive. While an expense, mitigating and preventing activities taken to prevent the event’s occurrence are typically far less expensive. From a business perspective, the challenge becomes that of balancing the value of risk reduction with that of the mitigating and preventative activities’ cost.[wcm_restrict plans=”41581, 25542, 25653″]
A key contributor to the cost factors associated with this balanced equation is the implementation timing of risk mitigating and preventing actions. Delaying such actions defers their cost until and only if such activities are needed to reduce risk. Subsequently, the better the organization’s ability to detect and respond to performance degradation evidencing an impending event the greater the deferment related cost savings. Without this predictive capability, risk mitigating and preventing actions need to be in place at all times, heightening short-term expenses and forfeiting the opportunity to avoid these costs should the associated performance degradation never occur.
Organizational performance measures themselves provide a means to recognize event predicting performance degradation. Action thresholds added to these measures provide a tool for easy recognition of when event mitigating and preventing actions need to be taken; alerting appropriate individuals in a timely enough manner so that actions can be implemented and their effects realized early enough to prevent the event. But while some deferment benefit is gained, a single threshold necessitates all of the event mitigation and prevention actions be implemented at the same time; forfeiting the possible omission of actions associated with more dire circumstances.
Multiple mitigation and prevention action thresholds further subdivides when conditions warrant such actions are taken; further reducing or at least deferring the cost of these measures. Multiple thresholds allow for the stepping up of risk reduction efforts only if conditions are not responsive to early diversionary actions and performance degradation continues. Thus, additional cost deferment and/or savings can be realized.
A Transcendental Argument for Multiple Thresholds…
An adverse condition exists that will ultimately result in a catastrophic equipment failure of significant cost to a company. Four mitigating and preventing actions have been identified that collectively ensure the condition will be resolve and the event averted. One or a combination of these four activities may also enable event avoidance but only implementation of all four actions assures event avoidance. Possible outcomes and costs:
Scenario 1 – Inadequate or No Performance Monitoring
Condition Exists, No Actions Taken – Event occurs at significant cost to the company; far more than the cost of implementing all four mitigating and preventing actions.
This is the worst of all possible circumstances. Organization leaders fail to recognize the adverse condition and subsequently take no action. Conditions worsen until the event occurs and the company realizes severe and costly outcomes.
Scenario 2 – Performance Monitoring with a Single Action Threshold
Condition Exists, All Actions are taken at the Action Threshold – The event is avoided at a total cost of 4 units.
This is the second worse outcome for although the event and its associated costs are avoided, the organization bore the cost of implementing all four mitigating and preventing actions, some of which may have been unnecessary to prevent event occurrence.
Scenario 3 – Performance Monitoring with Multiple Action Thresholds
Condition Exists, First Action is taken at the Initial Action Threshold – Total Cost: 1 Unit
- First action is taken, the condition is resolved and the event avoided or
- First action is taken, the condition is improved but not enough to avoid the event
The first possible result is the best possible outcome as the event is avoided at the lowest possible cost. Should the adverse condition persist, organization leaders implement follow-on actions once the appropriate threshold is met.
Condition Exists, Second Action is taken at the Secondary Action Threshold – Total Cost: 2 Units
- First and second actions are taken, the condition is resolved and the event avoided or
- First and second actions are taken, the condition is improved but not enough to avoid the event
The first possible result is the second best outcome as the event is avoided while only incurring the cost of two of the four mitigating and preventing actions. Additionally, the expenditure of resources on the second set of actions was deferred creating additional benefits. Should the adverse condition persist, organization leaders implement additional follow-on actions one the next threshold is met.
Condition Exists, Third Action is taken at the Tertiary Action Threshold – Total Cost: 3 Units
- First, second, and third actions are taken, the condition is resolved and the event avoided or
- First, second, and third actions are taken, the condition is improved but not enough to avoid the event
The first possible result is the third best outcome as the event is avoided while only incurring the cost of three of the four mitigating and preventing actions. Additionally, the expenditure of resources on the second and third set of actions was deferred as long as possible creating additional benefits. Should the adverse condition persist, organization leaders implement the fourth and final action which ensures event avoidance.
Condition Exists, Fourth Action is taken at the Final Action Threshold – Total Cost: 4 Units
- All actions are taken, the condition is resolved and the event avoided
In this case, the cost of all four actions is realized by the organization similar to that in the second, single threshold scenario. It should be noted that the mitigating impacts of the first three actions may allow this final action (and actions two and three) to be taken at a point in time past that the single threshold mandated all four actions be taken. Therefore, there is the possibility that the deferment benefits will be realized in excess of the single action threshold case; making the multiple threshold option more cost effective than the single threshold case.[/wcm_restrict][wcm_nonmember plans=”41581, 25542, 25653″]
Hi there! Gain access to this article with a StrategyDriven Insights Library – Total Access subscription or buy access to the article itself.
| Subscribe to the StrategyDriven Insights Library
Sign-up now for your StrategyDriven Insights Library – Total Access subscription for as low as $15 / month (paid annually). Not sure? Click here to learn more. |
Buy the Article
Don’t need a subscription? Buy access to Organizational Performance Measures Best Practice 12 – Multiple Action Thresholds for just $2! |
[/wcm_nonmember]
Additional Information
Additional information regarding organizational performance measures and their thresholds can be found in the StrategyDriven whitepaper series Organizational Performance Measures.
How to Get Fired! Or keep your job, whichever you’d prefer
So, your formal education is coming to a close. You’ve had a wonderful time in school, and you’re in no hurry to trade that for a life filled with stress and responsibility. In fact, this whole ‘getting a job’ thing isn’t even your idea; it’s your parent’s or school counselor’s idea, it’s the entire seething mass of society trying to crush your freedom.
Well then, fight back! If you would rather play video games all day than suffer through a lifetime of stable employment, here’s exactly what you need to do:[wcm_restrict]
- Dress every day as though you’ve just woken up. Nothing says ‘disinterested in advancement’ like a man or woman too lazy to bother with basic grooming.
- Treat your job like college! In other words, do what you like when you like and ignore the rest. Show up when it suits you, skip meetings you expect will be boring or inconvenient, and save all your productive energy for the night before any project is due. You’ve had several years to perfect these skills, and if you continue putting them to good use you should ensure that the IRS never bothers to audit you. After all, why hassle a person without assets?
- Gossip! Remember how you’ve used your Facebook account to complain about the various problems of others? Well, no need to stop now! And since nothing on the Internet stays private, it’ll only be a matter of time before word trickles back to your boss about what you’ve been saying about him/her. And when it does, congratulations! You’ll never miss another mid-morning cartoon marathon in your life!
In all seriousness, those techniques are very effective at helping people lose their jobs. And if that’s your goal, you can stop reading now. However, if you actually want to keep a job – any job – for any length of time, here are a few things to consider:
- Under no circumstances should your parents accompany you on any interview. Nobody will hire anyone whose mommy and daddy need to do all the talking. Seriously, if they’re coming with you, why not just sit in the car and wait to see how it turned out. Then maybe they’ll take you out for ice cream afterwards!
- Do not use your social networking email as the contact email on your resume. It’s awfully hard to take anybody seriously when they ask you to contact them at vampiregirl23@facebook.com.
- Show up every day, on time. Not terribly profound advice, but it’s a habit school – especially college – doesn’t require you to develop. Your job will, though.
- Understand that you’re not going to start at the top unless you’re related to the person who hired you, of course. Otherwise, yours will be a slow and steady progression like everyone else’s, and if you want that progression to happen faster, you’ll concentrate on proving yourself first. If you expect to advance before you’ve demonstrated an ability to handle more and more difficult assignments, then you’ll be waiting for a long, long time.
There’s more to know and plenty of other behaviors to avoid, but this should get you started. So get out there and enjoy yourself because the ability to determine the path of your life, which your education has just given you, is a more incredible experience than you might expect. Don’t blow it.[/wcm_restrict][wcm_nonmember]
Hi there! This article is available for free. Login or register as a StrategyDriven Personal Business Advisor Self-Guided Client by:
[reveal_quick_checkout id=”25489″ checkout_text=”Subscribing to the Self Guided Program – It’s Free!”]
[/wcm_nonmember]
About the Author
Jeff Havens is a former comedian turned college and corporate speaker. His latest comedy lecture, How to Get Fired!, helps prepare college students for their professional lives by ‘encouraging’ them to do each of the top ten things that most commonly cost people their jobs. The accompanying book, How to Get Fired!: The New Employee’s Guide to Perpetual Unemployment
Leadership Inspirations – The Power of the Team
“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”
Margaret Mead (1901 – 1978)
American cultural anthropologist
Capitalism at the Crossroads – Becoming Indigenous
Becoming Indigenous
The Monsanto experience holds an important lesson: If corporate sustainability strategies are narrowly construed, they will fall seriously short. It is not enough to develop revolutionary technology with the potential to leapfrog currently unsustainable methods. Antiglobalization demonstrators have made it apparent that if corporate expansion is seen to endanger local autonomy, it will encounter vigorous resistance. Multinationals seeking new growth strategies to satisfy shareholders increasingly hear concerns from many quarters about consumer monoculture, labor rights, and cultural hegemony. As long as multinational corporations persist in being outsiders—alien to both the cultures and the ecosystems within which they do business—it will be difficult for them to realize their full commercial, let alone social, potential.
Today corporations are being challenged to rethink global strategies in which one-size-fits-all products are produced for the global market using world-scale production facilities and supply chains. Even so-called locally responsive strategies are often little more than pre-existing corporate solutions tailored to “fit” local markets: Technologies are frequently transferred from the corporate lab and applied in unfamiliar cultural and environmental settings; unmet needs in new markets are identified through demographic (secondary) data. The result is stillborn products and inappropriate business models that fail to effectively address real needs. As GE CEO Jeff Immelt recently noted, existing large corporations will be pre-empted by more nimble local players from the developing world unless they learn how to innovate from the ground up—what he calls “reverse innovation.”38
[wcm_restrict]Indeed, in response to the failure of traditional development assistance and large corporations’ inability to effectively address the needs of the poor, “social entrepreneurship” has burst onto the scene.39 Rather than innovating from within existing institutions, this new breed of change agent seeks to launch new enterprises that address directly the problems of poverty, inequity, and unsustainability. Led by organizations such as Ashoka and Grameen Bank, there are now thousands of such fledgling enterprises around the world, each seeking to develop the new strategies and business models needed to catalyze social change.
The past decade has also seen the emergence of a new brand of financier—the “patient capitalist.” Patient capitalists are not aid agencies or large corporations, but rather groups of investors and intermediaries focused on supporting small, high-impact entrepreneurs on the ground. This emerging sector includes groups such as the Acumen Fund, E+Co, Root Capital, Grassroots Business Fund, Intellicap, Microvest, New Ventures, and Technoserve. Taken together with the rapidly growing social investing, clean tech investing, and microfinance sectors, we are witnessing the birth of an entirely new industry—impact investing. Indeed, at the 2009 Clinton Global Initiative, the Global Impact Investing Network (GIIN) was announced as a vehicle for accelerating the development of this new financial sector.
Clearly then, the next challenge for large corporations will be learning how to become “indigenous” to the places in which they operate (see Exhibit 1.2). Doing so will require that they first widen the corporate bandwidth by admitting voices that have, up to now, been excluded; this means becoming radically transactive rather than just radically transparent. It will also entail the development of new “native” capabilities that enable a company to develop fully contextualized solutions to real problems in ways that respect local culture and natural diversity. When combined with multinational corporation’s (MNC) ability to provide technical resources, investment, and global learning, native capability can enable companies to become truly embedded in the local context. It was with this realization that I embarked on a new professional challenge in 2003, having accepted the Samuel C. Johnson Chair in Sustainable Global Enterprise at Cornell University’s Johnson School of Management. Our initiative at Cornell has spawned a new effort, the Base of the Pyramid Protocol, which seeks to develop a practical approach for becoming indigenous.
Unilever’s Indian subsidiary, Hindustan Lever Limited (recently changed to Hindustan Unilever Limited), provides an interesting glimpse of the development of native capabilities in its efforts to pioneer new markets among the rural poor.40 Hindustan Lever Limited (HLL) requires all employees in India to spend six weeks living in rural villages, actively seeks local consumer insights and preferences as it develops new products, and sources raw materials almost exclusively from local producers. The company also created an R&D center in rural India focused specifically on technology and product development to serve the needs of the poor. HLL uses a wide variety of local partners to distribute its products and also supports the efforts of these partners to build local capabilities. In addition, HLL provides opportunities and training to local entrepreneurs and actively experiments with new types of distribution, such as selling via local product demonstrations and village street theaters.
By developing local understanding, building local capacity, and encouraging a creative and flexible market development process, HLL has been able to generate substantial revenue and profits from operating in low-income markets. Today more than half of HLL’s revenue comes from customers at the base of the economic pyramid. Using the approach to product development, marketing, and distribution pioneered in rural India, Unilever has also been able to leverage a rapidly growing and profitable business focused on low-income markets in other parts of the developing world. Not surprisingly, Unilever has encountered challenges and bumps in the road in its journey to reach the base of the pyramid; these are discussed in later chapters. Importantly, however, through its strategy, the company has created tens of thousands of jobs, improved hygiene and quality of life for millions, and become a partner in development with the poor themselves.
The Road Ahead
To summarize, the greening initiatives of the late 1980s and early 1990s were revolutionary, if insufficient, steps: They repositioned social and environmental issues as profit-making opportunities rather than profit-spending obligations. More recent “beyond greening” strategies are even more significant: They hold the potential to reorient corporate portfolios around inherently clean technologies and create a more inclusive form of global capitalism that embraces the four billion poor at the base of the economic pyramid. If narrowly construed, however, such strategies still position MNCs as outsiders, alien to both the cultures and the ecosystems within which they do business. The challenge is for multinationals to move beyond “alien” strategies imposed from the outside to become truly indigenous to the places in which they operate. To do so will require companies to widen their corporate bandwidths and develop entirely new “native” capabilities that emphasize deep dialogue and local codevelopment. A more inclusive commerce thus requires innovation not just in technology, but also in business models, business processes, and mental frames.
Indeed, over the past ten years, “Clean Technology” and “Base of the Pyramid” strategies have exploded onto the scene, and social entrepreneurship has emerged as a new force for innovation. Each strategy provides important pieces to the sustainable enterprise puzzle: The former contributes “next generation” technologies with dramatically lower environmental impacts, and the latter creates innovative new ways to reach and include all of humanity in the capitalist dream. Yet each also comes with its own baggage and blind spots. Therefore, a crucial next step is to converge these strategies into what I call the “Green Leap.” Such a strategic convergence recognizes that clean technologies are almost always “disruptive” in character. (That is, they threaten incumbents in current served markets at the top of the pyramid.) As a result, the base of the pyramid might be the best place to focus initial commercialization attention. At the same time, the Green Leap approach also recognizes that successful strategies must be cocreated with communities and local partners so as to ensure cultural embeddedness, rather than imposing technological solutions from the top down.41
Given the urgency of both the need and opportunity described here, Cornell’s Center for Sustainable Global Enterprise launched the Cornell Global Forum on Sustainable Enterprise—an initiative to accelerate the rate of change toward this Great Convergence in the world. Indeed, nearly 100 of the world’s leading practitioners on the forefront of the “Green Leap” participated as delegates to explore entrepreneurial strategies for the growth and scaling of ventures in the “convergence zone.” The inaugural Global Forum was held in New York City, June 1–3, 2009, and the plan is to build this initiative into a growing global social network and an ongoing business movement.
Thus, as we enter the second decade of the new millennium, capitalism truly does stand at a crossroads. The old strategies of the industrial age are no longer viable. The time is now for the birth of a new, more inclusive form of commerce, one that lifts the entire human family while at the same time replenishing and restoring nature. The path to a sustainable world, however, will be anything but smooth. It will be a bumpy ride strewn with the remains of companies that variously dragged their feet, made promises they could not keep, bet on the wrong technology, collaborated with the wrong partners, and separated their social and business agendas. Only those companies with the right combination of vision, strategy, structure, capability, and audacity will succeed in what could be the most important transition period in the history of capitalism.
-This is part 3 of a 3 part series excerpted from Stuart L. Hart’s, Capitalism at the Crossroads (3rd Edition)
Sources
- Jeffrey Immelt, Vijay Govindarajan, and Chris Trimble, “How GE Is Disrupting Itself,” Harvard Business Review, October 2009.
- See John Elkington and Pamela Hartigan, The Power of Unreasonable People, (Boston, MA: Harvard Business Press, 2008).
- Brian Ellison, Dasha Moller, and Miguel Angel Rodriguez, Hindustan Lever: Reinventing the Wheel (Barcelona, Spain: IESE Business School, 2003).
- Stuart Hart, “Taking the Green Leap,” Cornell University, Working Paper, 2009.
[/wcm_restrict][wcm_nonmember]
Hi there! This article is available for free. Login or register as a StrategyDriven Personal Business Advisor Self-Guided Client by:
[reveal_quick_checkout id=”25489″ checkout_text=”Subscribing to the Self Guided Program – It’s Free!”]
[/wcm_nonmember]
About the Author
Stuart L. Hart, author of Capitalism at the Crossroads