What is your success formula for the future?

Setting challenging ambitions and quantifying key elements is central to formulating new corporate and business strategies. Investing heavily in new strategic directions and then see what happens can be a highly dangerous route. Challenging ambitions and ‘big hairy audacious goals’ can inspire and motivate people to do an extra mile, well beyond what you would have otherwise achieved. ‘Yes, we can’ is the mother of the best of achievements. However, setting ambitious quantitative targets is only part of the deal and can, at the same time, be highly dangerous. 

 

Ambition has blinded companies in the past and led them straight
to failure and bankruptcy. Behind ambition lurk the dangers of
group think, tunnel vision, and wishful thinking.

 

 

‘The magic number’

The urge to set ambitious goals is often the highest during a long period of stagnation or small improvements in performance, the more so when ‘all the good and hard work we have done’ has not translated into vast growth in turnover and profits yet. The lack of accelerated growth creates feelings of crisis and urgency. The evidence is piling up and feeds the need to tackle it once and for all. The process of setting ambitious strategic goals boards and companies then enter is, in many respects, an ‘interesting’ one. A cognitive bias called ‘anchoring’ plays a central role in this process.

 

 

Most of the time, corporate boards and management teams already have a clear number in mind well before they start a new process of strategy development. In fact, it is quite often the reason why boards start a next round of strategy development. It may also explain why strategic goals so often equal nice and neat numbers like ‘$100 million or $1 billion in 2020’. From the moment ‘the magic number’ sings around, new insights do not lead to new calculations from scratch but are added to or subtracted from the ‘anchor’ that was there from the start. It goes without saying that the former (adding) happens more often than the latter (subtracting) for ambitious boards (lower-level management teams may obviously act differently for political reasons).

 

The comfort of ambition

Setting clear quantitative targets create comfortable feelings of control to boards who set them. Based on a gap analysis of what is needed, targets are then split up in smaller chunks and spread across the organisation in a ‘shower’ of KPIs. In the periods to come, quarterly and annual reports focus on the difference between set targets and realised performance. Positive differences are celebrated while deficits require extra efforts from your employees. “They need to run faster, make more hours and motivate their staff better”. If they fail to meet several of ‘their’ targets in a row they are clearly not the right man of woman for the job. Aspired projections of the past become the benchmark for future achievements. The top can often hide the longest, as the ‘organisation’ is first to blame when targets are missed.

 

Building a Michelin starred restaurant

Take an ambitious chef that starts his own restaurant. He may have his eyes set on gaining a Michelin star as soon as possible. Will he get one? We all know it depends on his talent to make the best dishes with the best food he can get and gather the right team of kitchen and restaurant staff around him. With outstanding competencies of himself and his team, lots of hard work will do the job and earn him the rightly deserved star or even stars. Hard work is a necessary requirement, yet without the right competencies, it will only result in a good restaurant, not in an excellent one. Nothing wrong with that of course as long as chefs are aware of it and accept it.

 

A healthy ambition is essential to strategy and can inspire people to give their best, yet it is by far not enough. To fulfil high ambitions requires competence, distinctive competence to be precise. Distinguishing oneself from the mainstream is essential to outcompete any other competitor and create extraordinary performance, be it in quality, growth or profit. Companies without any distinctive competencies will never become market leaders and only gain market share temporarily and by chance. Once competitors start to put more effort in regaining their lost shares, turnover and profits will go down in no time.

 

Competence is the essence of strategy

In the past decades we have helped numerous companies to articulate their distinctive strategic competencies and mapped how they reinforce each other in a coherent success formula, also known as a company’s Business Idea. Every time I have seen companies accelerate growth when management teams have a clear view on the corporate competencies that create superior performance and focus their efforts on reinforcing these. Definitely during the early periods of executing a strategy, monitoring the growth of distinctive competencies is far more important than tracking performance down the hierarchy of goals and KPIs. In a nutshell: reinforcing the unique qualities of your kitchen team wins over beating them up and also lasts much longer.

 

Setting challenging ambitions and quantifying key elements is central to formulating new corporate and business strategies. Investing heavily in new strategic directions and then see what happens can be a highly dangerous route. Challenging ambitions and ‘big hairy audacious goals’ can inspire and motivate people to do an extra mile, well beyond what you would have otherwise achieved. ‘Yes, we can’ is the mother of the best of achievements. However, setting ambitious quantitative targets is only part of the deal and can, at the same time, be highly dangerous.

 

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