Author: Tom Koor

Tom Koor

Why is learning critical to your company’s success? V2

What it the purpose of this article?

Enable founders, CEOs, boards of directors, C-suite, and investors to discuss what people need to learn and how to learn. The focus is on your company’s value creation plan.  The concepts also apply to all other parts of your company.

You can download a PDF of this article from: Why is learning critical to your company’s success V2

 What are the critical learnings in this article?

  • Facts, assumptions, knowledge, experience, and skills are rapidly becoming out-of-date.
  • Making and executing decisions based on out-of-date facts, assumptions, knowledge, experience, and skills often leads to company failure – be it a startup or long-established global company.
  • The challenges are: leaders (e.g. board directors, C-Suite) not wanting to learn and/or unable to learn, determining what to unlearn and learn, as well as how to learn.

 Why focus on learning?

The inability to learn is the root cause of many companies failing. “The assumptions on which the organization has been built and is being run no longer fit reality.”1  This is true whether you are a pre-revenue startup or a long-established global company.

Why are assumptions critical?

All forecasts and plans are based on assumptions.  It is impossible to predict with 100% accuracy what will happen in the future and what the results will be from your decisions and actions.

It’s getting harder to make appropriate assumptions about the future because your company’s ecosystem will be getting more complex, the interactions between ecosystem members will be getting more complex, and changes will be occurring more rapidly to both your ecosystem members and the nature of their interactions.

Past results also often reflect assumptions rather than facts.  For example:

  • Did a good result occur due to good talent and good process OR was poor talent and poor process lucky?
  • Why didn’t customers buy your solution? Did you ask your customers?  Did they tell you the complete truthful explanation?
  • The interaction of your companies ecosystem members was complex. Hard to actually determine what the cause and effects were. Did your analysis reveal correlation rather than cause and effect? Correlation could lead some one to say “cancer causes smoking.”
  • Did you identify the past critical assumptions for success?

How fast is knowledge growing?

In 1982, futurist and inventor R. Buckminster Fuller estimated that up until 1900, human knowledge doubled approximately every century, but by 1945 it was doubling every 25 years. In 2020 it was doubling every 12-13 months.2

How do you know if your knowledge is out-of-date?3

Knowledge becomes out of date and decays.  The rate of decay varies by the specific area.  Just as the amount of knowledge is rapidly increasing, the amount of obsolete knowledge is rapidly increasing. Your decisions and actions must be based on the current situation, not on what existed a few years ago.  Your decisions should not be based on hopes, dreams, unvalidated assumptions, and missing or incorrect facts.

What is learning?

“Learning is about acquiring diverse, rare, and valuable chunks of knowledge through people, information, and experiences.”4  Learning must result in value.  You need both diverse and in-depth areas of learning, which will change over time.  Learning is far more than facts and data.  New mental models, frameworks, paradigm, and ways of thinking are all part of learning.

Are company learning efforts effective?

Most companies fail to help their employees learn.

  • 70% of employee report they do not have mastery of the skills needed to do their jobs. Only 25% of respondents believe training measurably improved performance. Only 12% of employees apply the new skills they learn in leadership and development programs to their jobs.5
  • 7% of the leaders polled by a UK business school think their companies develop global leaders effectively.6

What are the challenges to learning?

  • Knowing what to learn and what questions you need to answer. McKinsey states that the first step in strategy is asking “What are the right questions?”7  Are you focused on the right problem? Albert Einstein supposedly said “If I had only one hour to save the world, I would spend fifty-five minutes defining the problem, and only five minutes finding the solution.”
  • If people do not apply what they learn, they will forget 42% after 20 minutes, and 75% after 6 days. 8
  • You need to unlearn obsolete knowledge.9
  • Finding the relevant knowledge to be able to address your problems.
  • Being able to filter out the ever-increasing amount of mis-information.
  • Finding the right people with the appropriate knowledge.
  • Learning at the wrong time. You learn best when you have to learn what is needed immediately.
  • Learning the wrong things. Learning what has limited impact on performance and value creation.
  • You don’t have the ability or desire to learn new: mental models, paradigms, or areas of deep expertise.

What areas do you need to learn about?

The following are some of the areas:

  • Understanding the members of your company’s ecosystem. For example, customers: what are the cash paying customers urgent problems and needs for which they are willing and able to pay to solve? How may of these customers are there?
  • Understanding how the ecosystem members interact and impact each other. For example, pressure from various members can result in shareholders voting in board members who are focused on dealing with climate change.
  • What are possible future scenarios and trends, and how will they be different from the past?
  • What are the talent capabilities required to make decisions regarding the company’s competitively differentiated value creation plan?
  • What are the appropriate decision-making processes? Strategic decision making, tactical decision making, and day to day decision making processes are much different.

Some of what you need to learn includes: facts, knowledge, mental frameworks, paradigms, skills, processes, and analytical techniques.

How do you learn?

The key principle of learning is to learn and apply the learning at the time you need it.  This can be done in many ways:

  • Coaches and mentors helping you to address your problems and needs. These coaches and mentors could include colleagues and external advisors. You may have to pay your external advisors for timely access. The value of learning is reduced if you have to wait days or weeks to address your issues.
  • Formal education at which you work through your specific problems and needs.
  • Micro-courses (a few minutes to an hour) to immediately help when you have a problem or need.
  • Online help systems to provide you with immediate answers.
  • Reaching out to experts in your network, both paid and unpaid.

Use the Feynman Technique10

This technique was developed by Richard Feynman, Nobel Laurate Physicist.

  • Write down what you know about the problem or need. This includes facts and assumption.
  • Be able to teach it to a child. Use plain simple words, without acronyms and complex terminology. If you have difficulty in making this short and simple, then your have the opportunity to improve your understanding.
  • Identify what you don’t know. You may not know what you don’t know. Your research may involve contacting others as well as reading.
  • Organize what you’ve learned into a story with simple sentences and analogies. Tell the story of your learning out loud.

Richard Feynman’s example of how to explain what the universe is made of to grade 7,8,9 students. “All things are made of atoms – little particles that move around in perpetual motion, attracting each other when they are a little distance apart, but repelling upon being squeezed into each other”.

Write notes out by hand, not typing into a phone, tablet, or notebook.11

  • Understanding and the ability to apply learnings requires note taking. Take notes whenever you want to lean: e.g. meeting or interviewing people, attending seminars.
  • Research has shown that hand taken notes result in deeper understanding and improved ability to apply the learning, compared to typed notes. Typed notes are usually much longer than hand taken notes.
  • The research hypothesis is that hand taken notes require your brain to think about what you’re seeing and hearing, and to synthesis and process your learning.

What are your next steps?

You must develop a learning plan for your specific situation, be it yourself or your entire company.

  • Document the historical results of your company’s value creation plan?
  • Analyze the historical value creation results? Compare the historical results compare to the competition. List your findings.
  • Document the current talent capabilities and process for making decisions regarding your value creation plan.
  • Define the changes you need to make to the talent and process based on what you’ve learned from: your historical analysis and from others.
  • Create your learning plan for your decision makers. Who needs to learn what and how they will learn.
  • Establish a learning performance monitoring process to address questions such as: how well are individual leaders learning? What is the impact of their learning?

Footnotes:

1 Perter F. Drucker, “The Theory of the Business,” HBR.org, Harvard Business Review,1994 September-October issue, https://hbr.org/1994/09/the-theory-of-the-business

2 Michael Richey, PhD, Chief Learning Scientist, The Boing Company, “Future Systems of Learning and Knowledge Development: Human Capital, Sociotechnical Systems and the flow of Information“, SRI International,  https://www.sri.com/wp-content/uploads/2020/08/NSF-08.06-2020-Future-of-Learning.pdf

3 https://hbr.org/2012/11/be-forewarned-your-knowledge-i

4 Michael Simmons, “The No. 1 Lifelong Habit of Warren Buffett: The 5-Hour Rule”, Medium, https://medium.com/accelerated-intelligence/the-no-1-lifelong-habit-of-warren-buffett-the-5-hour-rule-57884dce03f3

5 Steve Glaveski , “Where companies go wrong with learning and development” Harvard Business Review Oct 2, 2019  https://hbr.org/2019/10/where-companies-go-wrong-with-learning-and-development

6 Pierre Gurdjian, Thomas Halbeisen, and Kevin Lane, Why leadership development programs fail McKinsey Quarterly Jan 1, 21014 https://www.mckinsey.com/featured-insights/leadership/why-leadership-development-programs-fail

7 Chris Bradley, Angus Dawson, and Antoine Montart, “Mastering the building blocks of strategy”, McKinsey, October 2013 article

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/mastering-the-building-blocks-of-strategy

8 Steve Glaveski, “Where companies go wrong with learning and development”, Harvard Business Review Oct 2, 2019 https://hbr.org/2019/10/where-companies-go-wrong-with-learning-and-development

9 Mark Bonchek  , Why the problem with learning is unlearning. Harvard Business Review November 3, 2016 https://hbr.org/2016/11/why-the-problem-with-learning-is-unlearning)

10  Taylor Pipes, “Learning from the Feynman Technique”, Medium, August 4, 2017 https://medium.com/taking-note/learning-from-the-feynman-technique-5373014ad230

11 Cindi May, “A learning secret: don’t take notes with a laptop”, Scientific American , June 3, 2014 https://www.scientificamerican.com/article/a-learning-secret-don-t-take-notes-with-a-laptop/

What further reading should you do?

The seven essential elements of a life-long learning mindset

Jacqueline Brassey, Nick van Dam, and Katie Coates McKinsey Feb 19, 2019

https://www.mckinsey.com/business-functions/organization/our-insights/seven-essential-elements-of-a-lifelong-learning-mind-set

How do you grow your company’s value?

https://koorandassociates.org/creating-business-value/what-is-value-growth/

Is your company  planning to fail?

https://koorandassociates.org/avoiding-business-failure/

Tom Koor

How do you make strategic decisions?

What is the purpose of this article?

Enable founders, C-Suite, the board of directors, and investors to discuss the talent and process required to make strategic decisions.

You can download a PDF of this article from: How do you make strategic decisions

What are the critical learnings in this article?

  • Make sure you are addressing the right problem before starting the decision-making process.
  • Determine if the problem and decision are tactical vs strategic.
  • There are different types of strategic decisions with different approaches.

Strategic decision making is flawed in most organizations1

A McKinsey survey of executives regarding the quality of their strategic decisions revealed that:1

  • Only 28% thought good strategic decisions were frequent;
  • 12% thought good strategic decisions were infrequent; and
  • 60% thought bad strategic decisions were as frequent as good strategic decisions.

What has the greatest impact on company performance? McKinsey found that it was the quality of the decision-making process. The % of company performance improvement due to:

  • Quality of the decision-making process: 53%
  • Industry/company characteristics: (e.g. consumer tastes, implementation resource capability) 39%
  • Quality and detail of analysis: 8%

What is a strategic decision?

A strategic decision has major impact on the long-term value of the company.  It may even be a “Bet the company decision”. A strategic decision often has uncertainty in costs and benefits, a long-term future which may change, and a dependence on simultaneous outcomes.  Most company decisions are tactical, with limited impact on long-term value. The short-term  future is clear, costs and benefits are known.

What are some examples of a strategic decision?

The following is a partial list:

  • Nominating a board director. Board directors may have the greatest impact on long-term value, given that the appoint and terminate the CEO, approve strategies, plans, and policies. Directors have the ultimate accountability for company performance.
  • The appointment or termination of a CEO.
  • Selling the company.
  • Transforming the company.

Can you actually predict the future?

There are four types of forecasts.

  • There is a single path to a specific outcome.
  • There are a small number of specific scenarios.
  • There is a defined range of scenarios.
  • The unknown – it’s not possible to even define a range of future scenarios.

Is your strategic decision focused on the right problem?

Albert Einstein supposedly said “If I had only one hour to save the world, I would spend fifty-five minutes defining the problem, and only five minutes finding the solution.” An adequate solution to the right problem is far better than a terrific solution to the wrong problem. Before looking for the best solution, make sure you’re focused on the right problem.

  • What is the basic need or opportunity? What is the scope of the problem?  Who in your company’s ecosystem is impacted?
  • What are the constraints: external (e.g. laws, public opinion, etc.) and internal (e.g. capabilities of your talent, including past experience, the ability to personally transform by learning fundamentally new skills and behaviours)?
  • What requirements must the solution meet?
  • What are the expected outcomes? What value is created or destroyed for the members of your company’s ecosystem?
  • Are the outcomes consistent with your company’s purpose, values, morals, and ethics?
  • How will you measure the outcomes?

 What are the four types of strategic decisions?

  • Proven historical success in your company. An example would be a company that has done dozens of acquisitions successfully and is very likely to make the right acquisition decision.
  • Proven historical success in other companies, but have not been made before in your company, or was made unsuccessfully. An example is an acquisition decision, which has been made countless times in countless companies.
  • A unique decision that has not occurred before externally or within your company, and unlikely to occur again. An example was the decision making regarding the Year 2000 software issue – never happened before and will never happen again. Your company must draw upon people with proven experience with developing solutions to unique problems. There are no: people with prior experience, processes, policies, etc. There is little value to your company in building a long-term team, documenting processes, etc.
  • A unique decision that has not occurred before externally or within your company, but likely to occur again within your company. Your company must draw upon people with proven experience with developing solutions to unique problems. There are no: people with prior experience, processes, policies, etc. Your company must: build a pool of talented people, document the processes and policies, etc.

What is the approach to each of the four types of strategic decision?

  • If your company has successfully addressed this problem in the past, what have you learned? Draw upon the people in your company with past experience and utilize documented processes, policies, etc.
  • If your company has tried and failed to successfully address this problem in the past what have you learned? Your company can draw upon external: people with experience, processes, policies, etc. If your company expects to make these decisions in future, you must: build a pool of talented people, document the processes and policies, etc. The challenge is that often the outcome is not successful, even with outside experts.
  • If the problem has never occurred before and never will occur again, what are the capabilities of the people needed to understand the problem and develop a solution?
  • If the problem has never occurred before but likely will occur again, what are the capabilities of the people needed to understand the problem and develop a solution? How will your company learn from this experience? How will your company retain the learnings, both in the experienced talent and documented knowledge?

Are your able to assess the effectiveness of past strategic decisions?

  • Was success due to the right process and people OR were the wrong people with the wrong process lucky?
  • Was failure due to the wrong process and people OR were the right people and process unlucky?

What has been the past impact of your strategic decisions?

Let’s use the example of board director selection and exiting for companies without a controlling CEO or shareholder.

  • What has been the impact on long-term value in the past 10 years?
  • How does this compare to other companies in your market place?
  • Is your company in the top quartile or bottom quartile?
  • If your are in the bottom quartile, determine whether your board director selection, development, exiting process need improvement of if the board decision making process needs improvement.

How do you know you are going to achieve benefits from your strategic decision?

  • I’ve heard countless consultants say “We developed a great strategy but the company was unable to implement.”
  • Will your company be able to successfully implement your strategic decision?
  • Has your company identified the talent, skills, experience, partnerships, capital, and other resources needed to achieve benefits?
  • If your company doesn’t have all the required resources, how likely is it that your company can acquire them?

Have you identified the decision making and implementation biases people have, and taken action to mitigate them?

Biases include:

  • Confirmation bias: people favour information that supports existing beliefs.
  • Conformity bias: people will go along with what the majority of the group believes.
  • Authority bias: people support what the authority figure believes. The most senior person may not be the authority figure.
  • Loss-aversion: Sticking to a decision, if the facts and assumptions have changed. People have an emotional attachment to a decision they have made.
  • etc.

What are your next steps?

  • Assemble the team to determine or validate what the problem is.
  • Assign one person whose sole focus is taking mitigating actions to address the biases of the decision-making team. This may be an external advisor, given that that bias identification and mitigation can lead to inter-personal challenges and require coaching of the decision-making team.
  • Determine whether you are making a strategic decision to address a strategic problem, or if this is tactical.
  • Identify what type of strategic decision you are making.
  • Review the facts and assumptions regarding the past effectiveness of the decision-making approach. What are the lessons learned in terms of what enables success and what leads to failure. Remember that luck often plays a role.
  • Identify the internal and external talent required for the strategic decision.
  • Review and revise the decision-making process. You may have to create a process if the decision has never before been inside or outside of you company.

Footnotes:

1 “The case for behavioural strategy”, McKinsey Quarterly 2010, Number 2

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-case-for-behavioral-strategy

What further reading should you do?

Few companies make decisions leading to long-term value creation.

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Successful companies need external talent, just like Olympic champions do.

https://koorandassociates.org/creating-business-value/what-are-the-three-types-of-talent-successful-companies-require/

Traditional strategic planning dooms companies to failure.

https://koorandassociates.org/strategy-and-strategic-planning/traditional-strategic-planning-dooms-companies-to-failure/

Tom Koor

How do you grow your company’s value? V3

What is the purpose of this article?

Enable a company’s leaders and investors to begin the discussion on how to prepare the company’s value creation plan.  This article outlines the principles that can be used to create and manage the discussion.  This article is not intended to be 100% comprehensive in both breadth and depth. The principles apply to any size company.

You can download a PDF of this article from: How do your grow your company’s value V3

What are the critical learnings in this article?

  • Growing you company’s value requires a competitively differentiated value creation plan, addressing the critical members of the company’s ecosystem e.g. customers, but not only customers.
  • Your company requires competitively differentiated talent in order to develop a competitively differentiated value creation plan. g. if the board of directors and C-Suite are less capable than the competitors’ boards and C-Suites, the company fails at value creation.

Who in the company’s ecosystem are you creating value for?

Ecosystem members could include:

  • Customers
  • Employees
  • Board of Directors
  • C-Suite
  • Shareholders
  • Suppliers and partners
  • The communities in which the company operates
  • Broader society

What is the value you enable your ecosystem members to achieve?

  • Value to customers might include: productivity, saving money, entertainment, improving health, and improving security.
  • Value to employees could include: compensation, enabling their life’s purpose, increasing their value to the current company as well as long-term market place value.

What value do ecosystem members provide your company?

  • Customers might provide: payment, recommending others to your company, and improving your company’s reputation.
  • The community may provide the company with the social license to actually operate. Natural resources companies in many countries now need to consult or even get the support of local communities

How do you share the value obtained by the company?

  • Sharing customer payments includes: deciding how much to charge customers, how much should employees be paid, (for example, should full time employees and full-time contractors be able to make a living income), how much should the board of directors be paid, how much should be allocated to dividends and share buy backs), how much should be spent on activities which improve local communities but generate no income, etc.

How do you decide on how to share the value?

  • The decision process may include consideration of: the company’s purpose, the company’s values, morals, and ethics, laws and regulations, expectations of shareholders and local communities.
  • The board of directors may make these decisions directly, through board approved policies, or delegate some of this decision making to the CEO.

How do you create value for ecosystem members?

  • The specific way your company creates value depends upon your company’s specific situation and characteristic.
  • The assets your company has available include: people (board of directors, C-Suite, employees, contractors, consultants, advisors), processes, technology, intellectual property, trade secrets, supplier/partner relationships, relationships with ecosystem members, and capital.  The reason I put capital last is because there is unlimited capital available for companies that are success at value creation.

What are your company’s challenges is achieving value growth?

Your company is facing competition, often from around the world.  Competitors are always working to be better than your company at:

  • Enabling customers to achieve value and perceive a superior value proposition.
  • Enabling talent (including the board of directors, C-Suite, employees, and contactors) to achieve value. This impacts how talent is attracted retained, developed, and exited.
  • Being productive or lower cost.
  • Attracting the best suppliers and partners.
  • Having better support from the ecosystem.

It can be difficult to assess the root causes of historical value growth.

  • Was success due to competitively differentiated talent and processes OR poor talent and processes but lucky?
  • Was failure due poor talent and processes OR competitively differentiated talent and processes but unlucky?

What are the two most important things to focus on to enable value growth?

  • Meeting the problems and needs of customers better than the competition. This is a combination of growing the number of customers and increasing the problems and needs which are being met. Without customers and without cash, the company does not exist.
  • The most important thing to focus on is the talent. The talent creates and executes the plans to achieve results. There are two groups of talent that must be competitively differentiated: the board of directors and the C-Suite. They company will fail if board the board of directors and C-Suite are less capable than the competition.

Your next steps to create your value creation plan.

In the next three months, you will understand the process to develop your value creation plan.  You’ll go from beginning to end, making whatever assumptions are needed to complete within three months.  Your focus will be on customers and talent – specifically the board of directors chair and the CEO.  In future, you’ll consider more members of your company’s ecosystem.

  • Document your company’s purpose and your company’s values, morals, and ethics. These will guide your decision making and execution.
  • Determine what your customers believe is the value they obtain from your company and how your company is competitively differentiated. Be specific regarding the problems and needs being addressed and the benefits they achieve. You’ll have metrics associated with then.
  • Define internal company customer metrics such as life-time profitability, and customer acquisition costs.
  • Outline future customer scenarios. Describe what is driving changes to: customer problems and needs, the number of customers willing and able to pay for your solution, what customers will be paying.
  • For each scenario, outline the changes and milestones for your company in the next five years in order to grow the total value customers achieve from you and thus grow your profits.
  • Determine the implications of the future scenarios on the required capabilities and characteristics of the board chair and CEO. This requires describing how the board chair and CEO enable company success in the above scenarios.
  • List the changes required to the board chair and CEO selection, assessment, development, and succession processes. This includes describing the type of coaches the board chair and CEO require.
  • Create the ongoing process to monitor, validate and update the value creation plan.
  • Determine which additional elements of the company’s ecosystem need to be included and which assumptions need to be validated as the value creation process evolves.

Further reading

There is overwhelming evidence that most companies are successfully executing their plans to fail and to not grow their value.

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Do you understand your customers?

https://koorandassociates.org/understanding-customers/do-you-understand-your-customers/

How can the board of directors create value?

https://koorandassociates.org/corporate-governance/how-can-the-board-of-directors-create-value/

Tom Koor

What are the three types of talent successful companies require?

What is the purpose of this article?

To enable founders, investors, the board of directors, and the C-suite to discuss what type of talent is needed to create and maintain world-leading companies.  I recognize that many companies do not strive to be a world leader or leader in their own country.

You can download a PDF of this article from: What are the three types of talent successful companies require

How do you read this article?

This article uses the analogy of athletes that strive to win at the Olympics.  They seek to be the best in the world.

What are the three types of talent associated with global winners?

  • The team members. These are the people who actually have win the race. They must beat the competition in order to stand on the podium.
  • The trainers. They use a structured process to improve specific aspects of each team members skills e.g. using videos of the team members show what specific changes need to be made. The trainers are deep experts in specific skills.
  • The coaches. They focus on the members minds and mental state. For example, if an athlete cannot visualize in their mind what it looks like as they cross the finish line, they likely will never win. “People cannot do things they cannot imagine”1.  The athletes must also cope with frequent failure. Few win every single competition.

What are the characteristics of the journey to become a global champion?

  • There are fundamental differences between the team, the trainers, and the coaches. g. great coaches are rarely great athletes and great athletes are rarely great coaches.
  • It takes time to become a global champion.
  • People must have the ability to transform themselves, to learn, unlearn, and constantly improve.
  • No one stays a global champion forever.
  • The coaches and trainers change over time. Global champions are supported by trainers and coaches that are also the best in the world.
  • People need to have the potential to reach the next level. People don’t immediately jump to become global champions.
  • Not everyone will become a global champion. It is very competitive. Not everyone has the potential.
  • Very tiny changes in results differentiate global champions from 4th It could be a few hundredths of a second for an athlete.
  • Trying very hard, by itself, is not enough to become a global champion.
  • Luck also plays a role e.g. a leading coach becomes available; a competitor suffers an injury.

What are the three types of talent in your company?

  • The team is comprised of all of the company’s full and part-time employees. This includes everyone from the board of directors to front line staff.  The company is constantly developing the talent of its employees.
  • The trainers include external experts. (e.g. lawyers, accountants, consultants who are industry and functional experts), educational organizations, etc.
  • The coaches go by many names e.g. coach, strategic advisor, mentor.

What are the implications for you and your company?

  • In today’s virtual global economy, you may be competing against global champions, even if you’re in a local market. E.g. Nigeria’s largest ride sharing company is Bolt, based in Estonia, with a valuation of $4.3 billion.
  • It’s hard to become a global champion if your talent (team, trainers, and coaches) is not among the best in the world.
  • Talent around the world is constantly improving. The talent that was successful 20 years ago loses to today’s talent.
  • Growing the value of your company requires growing the value of your talent.

What are your next steps?

  • What is your company’s value creation plan: for the next 1-3 years; for the next 4-6 years?
  • What are the three types of talent you will need in the future?
  • What changes in talent are needed?
  • What is your ongoing process for acquiring, retaining, developing, and exiting your team talent?
  • What is your ongoing process for assessing and changing your training and coaching talent?

 Footnotes

1 Peter Jensen (Olympic coach), Igniting the third factor, Toronto, Performance Coaching Inc., 2008, page 105

Tom Koor

How can the shareholders agreement focus everyone on value? V2

What is the purpose of this article?

This article discusses how a shareholders agreement in a private company could help focus everyone on value creation and extraction.

I am not providing legal advice. Please consult a lawyer if you need legal advice on creating, reviewing, or updating a shareholders agreement or other legal governance documents.

You can download a PDF of this article from: How can the shareholders agreement focus everyone on value V2

What are two types of shareholders agreements

#1 USA (Unanimous Shareholder Agreement)

“The written agreement among all of the shareholders of the corporation can wholly or partly restrict the powers of the directors to manage, or supervise the management of the business and the affairs of the corporation”1

#2 Voting trust or pooling agreement

“Some shareholders of a corporation may choose to enter into voting arrangements such as voting trusts, pooling agreements or shareholder agreements under which they agree to vote their shares in a consistent manner.  Voting arrangement of this sort….do not have the effect of reducing the powers and liabilities of directors”1

What are some potential shareholder expectations regarding their investment?

  • limiting some decisions to only the shareholders e.g. hiring, termination, and compensation of the CEO; sale or wind down of the company; terms and conditions of future financing.
  • requiring shareholder approval of various documents: e.g. Board of directors mandate, board committee mandates, company policies, strategic plan, budget.
  • defining the process used by the shareholders to make the above decisions and approvals.
  • defining what information needs to be reported to shareholders at what time and in what format.
  • constraining the business e.g. limit geographical operations, which products and services may or may not be provided, pricing.
  • defining the process and constraints for shareholders to sell their equity.
  • defining the dispute resolution process. This process could result in a forced sale of shareholder equity.
  • describing the ways specific shareholders extract value from the company e.g. dividends; products and services; future sale of shareholder equity.
  • describing how shareholders will support the company e.g. introductions; financing guarantees.

The shareholders may have other expectations as well e.g. the purpose of the company

Some or all of the above expectations might be included in the USA.

How might the USA impact on value creation and value extraction?

I assume the company has a value creation plan and the shareholders have a value extraction plan.  The plans can be directed and constrained by shareholder expectations which are in the USA.

What are the risks of not documenting the shareholder expectations?

The short-term risk is a series of immediate disputes, which could harm both value creation and extraction.  For example, what if the shareholders don’t understand and agree that some shareholder will extract value through low-priced products and services while other shareholders extract value through dividends arising from high priced services to customers. How will management create and execute strategies when they are attempting to limit profits and grow profits at the exact same time?

The long-term risk is that shareholder expectations could change, especially when shareholders are companies.  The companies’ strategies for their investment could change and new executives representing the companies could have different expectations.

What are your next steps?

  • Shareholders should discuss and document their expectations regarding value creation and value extraction. Agreement and consensus are not always required.
  • The challenge is to figure out how to reconcile conflicting expectations. (e.g. one founding shareholder might want to stay with the company for the rest of her life.  Another founding shareholder might want to exit and sell her equity in 5 years for maximum value). This expectation setting process is carried out without lawyers and there is no legal document as an outcome.
  • Then lawyers review the shareholder expectations document. The lawyers point out potential issues and risks, which may result in further shareholder negotiations regarding expectations.  The shareholders decide among the legal options.
  • I assume that the USA will be one of the selected options. The lawyers must craft this.  The process of creating the legal USA may well results in more issues, requiring a negotiated update to the shareholder expectations document.
  • The lawyers will have to craft a dispute resolution process into the USA which is able to deal with future changes of shareholder expectations. Potential outcomes of dispute resolutions include: sale of the company, existing shareholders buying out some other shareholders.
  • The shareholder expectations document needs to reviewed on a regular basis and must be reviewed every time there is a potential new shareholder or change to an existing shareholder.

Footnotes

1 Barry Reiter, Bennett Jones LLP, Directors Duties in Canada, 5th edition, Page 95

Further reading

How can founders and investors create a shareholders agreement?

https://koorandassociates.org/corporate-governance/how-can-founders-and-investors-create-a-shareholders-agreement/

Tom Koor

What is strategy and strategic planning? V2

What is the purpose of this article?

Enable founders, board directors, the C-Suite, and advisory board have a discussion about their company’s process for strategy and strategic planning.

You can download a PDF of this article from:  What is strategy and strategic planning V2

How do you define: strategy, strategic planning, and the strategic plan?

  • What is strategy? The facts, assumptions, and analysis of what successful future scenarios for the company could look like. A successful future means growth in value.  Value of the company and value for key members of the ecosystem.
  • What is strategic planning? The process to engage key members of the company’s current and future ecosystem members in order to discover a potentially implementable strategy.
  • What is the strategic plan? The strategic plan should be called the value creation plan. The strategic plan communicates the actions necessary to grow value and reach the successful future.

What are the questions the strategy must answer?

The facts, assumptions, and analysis of  what successful future scenarios for the company could look like. There are 7 sets of questions to this:

  • Who are the current and future members of the company’s ecosystem that are critical to the company’s success?
  • What is the vision for the future company?  How will the ecosystem perceive the company? Why will those critical ecosystem members enable the company’s success?  What metrics will those members use to assess value and success?
  • Who will be your future cash-paying customers? Why will they buy from your rather than the competition?  How are their problems and needs being better addressed by your solution than the competition? How are you enabling your cash-paying customers to achieve more value?  Why are customers buying from the competition rather than you? How many cash-paying customers will there be? What will be the market size. You may be in different markets with different customers. Customer needs will change and there will be new unmet needs. What will be the customers’ ecosystem? (e.g. Technology trends, demographics, politics, regulation, etc.)
  • What will customers perceive as the competitively differentiated value proposition? What will be the customer experience? How will customers perceive that your company meets their needs better than the competition?
  • Who will be your future competitors? What improved products and services will they be offering? Old competitors will likely disappear and new competitors emerge. (e.g. New ventures, entrants from adjacent markets). What will be the competitors’ ecosystem?
  • What are the characteristics of the future talent requirement? Board of Directors? Advisory Board? C-Suite? Coaches? Employees? Advisors and Consultants? Often skills and capabilities that brought the company to its current situation are not the skills and capabilities that are required for future success.
  • Is it clear what the future value of the company will be to key members of the ecosystem (e.g. shareholders, employees, and society) and how that value compares to the current situation?

Good analysis done by good leaders with good judgement often produces poor strategic decisions.1

A strategic decision is on of those relative rate major decisions that has a major business impact. E.g. bet-the-business investment; major M&A; major new product/service launch; business transformation’ etc. A McKinsey survey of 2,207 executives regarding the quality of their 1,048 strategic decisions revealed that:

  • Only 28% thought good strategic decisions were frequent;
  • 12% thought good strategic decisions were infrequent; and
  • 60% thought bad strategic decisions were as frequent as good strategic decisions.

What has the greatest impact on company performance? McKinsey found that it was the quality of the decision-making process. The % of company performance improvement due to:

  • Quality of the decision-making process: 53%
  • Industry/company characteristics: (e.g. consumer tastes, implementation resource capability) 39%
  • Quality and detail of analysis: 8%

The strategic decision-making process is much different from the normal day-to-day decision making.

What does the strategic planning process need to consider?

Strategic Planning: The process to engage key members of the company’s current and future ecosystem members in order to discover a potentially implementable strategy. Too often I’ve met companies where the consultants have said “We developed a great strategy but the company could not implement.” A strategy that cannot be implemented is not a great strategy. Strategic planning is a learning, and unlearning, process.

There are 8 sets of questions around strategic planning:

  • What is the purpose of your company?
  • Do you have the right talent involved in strategic planning? The decision makers must have a value growth mindset and capabilities in value creation.
  • What the process for answering the 6 strategy questions outlined above?
  • How will you get input from key members of your company’s ecosystem?
  • How will you get support form key members of your company’s ecosystem? E.g employees
  • What will be the indicators you are constantly monitoring to identify if immediate changes in your strategy plan are required due to changes in: customers, competitors, and the ecosystem. In today’s world, there is unlimited capital available to a competitor whose solution customers want to open up their wallet to.  Those competitors can rapidly grow in a few years and destroy your company.
  • Who is accountable for achieving the measurable results? g external customer metrics (How many potential customers have a problem/need for which they are willing and able to pay for your solution? How do the customers perceive they are getting more value from you than from the competition?) internal customer metrics (customer acquisition costs? customer lifetime profitability? By channel, partner, customer segment, and cohort?).
  • Does the strategic planning process result in the company’s value creation plan?

What are your next steps?

  • Document your current process for creating and maintaining your strategy and strategic plan.
  • Does your current process address the above questions and challenges?
  • What changes do you need to make to your process and the talent involved in the process. If talent cannot change themselves or be coachable, then replace the talent.
  • We live in turbulent and rapidly changing times. The strategy and strategic plan may need to change at any instant because facts and assumptions have changed, making decisions and plans obsolete. Every board meeting must begin with a discussion regarding the facts, assumptions, and analysis underlying the strategy and the strategic plan.  The CEO must have a similar discussion at the start of every meeting with her executive committee.

Footnotes:

1 “The case for behavioural strategy”, McKinsey Quarterly 2010, Number 2

 Further reading

What is the purpose of your company?

https://koorandassociates.org/corporate-governance/what-is-the-purpose-of-your-company/

How do you grow your company’s value?

https://koorandassociates.org/creating-business-value/what-is-value-growth/

Traditional strategic planning dooms companies to failure

https://koorandassociates.org/strategy-and-strategic-planning/traditional-strategic-planning-dooms-companies-to-failure/

“Does your board really add value to strategy?”, Professor Dieder Cossin and Estrelle Metayer, IMD Global Board Center

https://www.imd.org/research-knowledge/articles/board-strategy/

What is the difference between strategy and tactics?

https://koorandassociates.org/strategy-and-strategic-planning/what-is-the-difference-between-strategy-and-tactics/

Tom Koor

Transformation success depends upon human behaviour change.

What is the purpose of this article?

Enable founders, the board of directors, CEOs, and other leaders to discuss the role of human behaviour change in achieving transformation success.

You may download  a PDF of this article from: Transformation success depends upon human behaviour change

Why do transformation efforts often fail?

Individuals do not change their behaviour, actions and decision making to support success.  Individuals may resist the transformation and even actively try to make it fail.  These individuals include customers, employees, and other individuals within the company’s ecosystem. The success of digital transformation, outsourcing, and cost reductions ultimately still depends on individuals changing their behaviour.

Most individuals prefer stability to the uncertainty and lack of control associated with change, and see more reasons for “don’t do” rather than “must do”. People look for reasons that activities cannot or should not be done.   People don’t carry out activities or the activities are late.  The quality and intent of the change is not carried out – people focus on being able to “check off” that they did something, while the underlying objective of the change is not achieved.

The failure may be evident only far after implementation is complete.  This is often seen when companies undertake major mergers or acquisitions and the expected revenue increases and cost reductions do not occur, at which point observations are then made that the “company cultures” were not considered, which is fundamentally that the resistance and support of the internal individuals was not assessed and planned for during decision making, planning and implementation.

There are 5 ways individuals will respond to transformation.

  • Active resistance e.g. taking deliberate action to resist the transformation and to cause failure. Spreads destructive rumours and misinformation.
  • Passive resistance e.g voices opposition, allows failures to occur. I call this “malicious compliance”.
  • Apathy, compliance e.g Go along with the transformation. No negative or positive comments regarding the transformation. Show little interest in the transformation.
  • Agreement e.g. agrees with the change, tries to avoid failure, agree with transformation when asked
  • Enthusiastic support e.g. Champions the change, seeks ways to enable success

What determines how individuals respond to transformation?

Individual emotional and intellectual perception of the transformation is driven 5 factors

  • What will be the day-to-day changes to behaviour, decision making, and actions?(e.g. processes/procedures, how to interact and work with others inside or outside the organization).
  • What will change in the individual’s environment changes (e.g. salary, benefits, who they work for, who their colleagues are, the work space, the technology they use, etc.).
  • How is the individual’s perception of their identity, value, or their future is impacted (e.g. career path, chance for promotion, perceived status, value of their knowledge, skills and past experience).
  • How are the individual’s purpose, values, morals, and ethics impacted and the alignment with the company’s purpose, values, morals, and ethics?
  • How consistent is the transformation with the company’s purpose, values, morals, and ethics?

The perception of the personal impact of change is determined by the individual.  A change which company leaders believe is “minor” may be perceived as “massive” by individuals.

What is the one factor that ensures transformation failure?

If individuals do not trust their leaders and do not believe what they are being told, then there is no reason for their emotional and intellectual perception to be positive. The individuals’ personal ecosystem may be providing mis-information and false rumours.

What is the leadership challenge with transformation?

Transformation can be very different from leaders past experience.  Past experience may often have focused on using analysis and logic to enable change.  Formal authority (i.e. the “Manager” tells people to do things differently) may have been the basis for driving change.  Transformation requires a new set of leadership skills e.g. being able to put themselves into the heart and mind of others, understanding what causes emotional reactions, how to behave and communicate in order to manage emotional actions, etc.

If the leaders are unable to transform themselves, then the broader transformation will fail.

Your next steps

  • Determine which individuals in the company’s ecosystem must support the transformation to enable success.
  • Assess how those individuals will respond based on their perceptions of the transformation. You’ll initially make assumptions and then validate by engaging the individuals to understand what they perceive.
  • If the transformation is at risk due to negative perceptions, too much resistance, and too little support, what changes do the leaders need to make?
  • Assess the degree to which employees and the company’s ecosystem trust what leaders say.
  • Is there sufficient trust to enable transformation success? If not, what changes do the leaders need to make to themselves?

Further reading

What is business transformation?

https://koorandassociates.org/business-transformation/what-is-business-transformation/

How do you succeed with transformation?

https://koorandassociates.org/business-transformation/how-do-you-succeed-with-transformation/

Why is trust critical for transformation?

https://koorandassociates.org/business-transformation/why-is-trust-critical-for-transformation/

Tom Koor

If you’re going to ask someone for an introduction.

The purpose of this article

Identify some things for you to think about before you ask someone to do an introduction for you.

You may download a PDF of this posting from: https://koorandassociates.org/wp-content/uploads/2021/04/if-youre-going-to-ask-someone-to-do-an-introduction.pdf

What made me wonder about the introduction process?

  • Recently a friend of mine asked me to do some introductions for his daughter, who has just finished 1st year university and is looking for a summer job. I asked some relevant people I know. Many of whom agreed for me to do an electronic introduction, leaving it to the daughter and the people I know to then connect directly.
  • But that made me wonder. Why did I do the introduction?  No financial benefit to me.  Why did people accept?  Each of them said there were no jobs available for the summer.  No financial benefit to them.

Who are the three people involved in the introduction process?

  • The seeker – the person seeking an introduction e.g. my friend’s daughter.
  • The introducer e.g. me .
  • The introducee e.g. the person or people I know.

Why is the seeker asking for an introduction?

  • Address a short-term financial need. g. need a job, need a sales lead.
  • Address an information need. g. learn how to find a job, learn how law firms recruit lawyers.
  • Build new relationships which might be of value in the future. Each individual relationship will not be of value but the pool will be. A relationship implies long-term communications and interaction.

Why does the introducer agree to do any introduction?

  • Knows the seekers and is will doing to do favour. May also believe that the seeker will then “owe a favour”.
  • Believes the introducee may be able to help the seeker in some way.
  • Believes the introducee might learn something.
  • Knows that the introducee has a current problem or issue for which the seeker might have insights or be able to solve.
  • Believes the introducee might have a future need for someone like the seeker.
  • Some seekers pay for introductions. E.g. sales leads.

Often there is not short-term value to the introducer.

Why does the introduceee agree to the introduction?

  • As a favour to the introducer.
  • Believes may be able to help the seeker in some way.
  • Believes might learn something.
  • Has a current problem or issue for which the seeker might have insights or be able to solve.
  • Might have a future need for someone like the seeker.
  • Some seekers pay for introductions. That is not my model.

Often there is not short-term value to the introducee.

Why will the introducer decline to make an introduction?

  • The relationship with the seeker is seen as too little value to warrant any effort.
  • Too busy.
  • Believes there is no value to the introducer or introducee.
  • Cannot think of a single potential introducee.
  • Does not want to help for a wide range of reasons.

Why will the introducee decline the introduction?

  • Too busy.
  • Believes there is no value to the introducee.
  • Perceives the introduction as a “sales call”.
  • Does not want to help for a wide range of reasons.

What might an introduction process look like?

  • The seeker determines why they are looking for an introduction, the type of introduction, the characteristics of a potential introduce, the potential value to the introducee, and potential introducers.
  • The seeker asks a potential introducer to make one introduction. It’s only one, in order to minimize the effort of the introducer.
  • The seeker prepares for the introducer, perhaps in an email:
    1. Why seeking an introduction and with whom;
    2. A few sentences about the seeker.
    3. A link to the seeker’s LinkedIn profile.
  • The introducer asks one introducee they know if open to an introduction. The information is point 3 above is shared with the introducee.
  • The introducer then sends one email to the seeker and introduce, thus allowing them to connect directly with no further effort on the part of the introducer. The introducer should include a sentence or two about the introducee.
  • The seeker needs to thank the introducer.

Not every introducer will make an introduction for you.  Not every potential introduce will tell the introducer that it’s ok for an introduction.

Your next steps.

Prepare your own introduction process.

Tom Koor

Why is trust critical for transformation success? V2

What is the purpose of this article?

Illustrate some of the reasons why trust is critical for transformation success.  This article is appropriate for any size company undergoing major change.

You may download a PDF of this article from: Why is trust critical for transformation success V2

What does successful transformation require?

People within the company and its ecosystem need to change. These changes can include:

  • Learning new skills and unlearning old ones;
  • Gaining new knowledge and unlearning old knowledge and experience;
  • Learning new processes and techniques and unlearning old ones;
  • Learning new behaviours and unlearning old behaviours; and
  • Potentially new values and culture and dropping old values and culture.

Successful transformation requires individuals to transform themselves.

People may transform themselves when they:

  • Believe there is personal value to them and/or to those they care about;
  • Understand why the current situation is not viable in the long-term;
  • Understand what the future looks like and the path to the future;
  • Feel some sense of control over their future;
  • Believe the leaders have heard and understand individual concerns;

Why does transformation fail?

  • Individuals see no reason to transform because they don’t trust what their leaders are telling them.
  • Individuals don’t transform because they emotionally resist being told what to do without understanding.

Going from a slowly-changing business to transformation makes visible:

  • All the issues with lack of trust in management; and
  • Management’s inability to deal with all the emotional factors of trust and resistance to change.

Your next steps

  • Determine the degree to which your employees and others in your companies ecosystem trust and believe what you say.
  • Define what changes in you values, moral, ethics, behaviours, and actions are required to improve trust.

Further reading

Society’s trust in corporate leadership and political leadership is low.

https://koorandassociates.org/values-morals-and-ethics/societys-trust-in-corporate-leadership-and-political-leadership-is-low/

What is business transformation? V2

https://koorandassociates.org/business-transformation/what-is-business-transformation/

How do you succeed with transformation? V2

https://koorandassociates.org/business-transformation/how-do-you-succeed-with-transformation/

 

Tom Koor

Is your early stage startup planning to fail? V2

Is your early stage startup planning to fail? V2

 Purpose of this article.

Help founders, their potential team members, and potential investors begin to understand whether or not they are planning to fail. The article is not intended to be comprehensive in breadth or depth.

You may download a PDF of this article from:  https://koorandassociates.org/wp-content/uploads/2021/03/is-your-early-stage-startup-planning-to-fail-v2.pdf

What are the 3 greatest contributors to startup failure?1

This research study analyzed 101 startup failures and identified the most frequently cited reasons for failure.  Usually there were several reasons for failure.

  • 42% of the time built a solution looking for a problem i.e. no market need.
  • 29% of the time running out of cash.
  • 23% of the time, not the right team.

How do you recognize you’re planning to fail?

How can you tell you are building a solution for which there may be little or no market demand

  • You’ve done few or no ongoing surveys and interviews of potential customers or cash paying customers.
  • You’ve done no ethnographic or thematic analysis of surveys and interviews.
  • You’ve done little or no analysis regarding the number of potential customers who believe they have a problem or need for which they are both willing and able to spend money to address.
  • Your estimate of potential market size is based on your personal opinion, or a one-page chart from a 3rd
  • You don’t have metrics for customer engagement at the pre-revenue stage.
  • You don’t have an ongoing process to validate market demand and market size.

How can you tell you are planning to run out of cash?

  • You don’t have a 24 month, by month cash flow forecast, with key milestones for each month.  Your milestones don’t include monthly customer engagement targets, even at the pre-revenue stage.  You don’t show the month in which the capital from your next fund-raising round is in the bank.  You’ve assumed that fundraising only takes a few months. The customer engagement milestones prior to planned beginning of your next fundraising will not persuade investors to part with their capital.
  • You assume that you can raise money from 3rd party investors when you have no revenue. Most startups obtain 3rd party funding (i.e. other than friends, family) once there is revenue. 27% of angel funded companies are pre-revenue.2
  • You assume that it will be easy to raise money from angel investing groups. 4% of Canadian startups that apply to angel groups receive funding. Only 9% are asked to present to an angel group.3
  • You assume that it will take little time to raise funds. The average seed stage round takes 12 ½ weeks. 20% of the startup require 20 weeks or longer. 20% of the startups require 6 weeks or less.4 A fund-raising round can take a long time. This research study examined 13,916 financing events.4 The average time between fundraising rounds was 20.6 months.  The time between rounds ranged from 6 months, to 35 months, 68% of the time.  e. 16% of the time less than 6 months and 16% of the time longer than 35 months.
  • Your cash flow plan has no scenarios e.g. what if customer growth is slower than expected, what if fundraising takes longer.
  • You don’t have a cap table, leading all the way to investor exit. The cap table assumptions are not related to your cash flow assumptions.

How can you tell don’t have the right team?

  • You haven’t recognized that your team includes: founders, employees, contractors, advisors, board directors, investors, and your network.
  • You haven’t identified the complete set of talent requirements and gaps for each stage of your startups evolution. Talent requirements include: ethnographic and thematic analysis, finance skills to create a cap table leading all the way to investor exit, monthly cash flow models and scenarios, presentation and communications skills, etc.
  • You don’t know what a startup is. A) A startup is a temporary organization designed to search out a repeatable, scalable, and profitable business model with lots of potential customers who are willing and able to pay to solve their problems and needs. B) Startups are not building a solution.  They are building a tool to learn what solution to build.6

Your next steps

As a startup founder:

  • Ask your advisors to do an assessment. As they compare your startup to others, are you planning to fail?

Footnotes

1 https://s3-us-west-2.amazonaws.com/cbi-content/research-reports/The-20-Reasons-Startups-Fail.pdf

2 Angel Capital Association and Hockeystick, “2019 ACA Angel Funders report “

3 A decade of deals, annual report on angel investing in Canada, June 2020, NACO (National Angel Capital Organization)

4“What we learned from 200 startups who raised $360 million”, Professor Tom Eisenmann, Harvard Business School, and DocSend

https://www.slideshare.net/DocSend/docsend-fundraising-research-49480890

5 https://medium.com/journal-of-empirical-entrepreneurship/how-much-runway-should-you-target-between-financing-rounds-478b1616cfb5

6 Lean Analytics – Use data to build a better startup faster (2013) by Alistair Croll, Benjamin Yoskovitz, O’Reilly Media, Sebastopol California Page 41