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Why Aren’t You Working On Your Powerful Profit-Driving Strategy?

20% of businesses create 90% of total economic profit. They do this by shifting their resources to high potential growth areas. Are you part of the minority or majority in your strategic planning?





Two uncomfortable strategic truths face the vast majority of executives and companies – and probably you, too. First, you don’t have a powerful strategy. And second, you aren’t doing much about it.

Though both statements may sound extreme, they are the clear implication of new McKinsey research on how companies create value and allocate resources.

The widespread absence of a powerful strategy is clear from our recent study of 3 000 of the world’s largest companies, which finds that just 20% in that group create 90% of its total economic profit.

The rest of the companies, more than 2 400, simply do not have a strategy that effectively outperforms the market.

A second new McKinsey study delves into the question of what executives are doing about their strategic shortfall, and concludes that most are not doing enough.

While they should increase investment in the parts of their business with the best shot at creating value and cut investment in business lines that are tapped out, they don’t.

Instead they divvy up their corporate resources in the same way year after year, giving businesses, whether great or weak, the same slice of corporate resources they had the year before.

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Of 1 500 multi-business companies examined each year over the course of two decades, only a minority actively shifted a substantial share of their resources to their most high potential growth businesses.

Even between 2007 and 2010, when tough external conditions should have forced hard internal choices, leaders remained stuck in their tracks. A great opportunity for change was wasted.

Inertia is expensive. The corporate minority that actively reallocate their resources do much better financially than those that don’t.

These ‘dynamic reallocators’ produced a median total return to their shareholders of 10% per year between 1990 and 2010. That is far ahead of the 6% return earned by the companies which rarely reallocate – the ‘dormant reallocators.’

And while resource dynamism made a big difference, the bar we set for it was not extraordinarily high: Companies moving just 41% of their capital base between businesses or to new business areas over a 15 year period made the cut.

Warren Buffett once said: “I was wired from birth to allocate capital.” Lucky for him! What should the vast majority of executives who aren’t genetically endowed like Buffett do to boost their odds of identifying good strategic bets, and then putting their money where their strategy is?

1. Retool your strategy development process

Good analysis in the hands of smart managers does not automatically yield great strategy. The process of developing that strategy is critical.

Nearly eight in ten executives surveyed by McKinsey describe the strategic planning processes at their companies as more geared to confirming existing hypotheses than testing new ones.

There are techniques to fix that problem.

Among them: Foster debate, create ‘challenger roles’ to institutionalise give and take, cut through the politics, and seek external perspective, even if it’s as simple as using outside analysts’ market predictions or making customer visits.

Create a corporate-resource map that is granular enough to show specifically where resources are currently deployed. This data will enrich discussion and help make the case for reallocation even to powerful division leaders who don’t benefit from it themselves.

2. Test your new strategy

Strategy is not a procedural exercise, but a way of thinking. To stimulate strategic thinking, answer this question honestly: When you look objectively at your assets, capability and market position is there any reason to believe you can create disproportionate value?

One way to look at competitive advantage is to define it as an imperfection in the market, something which stops competitive forces from sucking away profit. Such advantages are scarce and often fleeting.

  • Does your strategy tap a true source of advantage?
  • Put you ahead of trends?
  • Does it rest on unique and proprietary insights?

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How confident are you that you can ‘beat the market’?

3. Execute decisively


Speed may be scary but one thing leaders need not worry about is reallocating too much. McKinsey research finds no evidence that the rewards of greater reallocation taper off.

Managers appear to be most at risk of doing too little, not too much. How much reallocation is needed varies, of course.

Some successful re-allocators enter and exit businesses entirely. But many more make less dramatic changes, shifting resources, year after year, to build up the best part of their business, and simultaneously pruning their less successful lines.

Whatever the degree of change required at your company, make it. Companies run by decisive CEOs rack up more economic profit – what’s left of operating profit after the cost of capital is subtracted – than competitors do.

Returns to shareholders of reallocating firms are strong. It’s not just business, it’s personal: The CEOs willing to make the tough tradeoffs also have longer tenures in their jobs than those who are slow to shift assets.

A better company, richer shareholders, and more job security are the rewards for being bold enough to build a powerful strategy and translate it into a real reallocation of resources.

Retool. Test. Execute

These are the priorities for leaders concerned that their strategy is undifferentiated or isn’t backed and implemented with sufficient resources.

While change is never comfortable, our research suggests the bigger risk for many companies is not facing up to their strategy problem – or doing nothing about it.

This article was a collaboration by Michael Birshan, Martin Hirt and Kurt Strovink.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.



4 Ways To Find Your Own Business Style

The only way to develop a business style is step-by-step over time.

Timothy Sykes




Finding a style in finance will define how you react to changes and how you approach new situations. It’s as important in business as it is in stock trading. Developing a business style and developing a stock trading system are extremely similar pursuits.

But I’m not going to pretend that it’s easy to do. It will take time and you do have to be willing to work at it.

Here are my four ways of finding your own business style.

1. Get rid of your expectations

You can’t force anything to work. It’s necessary for you to be flexible when it comes to finding a business style. Begin by letting go of any expectations you have before trying a new style.

Prior to attempting a new style, you have to be willing to go into it with no expectations. You never know what you’re going to find.

Related: 8 Steps to Building Your Business According to the Lifestyle You Want

2. Track your movements

Some things are going to work and some things aren’t going to work. I always tell my students in the Tim Sykes Millionaire Challenge that they should keep records of the things they’re doing. Keep these records as detailed as possible because attempting trial and error can quickly lead you in circles.

Don’t fall into the trap (as I did in the beginning) of trying the same thing multiple times because you never tracked the results.

I keep large spreadsheets with notes of the various styles and systems I’ve tried in business. Business mistakes can be costly, so you need to do everything you can to avoid making them.

3. Look at what others are doing


I refuse to believe that someone is doing something truly unique. The moment someone makes a breakthrough in business there are a hundred people replicating the same things. And that can be a powerful tool. Consider what others are doing and see whether you can learn something.

It’s why I also advocate finding a mentor to help you out. They’ll be able to help you out and you’ll benefit from their enhanced experiences in business.

Again, track what you’re taking from other people so you know whether something is working.

Related: I Started Saying ‘No’ To These 6 Things. My Life And My Business Got A Lot Better

4. Refine what you do

Rarely will anything in business work the first time. However, your first attempts will give you a good benchmark as to what you need to do next.

You should never be satisfied with what you have, even if it’s working. Always work on improving your business style. I believe this is the most important thing because it also teaches you how to adapt to changing conditions over time.

Last Word – Constantly Growing

There’s no step-by-step guide for how to develop a business style. The only way to do it is to obey the fundamentals and then develop everything over time.

Even though the process is long, you’re guaranteed to learn a lot of lessons and gain from a huge number of experiences over time.

This article was originally posted here on

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6 Questions You Should Be Asking When Coaching

Top athletes have coaches because they’re winners. Business leaders should be the same.

Nadine Todd



Dr Marshall Goldsmith

Whether you’re a CEO looking for a mentor, coaching your management team, or structuring a coaching programme for your managers to implement, there are six questions that can help anyone get better at anything.

The expert

Dr Marshall Goldsmith is a best-selling author and world-renowned business educator and coach. He has coached top CEOs, including Alan Mulally, former President and CEO of Ford Motor Company.

The key to a successful coaching programme is simple dialogue and establishing responsibility. The person being coached must understand and agree that success lies in their hands. They must take responsibility for their actions.

Related: How Business Coaching Can Help You Achieve Your Goals

The method

Once every few months, have a direct coaching session. Ask (or answer for yourself) these six questions:

  1. Where are we going?
  2. Where are you going?
  3. What are you doing well?
  4. Do you have suggestions for my improvement?
  5. How can I help you?
  6. So you have suggestions for me?

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4 Ways To Develop The Leaders You’ll Need In The Future

One of the most challenging aspects of leadership development is consistently and effectively identifying the next wave of leaders.




One of the most challenging aspects of leadership development is consistently and effectively identifying the next wave of leaders.

It can be easy for those at the top to forget that eventually someone will have to take their place at the helm. And ignoring that fact has lead to issues with succession planning, unwanted turnover and other challenges in leadership development in many organisations.

2016 High Impact Leadership research from Bersin by Deloitte asked 2,422 HR and business leaders from around the world how well they believed they could discover new leadership talent. Just 35 percent of respondents said they were above average when it came to successfully identifying and developing leaders.

To understand why this is, consider the typical leadership development paradox. Traditionally, the first step is to choose who has leadership potential, then develop their skillset. Logically, however, this makes little sense.

How is it possible to identify effective leaders if employees have yet to receive any type of leadership development?

Here are four ways to properly identify better qualified candidates for leadership positions:

1Stop choosing potential leaders based on unrelated skills

Gallup’s 2015 State of the American Manager Report, which studied 2.5 million manager-led teams in 195 countries, found that the top two reasons employees are promoted to management positions are because they were successful in a non-managerial role or because of their tenure with the company. Neither of those criteria have any proven correlation with leadership skills or relevant experience.

Create a better means of measuring for true leadership potential. Look at the culture of the organisation and envision what it would look like for someone to lead by those values.

Also consider how successful leaders evolved over time in the organisation. Then use that information to make a list of recognisable traits to look for as signs of leadership potential.

2Broaden leadership development to more employees

People learn and grow at their own unique pace. Requiring that an employee reach a certain position or be with the company for a certain number of years before they’re offered leadership opportunities holds back those who might be ready for more responsibility now. Or even worse, it might push those who aren’t yet ready into leadership roles.

Instead, let leadership development be a company-wide initiative. This gives more people the chance to take the next step in their career. It also creates a larger pool of possible great leaders to draw from across the organisation.

3Track progress and growth

Track progress and growth

There’s no way of knowing who is ready to step up and lead unless development is monitored. Remember that this is a process. Employees need feedback from their mentors and coaches to know for certain what skills they’ve mastered as well as where there can still be improvements made.

Develop a way to assess progress for different leadership positions, and be clear with employees and coaches about what success would look like in different situations. For instance, explain what is expected of a first time project leader.

Get everyone on the same page about the developing leader’s responsibilities and how that should guide their team.

Then collect thorough feedback from all those involved. Ask the leadership candidate what challenges they faced as well as where they think they thrived. Pose the same questions to those they supervised and organisational mentors.

Over time, this will reveal patterns that make it easier to identify who is best suited for leadership in the long-term.

4Focus on continual leadership development

There is no such thing as too much experience. There is always more that can be learned. After leadership candidates have been identified, continue to nurture them. This keeps employees from feeling that they have plateaued, which is unfortunately common.

The 2014 Insigniam Middle Management Survey: Middle Management’s Critical Role In Saving Company Innovation looked at responses from 200 middle managers from around the world. It found that only 15 percent of managers believe they will ever be promoted to the next level of leadership at their company.

Whether intentionally or not, employees who have proven their leadership abilities are being told that their leadership journey is over – and this hurts both them and the organisation. Encourage a steady stream of highly trained and skilled leaders working their way up by demonstrating that there is no end to development.

In order to clearly see who the next wave of leaders is going to be, employees need to be given the chance to hone and exercise their skills.

That means redefining how leadership potential is identified and providing each employee with the chance to develop personally and professionally.

This article was originally posted here on

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