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Performance & Growth

Why Companies Fail At Strategy Execution And 8 Ideas To Help

There are some steps that you can implement to increase your chances of successful implementation.

Janet Featherstone

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Most strategy gurus believe that an organisation has a better chance of survival if it has a poor strategy implemented well, than if it has an excellent strategy implemented poorly. In this day and age, businesses likely don’t have the luxury of either. Building a sustainably successful business requires both a quality strategy and excellent implementation.

Thanks to the pressures of running a business, the chosen strategic direction is often shoved to the side-lines and becomes something you’ll ‘get to sometime’. The problem is, you never do. As a result, the business does much of the same as it did before, even if it does it a little bit better.

Failure to implement your chosen strategy means that instead of the organisation moving forward to hopefully disrupt or changes the rules of game, you play by the same rules as last year. Eventually, another organisation does something game changing, and you find yourself having to play by their rules. It’s risky business.

Related: Include a ‘Bounce Back’ Strategy in your Business Plan

1. Plan for change

Chances are good that if you engaged in a formal strategic planning workshop that you left that session with a good idea about ‘what next’. The challenge now is deciding how to implement ‘what next’.

You will be familiar with the quote by Churchill “He who fails to plan is planning to fail”.

The next step is planning how to bring these great ideas into reality.

The planning process will focus on what needs to be done and who will be accountable for delivery. There is an excellent tool called a RACI Matrix. When an action has been decided, you allocate:

  • The person Responsible for undertaking that action, and making it happen
  • The person ultimately Accountable for ensuring it happens
  • Through identifying the stakeholders who will be involved, either directly or indirectly, you identify who you need to keep Consulted and Informed.

2. Show each person how their contribution matters

office-contribution

Every person within the business must understand how their efforts relate directly towards the achievement of the organisation’s objectives. They must be shown the value that they create (tangibly or intangibly) and how this builds towards the overall achievement of the organisational strategy.

Taking this approach enables each employee to see how their efforts are important to the overall welfare of the company.  It also assists each employee to see which efforts result in moving the organisation towards its strategic objective, and which activities keep the organisation on the hamster wheel.

3. Allocate resources required

A strategy cannot be successfully implemented unless and until the resources required for its implementation are awarded. If you are asking your team to change direction, and you are expecting a 10% increase to the bottom line through your existing focus, one or the other is going to be achieved.

When you plan implementation, you must have a very realistic analysis of what can be achieved through the existing resources, and where additional resources require commitment.

Related: (Slideshow) 10 Epic Businesses Give You Top Advice on Innovation and Strategy

4. Set clear targets

As an output from your strategy workshop, you must have clearly defined SMART (specific, measureable, accurate, realistic and timeous) objectives.  At an organisational level, you must know with the utmost clarity how much revenue you expect to generate from old versus new business activities, and how that activity is being funded. This needs to be defined for each month and year of the strategic implementation.

Each person who has been tasked with an element of the strategy must understand how their efforts contribute towards overall strategic attainment in terms of the numbers. Through a sensitivity analysis, these individuals must be shown the implications to the business of missing these milestones, or delaying their arrival. Time lost can never be regained.

5. Incentivise based on the new strategy

The new strategy cycle must include a review of how employees are incentivised. People will perform based on the metrics they are measured against. If you are expecting a change in behaviour, but you’re rewarding the behaviour that’s always been, you’re on a road to nowhere new.

6. Understand the 80/20 principle

80-20-principle-rule-for-business

The 80/20 principle is a critical factor in strategic delivery. Most employees spend their most productive first hour in the office sifting through e-mails and doing other ‘busy’ tasks that don’t necessarily move the business closer to its objectives.

Each day, every employee must set themselves at least one critical task which moves the business towards its strategy.  That employee must not be distracted from that task until it is completed. Only once this fundamentally important task is complete should less important matters enjoy attention.

If this means meetings only start from 10h00, that’s a change the business must make. Managers must be disciplined in knowing the difference between what is urgent and important, and support their staff to complete their important tasks each day.

Related: The 7 Essential Principles Necessary for Business Success

7. Review progress monthly

Unless strategic progress is tracked monthly, progress will slide. Each person tasked with delivery of elements of the strategy must present their status to the larger group. Leaders must watch for areas that are failing to achieve at the desired rate, and must evaluate what action to apply to accelerate the rate of delivery.

These meetings must never be cancelled. Cancellation of strategy progress meetings sends a signal to the organisation that there are other matters more important than delivery of the strategy. That simply cannot be the case.

8. What’s the conversation?

As the executives within a business, you set the focus of the organisation through the conversations you hold with employees.

If the company says strategic delivery is key, but your conversations are all about today’s sales numbers, that will forever form the focus of the functions reporting to you.

Sales numbers today are of course important because they secure the business for tomorrow, but the strategy sustains the business next year.

Strategy therefore must enter and remain as a key component of the conversation. No matter how good your business model is today, there will come a time when what worked works no longer. Or perhaps it works to a lesser extent.

If you intend your business to be sustainable in the longer term, then you have an obligation to yourself and everyone who relies on your organisation to think deeply about what is going to create viability for your company, and identify what actions will get you there. And then you must take that action decisively and relentlessly if you want to enjoy business longevity.

Janet Featherstone is an international business & executive coach, consultant and strategist. Janet is a professional associate at GIBS. Connect with Janet at https://za.linkedin.com/in/janetfeatherstone.

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Performance & Growth

Alan Knott-Craig Answers: How To Build A Debt-Free Business

It’s tempting to go the debt route when building your business or asset base, but be careful — debt can kill your business just as quickly.

Alan Knott-Craig

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I’ve been offered debt secured against my shares. I can use the debt to buy a house or buy more shares in my company. I really believe in my company, it’s growing fast. What should I do? — Bob

There’s no such thing as free debt. It always has a catch. In this case, the catch is that if you don’t pay back the debt, then you lose all the shares in your company that you’ve worked so hard to build.

In other words, if your share value doesn’t go up, then you will lose the shares you have.

Maybe you don’t think that’s possible, and maybe you’re right. But you never know what black swan is swanning your way. The president could be assassinated. Russia could declare war on America. North Korea could send a nuclear missile to Japan. There could be another credit crisis.

All of these things would have massively negative impacts on the economy and sentiment.

The economy affects your profits (sales drop). Sentiment affects your ability to sell your shares (no confidence = no buyers).

Suddenly you find yourself staring down the barrel of a debt repayment deadline, and BOOM! You’ve lost your company and your wealth.

That’s not to say you should never take risks. When you’re young you have to gamble a bit. Roll the dice. Just beware of debt. Debt kills.

Related: Dealing With Debt As An Entrepreneur

The only legitimate reason for taking debt to buy shares is if your partner wants to exit the business. Maybe she’s met the love of her life and wants to move to Tahiti, and if you don’t buy her shares then someone else will and you’ll find yourself in bed with a stranger.

If you don’t have the cash then you need debt. Fair enough. But be very careful. Debt kills. I can’t emphasise this enough.

It’s best to live life imagining the shares in your company are worth nothing. That way you won’t live beyond your cashflow. And you won’t take debt against your shares.

If you’re still tempted to get debt, ask yourself, “Do I love what I do?” If the answer is “No,” then definitely do not take any debt. Debt will simply yoke you to something you don’t love. Debt will make you a slave.

Generally speaking, debt is driven by greed. Greed, greed, greed.

And greed always ends in tears.

I want to build a property empire, but every time I buy a new property I’m forced to sell my existing property because the bank refuses to give me two bonds. At the moment I’m struggling to cover my bond repayments with rental income. Advice? — Phumlani

First thing first, read Rich Dad Poor Dad by Robert Kiyosaki. This book will tell you everything you need to know.

In summary, it’s about using the bank’s money to make you rich. Borrow money, buy property, use rental income to pay off mortgage, you’re left with asset and income stream. Boom! What could possibly go wrong?

Here are some rules of thumb:

  • Buy commercial property. A tenant that relies on his premises to generate income will look after those premises more than a simple residential tenant. In other words, you’ll spend more money maintaining your residential property.
  • Location, location, location. Pick an area with low risk of property prices failing. It might be more expensive but your first priority is always “Don’t lose money.”
  • Yield is everything. Divide the annual rental income by the property value. If more than 7%, go for it. If less, don’t. You want the yield to be close to prime rate.
  • Don’t take more than 50% debt. You never know what will happen. If the tenant misses her rent for a few months you want to have a safety cushion so you don’t get caught short of cash when your monthly mortgage repayments are due.
  • Never sell. The transaction costs for buying and selling properties will eat away your profits. Buy to hold. Never sell.

Remember, there’s nothing wrong with growing without debt. Many property moguls never ever used debt to grow their empire. It’s slower, but safer.

Debt is a shortcut. Sometimes it works, but most times it ends in tears.

Related: 7 Ways To Be Debt Free For The Rest Of Your Life


Read this

13-rules-for-being-an-entrepreneur-coverAlan Knott-Craig’s latest book, 13 Rules for being an Entrepreneur is now available.

What it’s about

It’s easy to be an entrepreneur. It’s also easy to fail. What’s hard is being a successful entrepreneur.

For an entrepreneur, there is only one important metric of success: Money. But life is not only about making money. It’s about being happy.

This book is a collection of tips and wisdom that will help you make money without forgoing happiness.

Get it now

To download the free eBook or purchase a hard copy, go to www.13rules.co.za.  To browse Alan’s other books, visit bigalmanack.com/books/ 

Ask  Al

Do you have a burning start-up question?

Email: alan@herotel.com

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Performance & Growth

South African Investors And Entrepreneurs, The World Needs You

With governments and corporations across the globe constantly on the lookout for innovators and entrepreneurs, time is most certainly against those who remain constricted by their limited citizenship portfolio.

Amanda Smit

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Citizenship-by-investment (CBI) was once seen as something only reserved for the ultra-wealthy, but it is now also becoming the new normal for business investors and entrepreneurs wanting to expand their reach. We live in a highly globalised world where the flow of goods, people, and ideas means that the freedom to move and do business internationally has never been more important. With governments and corporations across the globe constantly on the lookout for innovators and entrepreneurs, time is most certainly against those who remain constricted by their limited citizenship portfolio.

How can citizenship-by-investment benefit South African investors?

First of all, entrepreneurs with multiple passports or residence permits are able to take advantage of the benefits and best practices of all the countries to whose jurisdictions they belong, while also being less vulnerable to a single country’s risks, shortcomings, and unexpected changing fortunes. The more jurisdictions an investor can access, the more diversified their assets will be and the lower their exposure to both country-specific sovereign risk and global volatility. By acquiring a higher quality nationality, one obtains greater global access and is better prepared for an uncertain future.

Nations within the EU, for example, offer citizens and residents access to all 28 member states, as well as to a number of other countries associated with the EU’s freedom of movement charter. In addition to expanded global mobility and a reduction in sovereign risk, alternative residence and citizenship also offer individuals access to career, educational, and cultural opportunities on a global scale.

Related: Funny Thing Happened On The Way To Global Expansion: We Met Our Doppelgänger

The benefits to governments and citizens of host nations

st-kitts-and-nevis

It would, however, be misguided to think that the advantages presented by citizenship-by-investment are for investors alone: for the governments and citizens of host nations the benefits are substantial. For governments, the inflow of extra capital reduces pressure on the treasury and protects national sovereignty by helping to mitigate the need for loans. Indeed, the establishment of a transparent, well-managed CBI program is not dissimilar to discovering a sustainable source of oil within the confines of a country’s national borders. Both scenarios create an immediate injection of new funds into the national treasury, which ultimately leads to greater long-term prosperity for the country and its people.

Successful applicants also bring intangible benefits to receiving countries, such as scarce skills and rich global networks. They add diversity and they uplift host nations through their demands for improved and novel services, which can create new opportunities for local communities. In Malta, for example, the establishment of a CBI program was as much about attracting rare talent as it was about generating much-needed capital in the aftermath of the 2008 financial crisis. Four years after the launch of the Malta Individual Investor Program (MIIP), Malta has one of the highest GDP growth rates — and one of the lowest unemployment rates — of any EU member state. In 2017, the country also reported a record-high budget surplus, with 90% of the gains attributable to the MIIP.

For smaller economies that face increasing trade and industry competition on the global stage, such an outcome can be transformative. Take the Caribbean nation of St. Kitts and Nevis, for example. Three years after relaunching its CBI program in 2007, the program accounted for around 5% of the country’s GDP. A year later, this figure had doubled, and after the sixth year, the figure had doubled again to 20%. By 2014, the St. Kitts and Nevis CBI program was responsible for approximately 25% of the nation’s GDP.

Related: From Local To Global – How To Expand Your Business Internationally

Moreover, other projects made possible through Caribbean CBI programs have had the knock-on effect of boosting employment and contributing to the greening of their economies. For instance, in Antigua and Barbuda an award-winning 10 MW clean-energy project cluster was realised within two years of launching its program. In addition to large-scale installations, over 50 schools and other government-owned buildings have been equipped with sustainable solar-energy systems in order to benefit from the new clean-energy supply. Such innovations were only made possible through the funds conferred by the country’s CBI program.

Thus, the inflows of funds from citizenship programs can be considerable, and the macro-economic implications for most sectors can be extensive. Just as traditional foreign direct investment (FDI) increases the value of the receiving state, bringing in capital to both the public sector and the private sector, so the benefits proffered by CBI — a form of FDI — rapidly turn the fate of a country away from debt and dependency and towards independence and stability.

Conclusion

In short, citizenship-by-investment is a boon to both host nations and investors alike. For South African entrepreneurs and investors who find themselves burdened by visa restrictions and red tape, acquiring a second citizenship is a simple means of expanding global reach, getting ahead of competitors, and giving something back to host nations that are only too grateful to have these talented individuals as part of their community.

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Performance & Growth

First Rule Of Securing Growth Capital: It’s Not About The Product

Paragon CEO, Gary Palmer, discusses the pitfalls facing business owners searching for capital to fund expansion.

Gary Palmer

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A common mistake made by entrepreneurs looking for growth capital is fixating on which product they should choose. When looking to finance growth in your business, the decision process should be focused on longer-term strategic priorities and then finding a partner to help you access the right product to deliver on those goals.

Let’s get real

At the outset business owners need to look at their business realities and decide whether they should be looking for debt or equity financing. For example, if a business can only support debt of 2.5 times EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), and they are already at that limit, then they will need to look for equity financing to achieve their growth goals. In many instances, a combination of both debt and equity financing will hold the key, allowing the organisation to benefit from cheaper debt funding, but ensuring that it is not overextended.

Related: Dragon’s Den Polo Leteka Gives Her Top Tips To Attract Growth Capital

Even if the growth project can be funded through debt alone, business owners face the challenge of dealing with a multitude of institutions, each of which puts emphasis on different aspects of the deal. No business owner can know the minutia of their requirements, and so working with a partner who can help you prepare your presentations is a must.

The challenge becomes all the greater when companies may be looking to finance a non-traditional project. We have a client who is looking for finance to build roads leading to his development. This is not something traditional lenders usually deal with, and so in this instance he will need to access more creative funding options not offered by the banks. Another example is when a founder is looking to buy out other partners, this too may need to go to a lending institution which is able to structure deals for out-of-the-box requirements.

Square pegs, round holes

A common frustration faced by business owners is that some lending institutions sell products rather than solutions. Too little time is spent understanding the needs of the client and designing an appropriate solution, tailored to the client’s unique requirements. These lenders are literally forcing the client’s needs into the limited number of financial products they offer.

It’s going to get more complex

Another challenge for business owners is the sheer number of institutions out there. New funds, new lenders and the plethora of fintech offerings are making it harder for growth companies to find the best offer available. In the US and Canada, more than half of the big property deals are now funded by non-banks. We believe South Africa is headed the same way. The added competition, is of course great for the market and will encourage better service and more creative options, but it does make it difficult for business leaders to keep track of everything available.

Don’t fall prey to borrower’s remorse

In so many cases, companies are in a rush to secure funding and often end up choosing a product which is not suited to their longer-term strategy. Getting out of a transaction can be exceptionally difficult. Far too often companies wake up to better options too far down the line. If more appropriate finance is found, companies will be left carrying the settlement fees attached to their previous funding, not to mention the administrative pain of changing lenders.

Related: Funding Growth

Paragon has over 150 lenders on its books and a network of angel investors which we can access to find the right deal. It’s our job to know exactly what is available and more importantly, to work with business owners to ensure they access lending which is not going to result in borrower’s remorse. The only way to ensure good results is to start the lending hunt with a partner who can help you first determine the right lending strategy, based on your business reality. The alternative could prove both expensive and painful.

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