Milwaukee Brewers owner Mark Attanasio demonstrates one of the most important qualities of a strategic leader – an honest assessment of the status quo.
“We know we’ve got a problem, which is starting pitching. We as an organization need to face that reality and address it, as opposed to shrink from it or excuse it. Our offense is so good, if we were just average in pitching, we’d be a contender. We’ve had two seasons now of having a top offense and extremely poor pitching.” Attanasio then admits there is no one coming up through the ranks to solve the problem, suggesting a trade may be necessary.
Imagine if someone somewhere in the J&J leadership team spoke up, “Our drive for earnings is leading plant managers to compromise quality to meet earnings expectations. If we don’t address our quality issues, I’m calling the FDA.”
I’m waiting for a CEO to stand up to Wall Street with the following truth: “After running up earnings for years through acquisitions offering tremendous cost synergies, we are now in the position where maintaining past earnings growth will preclude our investing in important long term growth opportunities. I won’t starve internal growth opportunities and risk losing my best leaders in the process just to please Wall Street. So I’m lowering our expected earnings growth by ten percentage points for two years, after which time internal growth will enable us to surpass our historic performance.”
Change only emerges when there is a gap between where you are and where you want to be. All too often, we wear rose-colored glasses to avoid the harsh truth of today’s reality. In the process, we deny our organizations a necessary driver of change.
My favorite client admitted in our first meeting, “We’ve worked through 2/3 of our great ideas for productivity improvement and frankly, what we have left in the bag falls way short of the cost reductions our big-box retail customers expect of us. We have no idea how we’ll sustain, much less grow profitability and that’s what’s keeping me up at night.” This was a company ready to change.
A student responding to President Obama’s speech broadcasted to US PK-12 schools this fall astutely articulated the value of honesty in motivating others. “He should have told us how much we’re falling behind other nations. Nobody I know wants to lose a competition.”
I use the term value promise (versus value proposition) in my business model framework as it engenders more honesty. Value promise speaks to what customers care about. Having a value promise demands asking customers, “Did we meet our promise?” and asking internally, “Is this behavior consistent with our promise?”
Value proposition on the other hand often provides false comfort. Leaders define their value proposition using company attributes that, while true, may not be what customers care about (e.g., “We’ve been in business 50 years,” when nascent competitors are also highly reputable). Or the attributes may not be true differentiators. (“We offer very high quality, placing us in the highest-end segment of our industry” does not necessarily make you a one-of-a-kind company.)
The first step in business model innovation is being honest about the growth prospects of your current business model and the uniqueness and defensibility of your value promise. Step two is communicating the truth rather than escaping from it.
For insight on business model strategy, read my recently released book, Beyond Price.