Tag Archive: Leadership

The Dangers Of Over-Reliance On High-Level Metrics To Manage A Company

“It is not enough to be busy. So are the ants. The question is: What are we busy about?” Henry David Thoreau – Letters to Harrison Blake (1848-1861) 

 

– The Mechanics Of Identifying ‘Pockets of Value Creation’

The title of this post was borrowed from an article i came across published on McKinsey website  “Unearthing the sources of value hiding in your corporate portfolio.”

The article provides interesting facts about the dangers of being too focused on specific financial metrics which could hinder company executives from spotting potential sources of Value creation. As an example, the article highlights a common case scenario where a large number of top managers pay much attention to  averages of top-line growth,” economic profit,” and “return on invested capital (ROIC)” and focus less on other important indicators  of growth and returns.  The article points out that even though a company may be experiencing a top-line growth, it is also important to also take a closer look at the market share and how well the company is competing. To achieve that, the authors state:

“…successful intervention requires executives to understand the more important leading indicators of growth and returns that are often overlooked. These include the growth of the relevant market, in size as well as in market share; changes in pricing and gross margin; and R&D and sales, general, and administrative expenses…” (Read on- Source: McKinsey)

–  Show Me The Money- The Money Is In The Strategy

A separate McKinsey quartely article (‘How to put your money where your strategy is’), highlights some common mistakes companies make when it comes to allocating resources. So what’s the deal? Is there a right or wrong when it comes to company resource allocations? There is no straight answer. It’s all abouth the right strategy. From the article, keeping an eye on how resources are allocated could help a company it’s performance. In the article, an interesting discussion about why companies should try and avoid allocating their resources to the same business units on a prolonged level of years,  is best described using the following scenario:

“..picture two global companies, each operating a range of different businesses. Company A allocates capital, talent, and research dollars consistently every year, making small changes but always following the same broad investment pattern. Company B continually evaluates the performance of business units, acquires and divests assets, and adjusts resource allocations based on each division’s relative market opportunities. Over time, which company will be worth more?…”  (Read on- Source: McKinsey)

–  The Relationship Between Resource Allocation Decisions And Higher Returns For Shareholders

I came across a variety of published studies and articles highlighting the importance of  companies’ senior executives consistently reevaluating how, why, how much and where their companies’ resources are allocated. Regular reevaluation of resource allocations not only helps  create more value to a company but also helps a company to strategically deliver higher returns to shareholders. Below are 3 + 1  further readings suggested to give you valuable insight about the importance of resource allocation-

 

 

Why Creativity in Business Matters

“I never made one of my discoveries through the process of rational thinking”

– Albert Einstein

 

Building a modern business requires grit and a great deal of creativity. Marketing a new product, or creating items or services consumers want, beckons the entrepreneur to expand and abandon traditional business models. Giant companies like Amazon, Apple, Facebook, Tesla etc, prove a creative and ever evolving business model conquers competition, drives sales, and increases consumer loyalty.

So what’s the big deal about Creativity in Business and Why does It Matter?

The simple answer – Your Success in business counts on creative thinking

Fact is, we are living in times where companies are facing major disruptions in their markets and managers are forced to respond strategically in order to remain competitive.  According to a study conducted by IBM CEOs  “believe that — more than rigor, management discipline, integrity or even vision — successfully navigating an increasing complex world will require creativity.”

Another study conducted by Forrester Consulting and Adobe also found direct correlation between a entrepreneur’s ability to create new ways to engage the market, and the success of their companies. Over half of the companies surveyed in the study showed revenue growth due to enhanced creative practices—such as hiring interesting and unorthodox employees who foster innovation, increase brand recognition, and inspire methods of production and delivery never tried before.

“Creativity is thinking up new things. Innovation is doing new things.”

— Theodore Levitt

Good Leadership Fosters Creativity –

When it comes to problem solving, creativity and leadership can have a huge effect on the  performance of a company in various. Modern company leaders who allow freedom and creativity within their workforce see incredible dividends down the road. The most successful example, Amazon’s Jeff Bezos, created Amazon in 1994 with the mantra and philosophy: “Its easier to invent the future than to predict it.” That one line says it all. Creativity in the modern era makes or breaks companies. Small business owner’s ability to diversify ideas, products, and marketing techniques determines their success rate and bottom line. But, as Amazon proves, even well established companies use evolutionary creative business models to continue to maintain and increase their market placement.

Where do we go from here?

The simple lesson:  While ancient marketing, production, and branding methods still generate revenue,  business creativity flourishes success and helps avoid stagnation which leads to the dreaded going out of business.

Further reading on importance of creativity in business

How Senior Executives Find Time to Be Creative- (Harvard Business Review)

-Your Team Is Brainstorming All Wrong- (Harvard Business Review)

-Leading others to think innovatively together: Creative leadership (The Leadership Quarterly-ScienceDirect)

 

“Creativity takes courage. ”  ― Henri Matisse