Posts Tagged ‘Strategy’

Strategy in the New Year

AngelThe New Year is upon us. I always view these last days of the year as a time to think as broadly and as strategically as possible about the coming few years. Many managers have just been through the planning and budgeting “ringer” in preparation for activity in the new year. As important as this process is in directing limited resources to the largest opportunities, I’ve always felt that this process sometimes limits strategic thinking. 

I always like to hark back to an HBR article titled ‘Strategic Intent‘ by Gary Hamel and C.K. Prahalad. The authors argue that many firms fall into a pattern of competing through imitation, and that a great deal of the planning process involves evaluating the competition, then deploying resources in areas that managers feel they can tackle share away from their rivals. Not enough time is spent seriously thinking about how to create a focused winning culture that drives radical change and innovation that not just gains marginal advantages over the competition, but drives to create a new playing field that the company can dominate. This drive is what they call “strategic intent”.[more…]

Strategic intent, the authors argue, is not a concept that can easily fit into a traditional planning process, because the stringent rules prevent stretch ambitions from being approved. The quote that has stayed with me most is that “most managers, when pressed, will admit that their strategic plans reveal more about today’s problems than tomorrow’s opportunities”. Industry leadership is something that can definitely be planned for, but it has to be an explicit goal that the organization adheres to and is infused into the culture. 

I talk about developing strategic intent quite often in client engagements, but admittedly it is the one concept that raises the most amount of skepticism. It sounds like consultant-speak that points out a rather obvious concept of a having a corporate goal. Even when there is agreement that an overarching strategic goal is missing and needs to be defined to drive the business forward, the conversation becomes fluffy, abstract, and hard to link back to the specific tactics that need to be implemented. My recommendation in these instances is to define a stretch goal, although not one that is limited to the existing resources of the firm. This has to be an ambitious goal that if achieved places the firm in an enviable spot relative to its competitors. Next there has to be a plan put in place to not just clearly communicate that goal to everyone in the organization, but also to get buy-in from all levels. It’s so important to give a sense of urgency and also a perception of flexibility and support to innovate. Overtime an organization will create new advantages that it can compete with. 

This leads, in a round-about way, to the message I want to leave you with this year. As we start the new year, plans and budgets in hand, we should constantly remind ourselves what it is that we ultimately want to achieve in the long-run and ask whether what we are doing on a day-to-day basis is in line with those goals. Taking some time to reflect on our true strategic intent should clear our thinking and allow us to be more creative on our approach. 

I wish everyone a Happy New Year and see everyone on 2014!

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Strategic Trends for Global Asset Managers

2013-07-03 16.30.18In the years since the 2008 financial crisis, we have seen major shifts in trends influencing growth in the global asset management industry. Four key changes are significantly affecting strategic thinking in the industry:

  • A continuing movement towards bifurcation of vehicles that provide “alpha” and “beta” exposure to market returns. This isn’t by any means new news, but we feel that this is clearly understood by professional investors, but is not fully understood by most non-professional investors. The impetus to find value for fees paid will accelerate the demand for “beta” products further which will cause a sea-shift in assets. Interest in index funds and ETFs will increase even more than they have in recent years.[more…]
  • Increased volatility in the market coupled with increased difficulty in identifying uncorrelated returns will push many alternative strategies into the limelight. Expertise in global emerging and frontier markets, private equity, quant and derivatives-based strategies are becoming the core way of generating any portfolio’s “alpha”. The game is up for those managers that are trying to sell what is effectively beta as alpha.

  • A global macro context is becoming core to any portfolio strategy, including those that bill themselves as focusing on a very targeted market. Even some of the most basic fundamental domestic equity portfolios are now subject to impacts from global markets. It’s becoming less relevant to specialize in one country, region, asset class, or sector. Asset allocation is becoming a more important overlay, especially in understanding movements in correlation over time and ability to shift strategy as correlations shift. Because of massive US corporate investment in China, for instance, many funds that bill themselves as US equity-centric may actually have huge China exposure and need to be managed as such.

  • It’s becoming much more imperative to be able to clearly communicate a firm’s expertise and points of differentiation. The days of asset managers being abstract or vague about their investment philosophies are quickly coming to an end. Many hedge funds and other specialized firms will gain favor because they provide unique value propositions that are not currently offered in the marketplace. What will be critical for their success, though, is the creation of a strong, recognized brand and clear messaging about their differentiation. Additionally, they will need to develop a highly efficient sales organization that can carry that message to investors. As successful as some investment strategies are, the ability to clearly (and sometimes simply) articulate why these strategies are worth investing in is just as important. This is no small effort and should be a core part of the business strategy.

We feel that there is still significant “life” to the traditional fundamental asset management model, mostly because of the huge asset pools that sit in those strategies today and the inertia built into these. But we think that this will shift very soon and very rapidly as competition accelerates and the industry continues to consolidate and chase limited opportunities. The firms that prepare for these shift will be the ones to thrive.

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What Does It Mean to ‘Collaborate’ in an Organization?

WalkWe have been having a lot of discussions recently about the definition of collaboration. For most of our clients, increasing collaboration is one of their ultimate goals. But what does it mean to increase collaboration? At first thought, it would seem obvious what it is: increasing the amount of communication exchange among team members in order to identify new opportunities to increase business. The natural next step that sprouts from this conclusion is to invest in technology solutions that allow for an exchange of information: CRM, instant messaging, collaboration sites like Sharepoint.

These tools facilitate collaboration, but they don’t in and of themselves create or inspire collaboration. Collaboration is at its core a cultural phenomenon. Collaboration springs from the development of a community that has shared interests and common goals, and clear visibility of the path to take to reach those goals.[more…] Organizations need to develop a culture where everyone buys into the idea that sharing information benefits the greater good of the firm. Leadership sets the cultural agenda, by creating principles and providing guidance on expected behaviors.

At this point in the conversation is when we start to lose our more systematic-minded peers, who object to the abstract direction of the discussion. In their view, people by nature want to collaborate but there are systemic barriers that prevent the free exchange of information. They feel that these barriers can be broken down with the use of technology. They state examples of how new media has expanded the ability to share information which, in the cases of Wikipedia and Twitter for example, are being done with little financial incentive. It’s human nature to share.[more…]

It’s important to try to balance the two dimensions; they work in tandem. You can have an organization where everyone buys into the benefits of sharing information, but without the tools that enable a free, relevant, and targeted exchange, people will easily give up. In firms with the right culture but the wrong systems, people will want to collaborate, they can’t, and they will feel guilty about it everyday. Alternately, you can have an organization that spends millions of dollars on any variety of tools to talk to each other, but no cultural transformation to buy into a broader benefit, then the investment is completely wasted. Worst of all, these are usually recurring costs.

The leadership of any organization needs to understand how interrelated these are and have a coordinated plan to address them. In the simplest terms, they represent the ‘why’ and ‘how’ of collaboration.

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Making Strategy into Reality: Effective Project Governance

One of the ways Oboe Partners differentiates itself is that we not only help create market-changing strategies, we help our clients create actionable projects that bring these strategies to life. An effective project governance and management process is critical in ensuring successful execution of well thought-out strategies. A big problem is that many managers have a distorted idea of what project governance and project management are all about. They might have images of sitting in hot, window-less conference rooms with project managers ranting through mind-numbing Gantt charts and bullet points detailing progress made so far and work to the next milestone. There is a place for that in the day-to-day execution of a project, but it’s more important for senior managers to focus on project governance when executing key strategic initiatives.[more…]

Project Governance vs. Project Management

To start, I want to clarify the difference between project governance and project management. Project management is the discipline of breaking down projects into chunks and managing resources to get that work completed within a reasonable time-frame under specific constraints. Senior managers should find project specialists who are experienced in the execution of projects, who are detail-driven, and accountable for delivery. This is a delegated responsibility where senior managers only get involved in minutia only if they feel the project path calls for it.

Project governance is different. Project governance is a management led process that creates the rules in which a project manager and all stakeholders play under to ensure success and to also mitigate down-side risk. The purpose of project governance is to:

1) Get buy-in from all the right stakeholders, and incorporate all relevant requirements
2) Provide controls and oversight on progress and cost
3) Create a platform to address any unforeseen issues that can (and usually do) come up
4) Make changes in direction in the event of changes in the environment
5) Provide for criteria and protocol to kill a project if it’s not realizing its perceived opportunity

A strong governance approach incorporates clear guiding principles and standards, an understanding of dependencies that could impact the project, and contingencies that allow for flexibility as the project evolves. It’s senior management’s responsibility to design and manage this governance.

Guiding Principles and Standards

The first step in setting up a project governance structure is to outline guiding principles and standards that are aligned with the firm’s overall strategies. This all sounds like consultant double-speak, but it’s important for senior management to provide objective guidelines on what constitutes priority work so that project managers can best weigh tradeoffs to ensure delivery of the most critical elements of the projects. It’s also critical to put in place clear decision-making and escalation protocols. Many projects fail not because of lack of want or lack of clear strategy, but because not everyone is marching at the same pace in the same direction.

It’s also critical to define what constitutes ‘success’ and what criteria will be used to measure progress and flag trouble. Everyone should be looking at the same measures and be on the same page on why a project is working or not working. Delays, setbacks, requirement changes, cost increases are all possibilities in the course of any project. With the right oversight structure, they can be easily and objectively managed.

Dependencies & Contingencies

Everyone involved should know what dependencies exist that might impact progress, be willing to raise these for discussion, and address them with resolve. These dependencies could be technical, organizational, resource-based, process-based, or external. The most successful projects that we’ve worked on are the ones that have a constant eye on all dependencies that may have an effect on the project’s success.

Contingencies are put in place as alternatives if a given path followed is not panning out or there’s a shifts in a dependency that is forcing a change. By understanding the dependencies of a project, contingencies can be designed in advance so as to provide flexibility to a project, or at the very least provide clear communication to all the stakeholders.

The Defensive Line

A good way of thinking about project governance is as a good defense, matched up with the strong offense of clear strategy and plan execution. It makes a massive difference in the success of all projects and truly where management’s strategy becomes a reality.

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How Do We Define ‘Strategy’?

‘Strategy’ is a tricky word because it means many different things to different people. Henry Mintzberg, a management professor and writer, offered that strategy has five different definitions:

Strategy as a Plan: a guide or course of action

Strategy as a Pattern: behavior over time, which I think of as an operating model based on focus and core competencies

Strategy is a Position: defined by product or service offerings and their current and intended position in the market

Strategy is a Perspective: similar to position, but more abstract. It points to the “theory” or grand vision of the business

Strategy as a Ploy: specific actions taken to gain headway in the market and to outmaneuver the competition[more…]

Many consultancies talk about having broad strategic capabilities, but are often unclear about what kind of “strategic” expertise and advice they are providing. In many cases they specialize in one of the above definitions, for example developing strategic plans (“Strategy as a Plan), helping the organization clarify their mission (“Strategy as Perspective”), or may have a specialized expertise, like technology (“Strategy as Ploy”).

We try to bring together all the definitions in our thinking in order to get a holistic understanding of all the issues facing the client and apply innovative solutions. We’ve decomposed the Mintzberg framework to help us get to the heart of the relevant dynamics, which then allows us to leverage our functional expertise to define a clear path forward.

1) First we aim to get clarity around the client’s desired ideal business objectives (“Perspective”)

2) Secondly we rigorously evaluate the client’s condition in the marketplace (“Position”) and the unique strengths, weaknesses and opportunities in their operating model (“Pattern”)

3) Next we define strategies that position the client’s resources most effectively and develop systematic steps to realize the desired objectives (“Plan”)

4) Last, we advise and help direct the execution of new strategies, with the help of our project management and technical expertise (“Ploy”)

We bring to the table what we feel is one of the most comprehensive approaches to not only gaining strategic clarity but to bringing strategies to life.

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Oboe Partners: Our Strategic Framework

We specialize in developing strategies that create sustainable competitive advantages for our clients. We realize that this statement is filled with a lot of management consulting speak and can sound empty or frivolous. But our strategic framework is based on a deep understanding of industry dynamics, analytical rigour, and technical expertise. These are the basis for the development of strategies and executable plans that change decision-making and behavior.

We apply our framework to four kinds of engagements:

Development of client-oriented strategies

  • Evaluate / target new markets and opportunities
  • Create new product distribution strategies
  • Develop strategic plans and set targets for sales and client service teams
  • Professionalize client management / client service functions that enhance sales and relationship impact

Develop understanding of client segmentation and client profitability

  • Identify and define key client segments and sub-segments, and uncover their drivers
  • Develop behavioral client segments that better represent effort and client characteristics
  • Create detailed analysis of client and client segment profitability
  • Activity-based management analytics

Optimize organizational design

  • Recommend optimal team structures aimed at gaining profitable market share globally
  • Create policies and processes to increase workflow efficiency and information sharing

Apply the best technology solutions to increase insights, productivity, and collaboration

  • Big Data
  • CRM and collaboration tools
  • Analytics and MIS
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Oboe Partners: What We Do

OWe established Oboe Partners as a strategy consulting firm with the philosophy that in order to deliver game-changing solutions to our clients, we need to provide not only market context, insight, and advice, but also nose-to-the-grindstone plans to realize the vision.  We have experience working closely with senior management of broker-dealers and asset managers on a variety of assignments that has helped them better operate in a market that is becoming increasingly challenging and competitive. Because of our experience in both the buy-side and sell-side, we understand the full investor value chain which helps us provide unique insights and solutions.

We start with an evaluation of the market space to understand market trends, competitor’s positioning, and most importantly a clear articulation of client needs. Next we do a full, unbiased accounting of our client’s market positioning, strengths, and gaps. Once we fully understand the market and our client, we create innovative recommendations intended to affect strategically significant change. Because of our extensive experience in not just strategy, but in implementation, we create plans for process improvements and platform investments needed to drive change and efficiency.

We’ve applied this discipline to many successful client projects, including entrance into new markets, new product launches, development of new platform capabilities, joint venture and other strategic alliances, and creation of efficiencies using technology and innovative organizational design.

Once these initiatives have been implemented, our engagements often extend to include ongoing measurement and benchmarking of performance. Because we have a strong capability in data and analytics, we help our clients develop analytical tools to help them measure success and deliver real-time information.  We’ve implemented performance dashboards, profitability analysis, and predictive modeling that helps our clients track progress and make changes that will steer their organization across the choppy competitive landscape.

 

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