S02E08 - Profit - Giving visions an eye exam or the DIY of visioning (Transcript)

# S02E08 - Profit - Giving visions an eye exam or the DIY of visioning

[00:00:00] Welcome to the supply chain dialogues season two, episode eight. I'm Daniel Helmig. Last week. I had the privilege of being invited to be part of the faculty of the world, 50 next leader program, over four days, the participants ran through a brilliant business simulation. Well, the received insights and personal perspectives of leaders from the faculty like me. One of the topics I spoke about was communicating a vision. While putting my thoughts together. I realized that a lot of what I know about visioning and execution meant nothing without putting it into the context, like purpose, culture, values, strategies, and so on.

In addition, I've seen an experience, so many visions of whom many failed some however inspired companies for decades to come that are started reviewing some of the literature and studies done in this field. In other words, I gave visions and eye exam. After I shared my thoughts on this topic with the participants last [00:01:00] week. Take the opportunity now, as long as everything is fresh in my mind to cover it here as well in the supply chain dialogues in expanded and further updated version. And to not make it a supply chain monologues since Noah is on uni break. Amy we'll fill in again.

happy to help out.

With all of these different buzzwords, like purpose, vision, et cetera.

Let's ease into the topic by defining the words, communication, and vision, and go from there.

Sure. Let me use wikipedia as my primary source. Communication is based on the Latin word "communicare", which means "to share" or "to make common". Communication is usually understood to be the transmission of information. Now, let me define the vision, or better directly, a vision statement. This is defined as a high-level inspirational statement of an idealistic emotional future of a company or group. The Vision describes the primary human emotion that a founder or the C-suite intends to experience with the people the organisation interacts with.

Thank you, Amy. And [00:02:00] there right from the start we have the first puzzle communication, transmits information. While a vision is an emotionally charged high level inspirational statement.

So looking back in your mind, how many visions from companies you worked in. Got you emotionally tickled. I'm not sure about you, but I've heard and seen a lot of visions, but very seldom. I felt them. They were communicated like factual information. Not an inspirational emotional statement. What we will see later is that leadership confused vision with strategy. Both have their reason of existence, but if you mix them up. Everyone gets confused.

So we jumped right in, but before we go any further, let's define the whole pyramid of leadership statements that take it from why we are here. To what do we need to do tomorrow? I was not clear on this for a long time, myself and only in a significant transformation. I had to step [00:03:00] back to understand what is, what I hope you will find a following as valuable as the world, 15 X liters participants. And one additional remark. Why we talk about boards and CEOs or C-suite. The model is scalable. You can apply the same when you run a division, a geography. Or function your board is then for example, your executive committee. So let's take the whole pyramid one by one, Amy. Enlighten us on purpose.

The purpose represents the fundamental reason why a company exists.

It answers the question.

Why are we here? You define the company's overall contribution and impact on society or the world. All the following aspects of the enterprise, foundational pyramid operationalize the purpose. And right here, the first big issue arises when leaders define a company's purpose or confuse it even with a [00:04:00] vision. Which we'll cover next. . Over many decades. Many companies said, we create an increased shareholder value. That sounds great. Right. We are in Milton. Friedman's Jack Walsh and his disciples cold and lonely. Country. In the seventies of the last century, Milton declared the main responsible of a business is to maximize their revenue and increase returns to shareholders.

He even said in his Friedman doctrine that the social responsibility of business is to increase its profit. Jake Walsh. And all the people who followed in his footsteps as well as most Western governments signed up to this theory.

Now let's do a quick thought experiment. If you set creating and increasing shareholder value as your purpose. And you operationalize it whole heartedly. How do you feel about creating jobs in your country? If [00:05:00] just a few thousand miles away, you can get the materials so much cheaper and increase shareholder value. Maybe the human rights they are, are an issue or the protection of the workers about health insurance, et cetera, is not that great. But heck. We operationalize our vision, right. R, how do you deal with investments to curb?

Let's say greenhouse gas, emissions and install filters to pollute less of your direct environment. Does this increase shareholder value? Well, None of the short run. So can accompany today, still have this old fashioned slogan about shareholder value. I think most companies today have learned. Their lessons. The singular focus on shareholder value is. Correspond for the fact that the former correlation of productivity. And prosperity of, for example, the U S worker stopped in the mid seventies when shareholder value became the new business, religion. Also [00:06:00] after the seventies productivity roars, continuously, sometimes in leaps and bounds. But did not contribute to the prosperity of the employees and their communities. Only the shareholders, portfolios, roles, driving unprecedented consolidation of wealth. To a few. ANd since the company's had a single focus on making shareholders richer, all other aspects of companies. Before took care of now either fell to the wayside or needed to be picked up by the governments. There is a reason why one of the three. Primary cost of the U S government's.

Today is healthcare. So we must be cautious. What we put in our purpose statement because it all starts there. We need to be very clear about what we wish for, because if we executed, we and the society will get it.

Now, today we should consider a purpose statement, which is inspired more by the triple bottom line. Profit people and planet. And let the [00:07:00] foundational enterprise pyramid run its course based on that. You will be set up for success because a company will be prepared for everything along all dimensions.

Most of us hold dear today. Now let's move to the next topic, vision, which is the main focus of this episode.

The vision is an aspirational, emotionally charged statement that describes the desired future state that the company aims to achieve.

It answers for the company stakeholders. The question. Where do we want to go? It provides a clear direction and long-term perspective for the organization. Now business is about competition, right? Winning in a competition is about focus. So what do you think about a vision statement that says. We are early leader in industry X. As a leader. Y a leader and not the leader. As Amy pointed out a vision needs to be an aspirational statement, which is [00:08:00] emotionally charged. Would you want to have your favorite sports team to have a vision, to be a leading team in the league? Definitely not. You want them to be the champion and want everyone in that team to live and breathe the vision to become the leading team of the winners. There are so many companies that have the vision statement that makes you yawn. No one notion, no aspiration. It says we want to be mediocre. We do not want to dream because, oh my God. And we will be held responsible if you do not achieve this dream many vision statements seem to be written by cowards. Or bureaucrats.

The other dimension of the vision statement is who has the vision. We will talk about this later, but just one thing for now visions, but only one person, a highly dangerous for a company. That can work for a very small amount of companies and normally fall apart after the leader steps down.

But. Again more about this. When we talk about the DIY model of creating a vision [00:09:00] statement. Amy. We had purpose and vision. What is the next one down in the foundational pyramid of a company?

Next is the Mission! The mission defines the specific activities and objectives that the company undertakes to fulfil its purpose and work towards its vision.

Now we ask, how do we do it? It outlines the company's core values markets and primary business activity. Take the founder of Sony, Mr. E Booker. He and a bunch of burn engineers monitor do something, but they did not know exactly what. So the first sentence of their initial purpose statement written by them in. 1946 was to establish an ideal factory that stresses a spirit of freedom and open-mindedness and where engineers with sincere motivation can exercise that technological skills to the highest levels. Wonderful. Now they then tried out several different markets and business activities until they settled in the Sony [00:10:00] company.

We know today. The company's first consumer product. Wasn't electric rice cooker. This product sold poorly. But they did have a successful business, repairing radios and other electrical equipment. Out of this developed and Japanese design tape recorder. And later a transistor radio. And then the rest is history, but only then, then there, we're developing a clear mission that there as well, updated over time. , otherwise you would not see the Sony sign displayed. When you look at many of today's movie blockbusters. So if you have a purpose and division as a startup experiment, a lot and define and redefine your mission. And keep on updating it. The mission should not be constant stone. And here's another tip. Vision and mission came out of the sixties and seventies of the last century. Now we have a small purpose. Combined with vision.

So you could as well skip a beat and directly [00:11:00] go to strategy in my mind. And come back to the mission. If you really feel that this does anything for you. And. This brings us now to the most overused word in business, both in academia and in corporate life. Strategy

The strategy is a high-level plan that outlines how the company intends to achieve its mission and vision.

Isn't that interesting that everyone talks about strategy, but the purpose, vision and mission are often just words on a website, read by few understood or even cared for by even less. Strategy defines what we do. It involves setting goals, identifying key initiatives and allocating resources to drive the companies towards its desired outcomes. The strategy often involves choosing which markets to target, how to differentiate the company from competitors and how to deliver value to customers and other stakeholders. Strategies change normally, as often [00:12:00] as CEOs change. And this is according to the study done by PWC quite a lot.

In 2018, P W C did a C E O Success study with the world's largest twothousand fivehundred public companies related to succession over the past 19 years. Results showed that the the median tenure of a CEO in this group was five years and only 19 per cent of the companies had a median C E O tenure of 14 years.

To further interesting facts. The long lasting CEO's were most likely to be found in the U S. 30% of this group. Europe 19% and rest of world. Between seven and nine with China. At 7%. Now, if you take that group out of the 2,500 companies, the median tenure of CEOs decrease even further down to three to four years. So, what does it tell us? Strategies should be set for maximum three years. And then be delivered in time. If see, or set out strategies for more years and the medium tenure of [00:13:00] their job group. You're either have a person that bets against his or her tenure odds. Or just does not want to face the music after three years, whether the strategy delivered results. We'll we'll get back to this later. So for the moment, let's get to the bottom of the pyramid. And talk about tactics.

Tactics are the specific actions, initiatives, and activities implemented to execute the company's strategy.

Most of us work a lot on this pyramid level.

It's about what we do. When here we talk about marketing campaigns, budgets, operational processes, sales techniques, product development, roadmaps, and other day-to-day activities. Here the calendar. Becomes an important tool. Here is where we spend too much time in meetings. When, before we were looking at years now, we count days or months. Now each of the different levels we talked about so far are important. Only having all of them defined and operationalized leads to the fact that the company normally can be successful.

[00:14:00]

Now at this point in time, people start asking, what about values in the whole theater? Where do they belong?

Values play a foundational role that cuts across all levels. Values represent the voiced fundamental beliefs, principles, and ethical standards that guide the behaviour and decision-making within an organisation.

Values are not inside of the pyramid, but are a circle around the whole structure. Values underpin the framework and influence the development of the purpose, vision, mission, strategy, and tactics overall. And. Important it as well that they are, as Emmy said, the voiced fundamental beliefs, principles and ethical standards. Now, these are what the board and the C-suite wants the employees to do top down. But there is as well, something else which is bottom up and that according to the famous management consultant and writer, Peter Drucker. [00:15:00] Can eat their strategy for breakfast. We talk about culture.

Culture refers to the organic, underlying shared beliefs, behaviours, and norms that define how people within an organisation interact and work together.

Culture and tails the overall atmosphere. Attitudes and expectations that shape the work environment and influence employee engagement, satisfaction. And performance. Culture is felt. So depending on whether you are a company originated in Silicon valley or Franklin Germany, or has inky Finland. You carry a certain amount of culture with you that is set up by the people that lived there. If you then expand into other countries, you might have the same values. But not necessarily the same culture. I still remember from my days in multinational corporations and every country, and often every business had the same underlying values, but then small to large [00:16:00] variation based on the same song sheet, when it came to culture. Even more interesting are companies that are created through mergers and acquisitions. If not managed really well, you will have a Titanic clash of cultures. So if you just implement your run of the mill merger or acquisition strategy with a vision and the rest of what we discussed on the pyramid, maybe even have aligned on values.

You still did only talk senior management or board room. Left-brain stuff. Emotions underlying culture happens in the right hemisphere of the brain and incorporations in the day-to-day life of their employees. If you do not address this, it will lead to issues. This is one of the many reasons why most mergers and acquisitions are light years away. From the synergistic value assumptions suggested when the decision was made and the board and shareholders agreed. Changing or aligning cultures is a process that takes much more time than strategy [00:17:00] or vision implementation. And here's a novel thought. If you buy a company. You buy, not only the IP, the book value and the customer base, but as well, the people that made that company great.

Since otherwise, you hopefully would not have touched them with a 10 foot pole. So when we come to realize that diversity. May be raised gender sexual orientation, age, and so on, actually helps us and companies to improve. The bottom line, according to a boatload of academic studies.

How about cultural organizational diversity inside of companies? That does not mean just to accept every aspect of the culture of the quiet company, but carefully decoupled culture from their strategies. Visions, et cetera. Again, the left brain stuff, or alternatively, find an umbrella culture. That transcends the different aspects of the different cultures of the organization you have combined. Main [00:18:00] point is be aware of the fact that culture. Like vision speaks to the emotional side of the foundational elements of the direction of a company and should not be ignored. Unless you'd like to be eaten for breakfast.

Now at the end, a small caveat for you. What Amy and I have done captures some of the models in the foundational permit of a company. I use the same quote as usually in these settings, all models are wrong, but some are useful. I can calibrate easily everything we discussed so far with my own work life in five different industries and find it quite useful in hindsight. It would have been great if I learned this earlier, but I assume. I'm in good company with many other people out there. So what now? We're not just here to define words.

Right. But to figure out what to do with them. So we started to think about communicating a vision. So we assume that the purpose is [00:19:00] already defined. Depending on the feedback of this episode, we can go into the development of a purpose segment. In another episode of the supply chain dialogues. Well, I have tons of examples. How visions work or did not work. In the last 30 to 40 years in my own corporations and in the thousands of suppliers. And supply markets, my teams and I worked in. But let me just use one brilliant example where most of what we talked about came to fruition, either positively or negatively.

I was already 10 years in Ford motor company in Germany. When my family and I'm moved to the USA. Before Fort felt very much like a regional, even local countries set up. We did not mix too much with one another and production procurement marketing design was done more or less separate. It did not take a rocket scientist to figure all that in a market with cutthroat margins for mass [00:20:00] produced. Cars. We were entertaining the luxury of buying and selling similar products over and over and over again. So for the next five years, while being in the us, I was one of the few Europeans invited to re-engineer a strategy of Ford motor company in line with a vision called Ford, 2000. The vision was coined by Alex Trotman later.

Lord Alex. Trotman the first non-American becoming the CEO of Ford motor company.

He ended the position in 1993. Just two years of the Ford pause at its biggest ever loss. $12.7 billion. Trotman said about improving things in a way he knew best prudent organizational setup after all his first job was a buyer. I just mentioned it to you just for fun. His vision was set in motion in 95.

One of his boldest moves. What's the change Ford's traditional role as a manufacturer of [00:21:00] its own components. Completely vertically integrated to being an astute bio of them from outside companies. Many of its disparate parts making businesses were spun into the entirely separate Visteon. Visteon and its workforce then had to compete for fought contracts. Meanwhile, resent.

This cost pressure was applied to Ford's existing suppliers. Trotman. Other action was to centralize Ford's design and engineering activities. From now on Europe would be responsible for developing small and medium sized vehicles. And north America would concentrate on large gods together with light trucks and sport utility vehicles.

The SUV's. This led to some strange situations, such as the replacement of the transit. Which was Britain's best selling van being entirely designed in north America, but it also saw the cost savings measure. Of different models being built on identical platforms. [00:22:00] Tropman Holt Ford, back to profitability.

Ultimately cutting 5 billion in costs. And achieving $7 billion in profit in 97 alone., Trotman stepped down in 1998 here before his contract was finalized, so you see. We're talking again, five years here.

According to Wikipedia, many people consider the vision a failure since many of the resulting products like the Ford Contour and Mercury Mystique designs based on the European Ford Mondeo platform, were not very competitive in the American market in the long term, and the major restructuring disrupted the whole company. The inability of senior management to successfully implement this program in the mid-to late 1990s turned out to be a huge opportunity lost, one that Ford was still desperately trying to leverage under the leadership of Alan Mulally in 2007.

I loved our time over there and still believe that a lot of what Alex Tropman and the Ford leadership vision was right. It was just a bit too much in one goal. Well, at least my wife and I succeeded in our [00:23:00] visioning of having an even number of family members.

So we returned to Europe with our second son, Noah, maiden Detroit. As mentioned before the culture here, the design and quality preference of different markets, eight, this strategy, not only for breakfast. But in every subsequent meal, following when four changed its strong focus on centralization and gave the respect of markets in marketing design. And R and D more flexibility. The revenues rose again. Since customers started to enjoy washing their cars in their driveways.

Again.

So Alex stayed on smack in the medium of the tenure. His vision was set for five years and he did not really get to feel the consequences of the mistakes being made when implementing this vision and the strategies he devised. Even the founding of Visteon happened after his tenure in 2000. I was at that point in time in Essex Britain. And involved in managing the dovish. including defining the swim lanes and the [00:24:00] contracts for working together with all former brothers and sisters now being called Visteon employees. But this is a story for another time.

So let's unpack what we talked about with regard to tenure and vision of CEOs., the established that CEO's normally do not hang around too long. We also established. A CEO and even more importantly the supervisory board that appointed the CEO. You have to hedge your bets about what you will get accomplished during the medium tenure of a CEO and based on 80 20, that is probably less than five years. How far out should be your vision? 5, 10. All the crazy 27 years in the case of greenhouse gas emissions, net zero that we have today. I find it quite a real responsible by boards to allow the CEO's to set a vision. Longer than the proven median tenure. Of the job group. In my view, vision should be said, even below the average [00:25:00] tenure to ensure that you see that the CEO is not only good in defining visions, but also in executing to increase value for the triple bottom line. And this sense I've come to appreciate over the last 40 years visions that had a length of a board. Maximum 1000 days or three years. Let's be honest. Who's still remembers a vision set two or three years ago. So you want to have something that stays fresh. And that does not mean that you should have only one vision.

You can have succeeding visions. So let's paint a picture to illustrate, say you are in a valley. And want to climb a mountain. So you set the end point of your vision as far as you can see. If you arrive at the peak and enjoy the view. Your vantage point changes and you see much more than before. So the next division is based on your new, wider knowledge of the landscape, either other prominent peaks, sunny shores. [00:26:00] Or treacherous terrain that you see and you realize that there is no straight way ahead. And you have to get skis, Lamaze, or a paraglider to move on. In business terms. You might find a blue ocean. A new market. Or new technologies. That can carry you forward to the next step of your way. Visions that are looking out further than the non horizon. Uh, gambling with other people's money in livelihood. Companies are places of value creation. Not casinos.

So we talked about culture for quite some time. As well as about the issue of strategy being eaten for breakfast by culture. No. Strategy is nothing more than breaking down a vision into bite-size elements. You can execute over time. That means that culture does not only eat strategy, but the real culprit is the person who puts strategy on the menu. The person defining the vision. So staying one last time in the overall [00:27:00] metaphor of eat or be eaten. How can you ensure that your vision is shared by the people sitting at the table? Rather than landing on the menu.

As I mentioned, I've seen more visions and I count over my work-life in different industries. I was involved in resulting strategies leading to about 30 mergers, acquisitions, divestitures, and many Overholtz of organizations into central de-central regional hybrid metrics and non matrix set up at the end of my career, I was finally part of one visioning. And his execution turned out quite well. So, if you allow me, here are some of the lessons learned, I call it the DIY model for visions. I put it together in three simple steps.

Step 1, or understanding the Status Quo

We need to understand the status quo. First leaders come with biases, nicely packaged in their little own toolboxes and that's normal. We all humans. They believe that their hammer will fit [00:28:00] as well on the new company's nail. But what if the solution requires Velcro? So talk to the stakeholders through focus groups, customers, peers, employees, and SMEs. Academia. If you'd like to understand that better. Read up on evidence-based management style.

Then discuss the output with the leadership team, ensure that you have selected a diverse team regarding gender color, thought culture, et cetera.

Step 2 or forming a Vision

before you start formulating a vision, check the old one. Is a new vision really needed. Or is there just a need to update the rest of the permit?

Mission's strategy and tactics. Uh, other values and the culture conducive to this vision. Remember. You're paid to improve the triple bottom line. Not necessarily to have a vision. What is wrong with a relay run? After you answered this question and it is needed to have a new vision, then do [00:29:00] this together with your leadership team. The probability is high, that they will be in the position longer than you are. Let them be comfortable and understand it as their vision as well.

So when you leave. Like most of your peers after three to five years as a CEO the chance is higher that the company will continue on the path. Which is the path supported by many. Now we need one more check before you publish. Run it through a smaller number of focus groups to tweak it. You will be amazed at what you have overlooked in the C-suite. Then, and only then find a story, a metaphor, the media that help you tell the story as well, find catch phrases or hook. Here, the folks from marketing can do wonders.

Let them generate a bunch of alternatives. And then selected with your leadership team. Again, check with smaller focus groups by the words and pictures you use work in each of your companies, cultures. [00:30:00]

Step 3 is about Operationalising the vision

Communicate to everybody everywhere.

And every time for as long as your vision is set. There is nothing worse than to stop being exhausted after you have created and communicated a vision. A vision should create a higher value to the triple bottom line. Now you design your blueprint of mission and strategy. The tactics are then done by the people who carry out this strategy. And do not forget your values. Best when nothing needs to change, but if required to drive and communicated with the vision. So if this is all done well, Strategies sits at your organization, stable. And not on the breakfast menu.

These were the three steps of a DIY. Visioning. The question is now, what is the extent of a vision period? We talked about it several times, so here's what I regard the Goldilocks zone for [00:31:00] visioning. The best visions I experienced all.

Let were defined for three years or 1000 days. And they were sometimes even accelerated. If you are ambitious and want to set a vision for 10 years, design it in three, 1000 day steps with increasing levels of fuzzy logic. As I mentioned earlier. You do not know what you will realize if you are 1000 days further along. On the next first peak, you might discover, as we said, a blue ocean and additional market or a new technology trends. So keep your options open.

Let's summarize.

Visions by individuals. Our stories. We learned about profits and other holy people. These visions belong in religious. Not in business settings. Today. Visions are ideas that become enriched and challenged by many people's view. I call it a [00:32:00] 360 vision. With all your stakeholders and customers, you look forward. Sideways at competition and markets. And backwards to where you come from with former strategies. You look up to your board. Representing your shareholders and independent views of other industries and down along the hierarchical permit at your employees and maybe even suppliers. And yes. In the end. To make it personal and emotionally relevant.

The vision needs to be initially communicated by the leader. It needs to be close and personal and relatable. And then, and only then the rest of the leadership team speaks as mentioned everywhere every time. To everybody.

I hope you enjoyed this episode of the supply chain dialogues. If you did, please subscribe. If not already done before shared with a colleague friend or any decision-maker, you know, in your company and with that, stay safe. Be bold [00:33:00] and see you next week. These are the supply chain dialogues produced and copyrighted by hand-make advisory again in 2023.