The governing thought was that if you followed a standard process you then didn’t need expensive skilled staff to ensure that the right requirements were set and well-designed new systems implemented. Analysis paralysis was a real blight on organizations during that period.
We believe that a far greater threat to business success is growing and that is ‘paralysis by business case’. This is where organizations abandon innovation and attempt to use business case thinking to drive their investment choices.
We have helped many of the constituents of the FTSE 100 and we can see, from our own experience, a strong correlation between innovation and success. We can also see a similar correlation between a focus on business case decision making and a singular lack of success.
Sustainability is the hardest, challenge businesses face, yet it is one of the least talked about. For example, since the FT30 index was launched, only one of the original participants, Tate and Lyle, remains. Between 2000 and 2008 there were 161 changes to the 100 constituents of the FTSE 100 index. The entire constituency has changed nearly twice so drinking from the cup of success is a fleeting experience. Making a short term profit for shareholders is easy; staying at the front is difficult.
Charles Handy, the economist, believes that every company goes through a natural ‘sigmoid curve’ of growth, plateau and decline - unless the company reinvents itself, or its products, on a regular basis.
Yet, our experience is that many companies when times are tough - when they reach that ‘plateau’ - start having an obsessive bean counter mentality and the business case becomes the god for moving things forward. Confidence in decision making dissolves away and there is an outstretched reach for a nice process that will get the decisions right. Nothing gets done without a ‘solid’ business case.
We have seen a large multi-national company spend three years agonizing over whether to carry out a major systems and process rationalization with successive business cases being rejected. It was a clear no-brain decision to go ahead yet there was a real fear around making that decision.
A huge amount of effort is invested in the business cases without any actual work being carried out. How good are the business case numbers anyway? In many cases they are used to justify decisions when an organization has lost the culture of innovation.
A major UK company we worked with looked at the governance cost of carrying out projects according to its commonly used ‘Prince 2’ type governance structure and business case development. The focus was on the effort required to decide whether to do ‘things’ and how many things get done. The analysis of a five year period showed that a 1 day project would require 312 person days effort to get through the starting gate. Over half of all projects were cancelled before completion and a large percentage of available resources were paralyzed around business case development.
Some of the most successful organizations have a completely different approach. They have a culture of innovation and decision making that is based on insight and the ability to take clear decisions to move a business forward. A look through the current FTSE constituents shows innovation and change to be at the core of their beliefs. Just a random sample of their key statements:
'Johnson Matthey has continued to develop its technology for almost 200 years, demonstrating the company's ability to maintain world leadership by adapting constantly to rapidly changing customer needs. '
‘At Anglo American we are striving to become the leading global mining company. To achieve this ambition we have identified six values to help guide how we behave and interact with others. Safety; Care and Respect; Integrity; Accountability; Collaboration; Innovation.'
'We know that Burberry’s strategy has proven effective and is being well executed. Our ambitions for Burberry remain high, with much on the agenda to accomplish. Burberry is still travelling. So, we have continued to invest in both brand and business during the year – including stores, product development, people and infrastructure.'
‘At Centrica our strategy is designed to address the complex issues the industry faces in ways that can deliver sustainable value for our shareholders and ensure we are well positioned for growth. Our vision is to be the leading integrated energy company in our chosen markets.'
Whilst not every organization in the FTSE 100’s success is founded on innovation, looking at the companies that do retain success it is clear that innovation and agility are common themes that are central to success. Relying solely on business case management just doesn’t work. The problem is that innovation often creates a market that just doesn’t exist at that time. By its nature it changes the dynamics of a situation and it is impossible to predict the likely upturn. Insightful and careful decision making is what is required by a strong, wise leadership.