critical thinking and breaking down the barriers to exit

© 2004 Walter Adamson

[email protected] Skype: walter www.digitalinvestor.com.au Melbourne, Australia

Keywords: managing change; strategy; critical thinking; management team; distribution channels.

Summary: Because the value propositions for chosen segments often change faster than the organisational alignment serving those segments there are inevitably lines of business that need to be periodically abandoned.

Critical thinking is a business improvement practice. It is a process that can be used by all leadership teams to overcome the egocentrism that can stand in the way of authentic assessment of the current state of their business.

While the glamour of strategy focuses on developing new services, the practice of abandonment is often neglected. By applying the approach of critical thinking your leadership team can regain the front foot.

Breaking Down the Barriers to Exit using Critical Thinking

By Walter Adamson

When organisations are in a state of change, whether forced or planned, one of the most difficult breakthroughs to achieve is not getting into something new but letting go of something old.

In many industries breaking down the barriers to exit is now a critical management competence. Not to change is to go backwards - at an alarming rate.

On the other hand, those who master change leadership will be the survivors.

As John Maynard Keynes said "the real difficulty lies not in developing new ideas but in escaping from old ones".

For example, the travel industry is changing faster than most, not only in its technology, but more importantly in its ways of going to market and the ways customers are buying.

The ways of going to market are changing enormously, for example web-based self-service where in Australia 80% of Virgin Blue’s bookings come from the internet, and of course net fares, travel agent consolidation and the challenges facing the global travel distribution systems in defining and marketing their value-add.



The travel industry is by no means alone, and IT, telecoms, pharmaceuticals, advertising, and even retailing to name but a few are all undergoing rapid structural change.

Pay Close Attention to Distribution Channels

Peter Drucker urges every business to pay very close attention to distributors and distribution channels "for these tend to change faster than anything else".

This advice is not news to the travel industry, but comes as a surprise to players in many other industries, such as telecommunications.

And it is even more compelling advice in a period of rapid structural change. All firms need to redesign their alliances and channels from a current strategic perspective.

You need to understand your own strategic processes and mission-enabling but non-core processes. You also need to clearly identify your customer value segments and commitments, and how to align the organisation to deliver those commitments profitably.

Abandon Lines of Business

What seemed like a good business once is now a liability. The challenge is to abandon those liabilities and to do it efficiently and effectively.

You need to abandon lines of business.

Drucker's famous concept of organised abandonment is built around this critical question:

"If we did not do this already would we, knowing what we know now, go into it. And would we go into it the way we are doing it now?"

If the answer is "no" then as an effective change leader you must commit to action: to abandon the product or service and aggressively install a new one in its place.

This is easier said than done, and many management teams experience difficulty in facing up to the authentic state of their various lines of business.

This is not only for factual reasons, where the numbers may not reflect the underlying structural time bomb, but also for emotional reasons. People have



an emotional attachment people to lines of business that they have created – and this has to be worked through.

Using Critical Thinking

By using a technique called critical thinking your team can facilitate their way through the process of coming to a more realistic appreciation of what has to be abandoned.

This approach of critical thinking aims to overcome the egocentrism that can stand in the way of authentic assessment of the current state of your business.

The approach is for the leadership team to develop the habit of analysing the logic of their own thinking, primarily by asking the following questions of themselves:

1. Can we analyse our goals and purposes (for this line of business)? 2. Can we question the way we define problems and issues? 3. Can we assess the information base for our thinking on this matter? 4. Can we rethink our previous conclusions and interpretations? 5. Can we analyse the ideas and concepts that we are using in our thinking? 6. Can we identify and check our assumptions? 7. Can we analyse our point of view? 8. Can we follow through on the implication of our thinking?

In this context the verb “can” means “are we able to in our cultural context, within the context of our management team and its ability to hold this kind of discussion openly and honestly?”

The questions do not exist in isolation but in relation to each other. It is important not to be too particular or over-logical - there will be redundancy between questions.

The point is that by your team developing the technique of thinking in this way and activating their knowledge discovery real progress will be made about the strength of the business.

Real progress will also be made in executing organised abandonment provided that the fundamental question - the Drucker question above - is re-asked by the team as part of the cycle of critical thinking, and that you make the commitment to action as necessary.



Bear in mind that the team's objective is not to focus on problems. It is exactly the opposite - to starve problems of more attention and time, and to feed new opportunities (also identified through the application of critical thinking to customer value models). Starve the problems and commit to abandon them.

By following a process of organised abandonment the leadership teams has a better than average chance of keeping your company aligned with your chosen customer segments and value propositions.

Summary

Because the value propositions for chosen segments often change faster than the organisational alignment serving those segments there are inevitably lines of business that need to be periodically abandoned.

While the glamour of strategy focuses on developing new services, the practice of abandonment is often neglected. By applying the approach of critical thinking your leadership team can regain the front foot.

Walter Adamson is the Founder of Digital Investor, based in Melbourne, Australia, where he helps IT and telco service companies design more effective value models and strategic partnerships. He is also an advisor to investors in IT companies and is an Advisor to the ICT Strategy Board of the Government of Victoria. He can be reached at [email protected] and phone +61-403-345-632, website www.digitalinvestor.com.au Skype: walter