When Strategic Focus Goes Wrong.
By Kkevin Dwyer
Wednesday, 22nd May 2013
Ask any teenager today who Eastman Kodak is and it is likely that they will not know and yet, little over ten years ago Eastman Kodak was riding high with over $10B in sales and with a famed research and development department that invented the first digital camera in 1975, used in commercial sectors such as medical imaging.

Today, Eastman Kodak is still working its way out of bankruptcy protection.

So what went wrong? Why was one of the world's most respected brands and the inventor of the digital camera so slow to react to the digitisation of taking pictures and the subsequent shift at the low end of the technology spectrum to taking photos with your phone?

A review of the many case studies written on Eastman Kodak reveals that the leadership of Eastman Kodak was well aware of the slowly emerging digital technology influenced business models. However, several decisions were made to not cannibalise the existing business model of selling cheap cameras and making money on film and the processing of film. The world changed quickly for Eastman Kodak and by the time they realised that their business model was being cannibalised by new competitors, it was too late.

Eastman Kodak lost strategic focus. They were so concerned about cannibalising a very successful model that they forgot to really understand emerging markets and the possibility of a disruptive technology breaking that model apart. There was undoubtedly disagreement within Eastman Kodak with regard to the potential of digital technology in the hands of consumers. However, because their strategic focus was on a business model rather than on the long term profitability of the business, the key decision makers opted to protect the model with an insufficiently robust contingency plan if they were wrong.

Unfortunately, losing or not even having, strategic focus is not unusual in organisations or in some cases in whole industries.

Take the records management industry as an example. Records management is the field of management responsible for the efficient and systematic control of the creation, receipt, maintenance, use, and disposal or archiving of records.

The key issues which get aired in conferences as being at the bleeding edge of the industry are what to do with social media and the burgeoning volume of records created. These issues get discussed with the seriousness they deserve, but at the expense of what needs to be the strategic focus of the records management industry: getting executives to focus on records management and the technology that supports it as a business system capable of transforming business outcomes.

By concentrating on issues such as the impact of technology on the number of records created and their nature, the records management industry forces focus on creating rules for social media and development of technology to easily capture it. This replicates the impact on previous foci on things such as compliance where the industry, as a whole, was unable to get the type of executive support necessary to properly implement records management systems. Many electronic records management implementations have failed. Our research suggests the number of absolute failures is 25%. Our qualitative research suggests when the degree to which new practices required for electronic records management are adopted compared with what was desired, the failure rate is at least 50%.

It makes no sense to concentrate on social media and the volume of records when executive support is low and the adoption levels within an organisation are also low. Implementing a system which people do not use makes no impact on the issue of social media.

If however, the records management industry concentrated on the improvements in productivity and risk reduction that a properly functioning records management system delivers to an organisation, there would be a significant change in attitude amongst executives. Make no mistake, a properly functioning records management system does improve productivity and reduce risk; substantially so.

4Hoteliers Image LibraryImagine that we were able to demonstrate that a functioning records management system can reduce costs by $500,000 per annum and improve revenues by $15,000,000 over five years. Or if we could demonstrate that security of extremely sensitive documents could be controlled such that only those who need to see documents actually see them and that an audit trail is continuously maintained such that any unauthorised viewing is obvious. Or if we could demonstrate that the process of monitoring contracts can be streamlined and we can ensure that the latest version of the contract is being used to control the interactions between ourselves and the vendor and in doing so we could save $5,000,000 per annum in uncontrolled contract expenditure.

The fact is that these benefits have been demonstrated. The above examples are real. The change in executives approach to records management in those circumstances has been remarkable. Budgets were increased as was manpower; executive support grew beyond that of merely allocating budget. A real interest grew in what records management entails and what the consequences were of a well-functioning records management system.

In this circumstance, the topic of social media has a context. The question is asked, "What social media records do we need to keep to ensure we reduce risk and improve productivity and how do we capture them?" The question is not about all social media records but the ones that count. In this circumstance we are likely to have a budget and resources. Without the context of increasing productivity and reducing risk, the discussion about social media becomes an interesting discussion without a context and one that an executive has no interest in to drive to find a solution.

Records management tactics will take care of issues such as compliance, social media and the sheer volume of records. The real strategic focus, however, needs to be on getting appropriate budget and getting the kind of support where records and knowledge management are front and centre of each executive team's agenda.

Strategic focus also goes wrong at all levels of an organisation.

In other articles I have written of the cult of cost cutting where the strategic focus becomes solely fixed on costs rather than on gross or net margin. In one organisation the focus was on cost reduction in operations, which was achieved. However, because there was no focus on net margin, and a peculiarly loose approval process for setting prices, the cost reductions were passed directly on to customers. Because the organisation was the market leader and considered to be the price setter, the result was an entire market losing net margin over more than five years. What was worse was the market was a specialist product market.

In another organisation in the retail market, their strategic focus was on sales and in particular on up-skilling their workforce in closing techniques. This narrow focus was doomed to failure, not least because a much bigger problem was the engagement at the start of the sales process which made closing difficult and reduced the number of people passing through to closing by more than 50%. It was also doomed to failure because of recruitment and performance management issues at sales level and store manager level. The strategic focus needed to be much broader and deeper and about the management of their human capital.

At organisational and industry level, when the strategic focus goes wrong, we ask the wrong questions because we have the wrong context in which to ask questions. As a result we end up with the wrong hierarchy of questions and therefore the wrong hierarchy of strategic choices. We then lose strategic competitiveness.

A good way to overcome this is to always include a blue sky session in each strategic planning session where there are no boundaries and the "What if?" questions are encouraged. Where challenging the status quo is mandatory. Follow that up with a session where reality is allowed to bite, but do not mix the two sessions.

Furthermore, encourage senior and middle managers to always think strategically. Challenge them to frame almost everything they do in the strategic context.

If you lose strategic focus or don't reframe strategic focus fast enough to counter disruptive changes, your role and your organisation may be relegated to the annals of history too.

We welcome your comments.
Contact Kevin by email at kevin.dwyer@changefactory.com.au or via phone on +61 (0)408 508 490


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