After “Execution”, Ram Charan has just written a new book with Larry Bossidy “Confronting Reality: Doing What Matters to Get Things Right.” Excerpts from his Strategy+Business interview:
There are four component questions to ask about your organization: How should your strategy transform? How should your operating activities transform, whether or not you have a shift in strategy? To accomplish a transformation, what shift in people and leadership is necessary? And what shift in organization processes must you facilitate?
These are the four components of how to make money: strategy, operating activities, people, and processes. When you confront reality, you may have to make changes in one of the four, two of the four, three of the four, or all four. To confront reality, you start with the selection of the mix of financial targets. You see how they link to the external environment. If those targets are not being met, you ask the question, Whats going on in here? A leader has to determine when not to change, when to change, and to what extent to change. Then you determine which of the four internal organizational components have to be changed, and in what sequence, to meet those goals.
Michael Dell personally told Larry that he didnt have a vision: He was driven to it. His singular goal was survival. That was it. How do I survive against these big guys? And out of that came a philosophy, a concept. But that meant a huge amount of transformation involving the whole supply chain, which his competitors didnt get. He wasnt starting with a strategy. Operating activities were forcing the strategy. Hes saying, Im a mass guy; Im going to sell direct and be the lowest cost. But saying it does not get him anywhere. He needed to transform the operating activities the supply chain.
When you understand your core business model, you can determine where there needs to be and where there doesnt need to be wholesale change. For most companies, the key processes are not going to go through major change. They are not adaptable. No matter what Dell does, the supply chain will still be needed. Now matter what Wal-Mart does in its business model, the linkage with suppliers will always remain a core competency.