In this blog, I identify several pitfalls that can stand in the way of creating value. Unless leaders acknowledge these potential pitfalls and take steps to mitigate them, then the idea of creating value is nothing more than a false hope.
This is the third blog in a series I’m writing, targeted to those with a stake in creating value in companies. Most of the concepts apply to all industries and types of companies. I hope you enjoy reading it and find some insight in doing so. Please reply, share on social media, or email me at email@example.com to keep the conversation going.
Through this blog series, I aim to provide constructive advice to creating value. Before that, I thought it would be helpful to identify a few common pitfalls that can stand in the way of creating value.
The pitfalls identified below are not collectively exhaustive and are not mutually exclusive. They are representative and can occur simultaneously.
1. Indifference: Many, if not most, leaders are interested in the strategy of their company, i.e., “what” they want to achieve. However, they are often indifferent towards tactics and projects, i.e., “how” they will achieve their strategy. As a result, this indifference shifts this burden to their managers. All too often, their managers do not have enough knowledge, skills, or experience to fulfill these responsibilities effectively without support and guidance. For example, the managers may have adequate knowledge of their part of the company but lack adequate knowledge of other areas of the company that may be affected by decisions made. Alternatively, they may have more than adequate knowledge but lack the necessary skills or experience to capitalize on that knowledge. For example, they may lack the fortitude to challenge critical assumptions and potential decisions. Either way, when leaders display indifference toward the tactics and projects, i.e. “how” they will achieve their strategy, then their companies are likely to invest in projects that do not contribute to the goal.
2. Herding Behavior: Often leaders approve and fund projects because the given solution or technology is hot in the market and/or competitors are implementing such solutions or technology. The rational might be that if our competitors are implementing “this,” then we should be implementing “this” as well to keep up with them. However, that is based upon a tacit assumption, which is that the competitors implementing such projects are contributing successfully to the goal through these projects. That may or may not be the case. Leaders need to understand the critical factors for a proposed project in the context of their company. Often, leaders approve and fund projects without understanding how the expected value will be realized. Perhaps, they assume that the managers proposing and implementing the project understand well enough how the expected value will be realized. That is a risky – and potentially very costly – assumption to make. Leaders should understand and challenge the assumptions and critical factors upon which projects are approved and funded. How the expected value of the project will be realized needs to be understood simply and clearly by managers and their leaders, regardless of how prevalent or mature the solution or technology is.
3. Squeaky Wheel Gets the Grease: Eli Goldratt wrote “not only the first elephant but also the last elephant will go through the door much faster if they go in procession.” Managers will accept this so long as their project or “elephant” goes first. All the managers throughout a company are vying for their chunk of a limited number of resources, e.g., leaders’ time and interest, funding, and people. Furthermore, they may be vying to have their project start as soon as possible. Those managers that understand how to navigate the politics of an organization most effectively and bend the ear of leaders often stand a greater chance of getting their projects approved, funded, and started before other projects. If a company does not have a systematic way of qualifying and vetting potential projects, then there is a significant risk that the projects that are approved and funded do not contribute to the goal. Furthermore, given limited financial and human capital, there is a risk that potential projects that had a greater likelihood of contributing to the goal are undertaken at a later time – or not at all.
4. Pet Projects: At times, managers may promote potential projects that do not align with or support the goal, strategy, or tactics of their company. In such cases, managers may be more interested in elevating their profile and visibility within the company – and perhaps outside the company – than they are interested in executing projects that contribute to the goal. Managers may push pet projects because they see them as a milestones to getting promoted or they see them as job security. Under the best of circumstances, managers just don’t understand how their projects might contribute to the goal, in which case they are negligent. Under the worst of circumstances, managers may know that their proposed projects are unlikely to contribute to the goal yet push for approval and funding only to further their personal agenda.
5. Necessary but Not Sufficient: Nearly all projects these days seem to require some – if not a significant – investment in technology. As Goldratt wrote, “technology is necessary but not sufficient. Technology can remove limitations that existed. However, to get the benefits of new technology we must also change the rules that recognized the limitations or constraints.” Often, leaders and managers think that implementing new technology is the only change necessary to make improvements. However, that could not be further from the truth. When implementing technology, companies must identify and change the rules, policies, and procedures that were in-place before the technology was implemented to achieve project outcomes that contribute to the goal. And, usually changing the rules, policies, and procedures is more difficult than implementing the technology. As a result, often they are not changed. What results is a new and expensive technology is implemented that enables the existing rules, policies, and procedures, which does not improve profitability.
In my experience, the pitfalls listed above exist to varying degrees within most companies. Leaders should be aware of them and others like them. They need to be on the lookout for them and work vigilantly to detect and mitigate them. And while it is a defensive measure, it’s an important step towards increasing the likelihood that projects contribute to the goal.
Previous blogs in the series linked below: