What is the difference between strategy and tactics?

What is the difference between strategy and tactics?

‘Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.’

Sun Tzu

In business we often confuse tactics with strategy. The media refer to some business’ actions as strategies when in fact they are in reality; tactics. For example, with the recent COVID outbreak in Australia, the media referred to hotel quarantine and border closures as strategies when in fact they were tactics in the strategy to stop the spread of the virus.

A tactic is an action or event to achieve a desired outcome.

A strategy is an integrated plan which helps an organisation achieve its objectives.

Tactics are usually designed by middle-level management, whereas top-level management create and implement strategy.

For example, if the strategy of a business is to increase profitable market share (a top-level management action), a tactic could be to increase prices or reduce discounts combined with a marketing campaign (middle level management actions). Tactics often change with the changes in market or economic conditions (the present), whilst strategy remains same for a long period (the future).

If the strategy is wrong, the best tactics in the world will not ensure the strategy is successful. Military conflicts are often good examples where despite sound tactics, a strategy that is wrong will never be achieved. In the Vietnam War, first the French and then the Americans failed due to poor strategy.

A better example is the nasty civil war called ‘the Bush War’ in Rhodesia (now Zimbabwe) from the early 1970s to 1979. In June 1977, Time Magazine reported that “man for man, the Rhodesian army ranks among the world’s finest fighting units“. The Rhodesian military developed a tactic called ‘Fireforce’.

It was a counter-insurgency military tactic using helicopter-borne and parachute infantry to envelop guerillas in the bush before they could flee. The operational assault usually comprised of a first wave of 32 soldiers carried to the scene by three helicopters and a Dakota aircraft, with a command helicopter and a light attack Lynx aircraft in support.  One of the advantages was its flexibility. When contact was made, typically with 6 to 12 insurgents, the 32 soldiers of the Rhodesian Army had immediate superiority on the ground. The tactic quickly yielded an 80–1 kill rate by trapping the guerillas and eliminating them by air and ground fire. However, despite its success measured by the kill ratio, it was not enough to keep the Rhodesians from losing the war, or realising that the war could not be won. KPIs need to measure progress towards an organization, or in this case a government’s strategic goals. Clearly kill ratios, which were also used by the Americans in the Vietnam War were not the right KPIs to meet the strategic goals.

What the Rhodesian Government failed to understand that the ‘bush war’ was political in nature. It was a war for the support of the Rhodesian Africans, not the minority white population. The right-wing government was ill equipped politically to win over the Rhodesian Africans to their side. The government’s budget and efforts were directed to the military side of the war and not the political one. The strategy of stopping majority rule was flawed, politically, morally and geopolitically. Having the best counter insurgency military in the world could not prevent black majority rule.

Also, a minority led white government, not recognised by many countries surrounded by hostile African nation states was never going to prevent guerilla insurgents from entering the country. Furthermore, in the later stages of the war the apartheid government in South Africa withdrew support further isolating the Rhodesian government. There was no plan B until the last year of the war and by then it was too late.

In conclusion, strategy is about choosing the best plan for accomplishing long-term goals of an organisation. Clearly kill ratios, which were also used by the Americans in the Vietnam War were not the right KPIs to meet the strategic goals. Tactics are normally the instant reaction of the organisation, in response to the changing environment whether political or business.

Can you think of examples of where tactics would successful, but the overall strategy failed?

The accompanying table below is a good reference for identifying what is a tactic and what is a strategy.

Basis for ComparisonTacticsStrategy
MeaningA carefully planned action made to achieve a specific objective is Tactics.A long-range blueprint of an organization’s expected image and destination is known as Strategy.
ConceptDetermining how the strategy be executed.An organized set of activities that can lead the company to differentiation.
What is it?ActionAction plan
NaturePreventativeCompetitive
Focus onTaskPurpose
Formulated atMiddle levelTop level
Risk involvedLowHigh
ApproachReactiveProactive
FlexibilityHighNormally less flexible
OrientationPresent circumstancesThe future

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Why do airlines offer cheap seats?

‘I don’t care what you cover the seats with as long as you cover them with assholes’

Eddie Rickenbacker – US aviator

It’s coming up to Christmas and in Australia it’s the summer holiday period. Yes, over the Festive Season unlike our friends in the norther hemisphere, we will enjoy sunshine and summer. Whilst the monthly blog is posted on 21st of the month, in December it is released early. After all, 21st December is very close to Christmas Day.

Summer holidays often means travel and with COVID restrictions lifting, air travel is often ‘front of mind’. Hence the December blog is about air travel

Today, flying as a form of travel is widespread and growing – so we, the general public, are affected by airline pricing. Airline ticket prices are not set and can vary significantly, with some airlines offering flights that seem to be ridiculously cheap.

Why do they do this?

Modern airlines have very sophisticated analytical programs that use yield management or dynamic pricing to maximise the seating capacity of each aircraft, while obtaining the highest price for each seat. As Rickenbacker’s quote implies, seats need to be filled. This is a concept relevant to many businesses, which is little understood. It is called marginal pricing and, if used carefully, can significantly increase a business’s profits.

What is marginal pricing?

Marginal pricing occurs when a business sells a product or service at a price that covers the variable cost of producing it. The marginal cost is the variable cost of producing an additional unit or service. The concept of marginal pricing assumes that the fixed costs and overheads are already covered by earlier sales.

How does marginal pricing work in practice?

With airlines, the marginal costs of getting additional revenue are very low. Once an aircraft takes off, the empty seat is gone forever. It is a perishable commodity and cannot be warehoused or sold on another day. The same can be said for scheduled truck deliveries with spare capacity. The marginal cost of additional passengers is virtually zero. This is why airlines can offer what appears to be drastically discounted fares.

The road industry provides a good example of how this works in practice. For example, the cost of operating a semi-trailer is $1,600 per day including variable costs – fuel, finance, tyres and maintenance, loading and unloading – as well as fixed costs and overheads such as insurance, registration, depot costs and the driver’s salary. This is based on traveling 900km per day and a freight carrying capacity of 22 pallets.

The semi-trailer is loaded with 18 pallets (82% capacity) with initial revenue of $2,160 ($120 per pallet).

•             Fixed costs and overheads: $450 per day

•             Variable costs: $1,050 per day

•             Marginal costs: $5.56 per pallet (loading and unloading a pallet).

With a spare capacity of four pallets, there is an opportunity for the vehicle to fill this capacity by using marginal pricing. The assumption is that no extra variable costs such as fuel and tyres are incurred, and the only additional or marginal cost is the loading and unloading of the additional pallets. According to the concept of marginal pricing, providing the marginal costs of $5.56 per pallet is included, and any additional revenue above this will fall to the bottom line as profit.

This is demonstrated in the following table:

Marginal Pricing of Semi-Trailer Delivery

This example clearly shows that the addition of three pallets loaded onto the vehicle, with revenue of $80.00 per pallet instead of $120.00 per pallet, increases the revenue from $2,160 to $2,400, with profits increasing from $559.92 to $783.24 per day, or 40%.

Within manufacturing, the marginal cost is the variable cost of producing an extra unit of output. Let’s use manufacturing 1,000 wheelbarrows as an example:

•             Variable cost of manufacture is $20.00 per unit

•             Fixed costs are $10.00 per unit

•             Overheads are $5.00 per unit

•             Total cost per unit for a single wheelbarrow is $35.00.

The total cost for 1,000 wheelbarrows is $35,000 (1,000 x $35.00).

However, the cost of manufacturing an additional 500 wheelbarrows is $10,000, as $20.00 per wheelbarrow is the variable cost of production. The manufacturer could sell the additional 500 wheelbarrows at $40.00 each and make a profit of $20.00 per wheelbarrow.

Marginal cost pricing is a valuable tool for businesses, providing an opportunity to increase profits significantly if managed – particularly with unused capacity, such as in a manufacturing plant and in services such as transport.

However, there are dangers in marginal pricing. As a business, you must know and understand your costs – and this includes the cost of the sales staff.

Are there opportunities in your business to increase profits by marginal pricing?

What are the dangers if you decide to implement this strategy?

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Do you have a “Beppo” Schmid in your organisation?

Do you have “Beppo” Schmid in your organisation?

“Never interrupt your enemy when he is making a mistake”

Napoleon Bonaparte

So, who was Joseph “Beppo” Schmid?

In World War II, Schmid was German Luftwaffe Field Marshall Herman Goering’s Intelligence chief and personal friend.  The provision of useful intelligence, particularly during the Battle of Britain in 1940 was of less importance to Schmid than his career. He was shrewd, calculating and ambitious. He removed any staff that could be considered a threat to his ambitions and replaced them with those who would not challenge him. Schmid was intent on ingratiating himself with Goering by only telling him what he wanted to hear.

One of the consequences was poor intelligence. This was a major contributing factor to the defeat of the Luftwaffe in the Battle of Britain, leading to the deaths of thousands of German airmen and the virtual destruction of the Luftwaffe.  In early 1940 Schmid’s team produced the ‘Study Blue’ report. It was based on a book about British industry ordered directly from a London bookshop, as well as British newspaper cuttings, and was supplemented by reconnaissance photographs. The study was used for planning the Luftwaffe’s campaign against Britain. It summary, the report underestimated the capabilities of the RAF in aircraft, pilots, aircraft production and technology, and overestimated the technical capabilities of the German aircraft, probably tempered by arrogance following the success of Blitzkrieg in the invasion of France.  

Throughout the Battle of Britain, Schmid’s intelligence was suspect. In August 1940 another report predicted that Britain would run out of fighter aircraft and that Germany was shooting them down at three times the actual attrition rate. Furthermore, they underestimated the number of RAF fighters by a factor of three. With unsustainable aircraft losses, the German objective to either compel Britain to negotiate a peace settlement or be invaded, failed. By early September 1940 Hitler’s Operation Sealion, the invasion of Britain, was postponed.

As managers, what lessons as managers can we learn from “Beppo” Schmid?

 Here are 3 management lessons…

1. Beware of egos and unbridled ambition

Sadly, throughout my career I witnessed too many examples of egos and blinding ambition endangering a business and, in the process, adversely affected employees’ lives. One of my former business partners refused to acknowledge that a customer he had secured was costing our business thousands of dollars a week because he didn’t want to admit that he had under quoted and didn’t want to face the customer. His ego would not allow him to admit the mistake.    

2. There is no substitute from doing your homework

The results of bombing were consistently exaggerated, probably through inaccurate claims and over-enthusiastic reports. Following the unexpectedly quick fall of France there developed an atmosphere of perceived victory. The Luftwaffe leadership and in particular Goering, became increasingly disconnected from reality. Doing his homework properly, rather than telling Goering what he needed to hear, Schmid could have prevented the massive loss of lives and material which weakened the Luftwaffe. They never fully recovered before Germany’s defeat in 1945.

3. Incompetent leadership severely impacts an organisation

A fish rots from the head first. Goering was an incompetent leader who surrounded himself with people who were afraid to say “no” – afraid to give him bad news and probably feared for their lives. Leadership whether poor or good has a massive impact on an organisation’s success and the lives of its employees. Leadership comes with responsibility and more importantly, accountability. Compare this with the leadership displayed by the RAF.    

What do you think are the lessons are?

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Are you an intelligent boss?

Are you an intelligent boss?

‘In a high-IQ job pool, soft skills like discipline, drive, and empathy mark those who emerge as outstanding.

Daniel Goleman – author of Emotional Intelligence

It is often assumed that good managers are intelligent, and this is what makes them successful. Is this what really occurs in the world of work? This depends on how intelligence is defined.

Do you consider yourself an intelligent manager?

What is IQ?

IQ stands for Intelligence Quotient, a common measurement of human intelligence. The IQ test was originally developed in France by two psychologists, Binet and Simon, in the early 1900s – and their work still provides the basis of the tests used today. IQ tests were further developed throughout the 20th century and have been used in many psychological studies as well as in business, education, the military and government.

What is EQ?

EQ stands for Emotional Intelligence and the concept emerged in 1995 with the publishing of a book called Emotional Intelligence by Daniel Goleman. It sold over five million copies. Goleman claimed that EQ discounted IQ in determining success.

Why is EQ now considered more important than IQ for success in business today?

Have you met or worked with people who are highly intelligent but have a low EQ? They frequently display a lack of empathy and initiative, are arrogant, refuse to listen to other points of view, are insensitive and argumentative, blame others, never hold themselves accountable and are unable to control their emotions.

I certainly have, and there is nothing more demoralising and frustrating than working for such people. Low EQ people often suffer from ‘I’ strain – ‘I did this’, ‘I did that’ and ‘I am very important just listen to me’. One of the main impediments to achieving better outcomes is allowing egos to override common sense. An important aspect of high EQ is being able to manage your ego.

People are considered intelligent if they can reel off facts, retain information or have high technical skills. However, this does not necessarily make them, or the organisation they work for, successful.

While we may, as managers, pride ourselves on our technical skills, industry expertise, and innovation, this does not make us successful managers or leaders. Being the smartest person in the room does not necessarily equate to success.In successfully managing organisations today, we are increasingly dependent on ‘soft skills’ that build relationships inside and outside the organisation. It is essential to be able to negotiate, collaborate and compromise by listening, communicating, being flexible, and being able to work with others. Management by walking around is a good example of using EQ skills. Poor levels of EQ can make or break customer relationships, create and perpetuate poor work environments and reduce constructive communication with managers, colleagues, peers and subordinates. Michael Gerber, in The e-Myth Revisited, .

According to Harvard Business Review, EQ is ‘the key attribute that distinguishes outstanding performers’ and is the leading differentiator between employees whose IQ and technical skills are approximately the same. People with high EQs tend to be happier and have more fulfilling personal lives – as they are more self and socially aware, manage their emotions and tend to be more engaged with other people and events.

The good news is that EQ can be taught. However, it depends on your mental outlook and willingness to change. It can be improved through coaching, training and good mentoring.

Here are three questions that you can ask yourself to gauge your level of EQ:

  1. How would your employees describe your leadership style?

Ask this to gauge self-awareness. Does it sound realistic when you answer this question? Do you mention any shortcomings you are trying to address?

  1. Could you do a SWOT analysis on yourself?

Would your colleagues or subordinates agree with your self-assessment profile?

  1. Do you know the interests and family circumstances of your work colleagues?

This is asked to gauge your level of empathy with others.

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How do you improve your business processes?

Process improvement…

‘Without continual growth and progress, such words as improvement, achievement, and success have no meaning

 Benjamin Franklin – one of the Founding Fathers of the USA

Against a background of continual distractions, including increasing regulations and competition, one of the greatest challenges for businesses is to continue improve their performance and profitability. Improved processes lead to better efficiencies, improved productivity, greater employee satisfaction and, ultimately, profits.

At its most basic level, there are four ways to improve productivity: 

  1. Drive better practices
  2. Innovate new practices
  3. Utilise potential practices
  4. Enhance current practices

Four Ways to Improve

In Japan, following the devastation of World War II, the concept of ‘quality management’ was developed and implemented by an American – W. Edward Deming. He became known as the ‘father of quality management’ and his work led to the amazing success of Japanese companies such as Toyota, Sony and Mitsubishi. The ‘Deming management method’ became known as the Plan-Do-Study-Act (PDSA) cycle, which imbedded learning into a cycle of continous improvement.

Plan-Do-Study-Act (PDSA) Cycle

The aims of this section are:

  1. Describe how important process improvement is to a business
  2. Introduce a methodology we used to improve productivity in our logistics business.

Our third-party logistics business’s specific niche was retail logistics. When the business was first set up, it provided floor-ready merchandising services (FRM©) to retail suppliers. At that stage, the business was not a traditional warehousing and transport business – instead, stock was processed in the warehouse in a way that enabled it to be placed in each individual retail store in a ‘floor-ready’ condition, underpinned by an electronic commerce system. Items were price and security labelled, placed on hangers if required and scan-packed to store level.

This required a more varied skill set than traditional warehousing. The production process depended on the type of merchandise – whether apparel, shoes, cosmetics or electronics. This required a flexible approach and a standard methodology. Each supervisor would organise and ‘set up’ the job, and plan and manage the FRM© process. The productivity of each job and section was measured and reviewed individually with the supervisors on a weekly basis.

The methodology was called ‘the W5H Check’ because it asked why, what, where, when, how and who. Before each job was set up, the supervisor used this checklist to maximise productivity – answering the questions on the checklist. This approach improved productivity by  reducing the number of times the goods were handled, minimising lifting and walking, questioning who was doing the work,  eliminating unnecessary tasks and simplifying the process. 

W5H Check©

We found that this process improved productivity over time as it was decentralised, empowered the supervisors to make decisions, and measured performance. The supervisors were encouraged to seek input from their staff on how best to improve productivity and were authorised to communicate directly with the customers. It was similar to the PDSA cycle used in the Deming method and included specific questions that required thought. The W5H Check© sparked a process of continous improvement that was driven by ‘hands-on’ supervisors who were given the authority to make decisions that were the best for the customer and for the business.

The benefits of this system included very low staff and supervisor turnover, long-term customer retention and high levels of employee satisfaction. When the business was sold, the majority of supervisors had been with the company for over 10 years.

What are the areas in your business that you could improve using the simple Four Ways to Improve test?

Do you think that the W5H Check© system would be useful in improving productivity in your business?

Are there lessons to be learnt from the example above, relating to pushing responsibility down to supervisor level?

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As a manager will the ‘cobra effect’ come back to bite you?

“The best way to increase wolves in America, rabbits in Australia, and snakes in India, is to pay a bounty on their scalps. Then every patriot goes to raising them”
— Mark Twain – American author and humourist

As a manager will the Cobra effect come back and bite you?

So, what is the cobra effect?

During the times of British Colonial India in the city of Dehli, government officials were terrified by the large number of venomous cobra snakes in the city and sought to solve the problem.

The solution?

The government offered a bounty for every dead cobra. Initially the strategy was successful as large numbers of snakes were killed. However, some of the enterprising citizens of the city began breeding cobras as a source of income. After a while, the government officials began to realise that there were too many cobra skins being handed in, so the scheme was terminated.

What was the outcome?

The ‘enterprising’ cobra breeders on seeing that their snakes were worthless, set them free. This increased the number of snakes, wriggling, loose, wild and free in the city making the initial problem worse.

In French Colonial Indochina a similar situation occurred in Hanoi. The colonial officials deemed there were too many rats, so a bounty scheme was introduced. Not for dead rats, but for their tails. Before long, the officials noticed the city was full of tail-less rats. The ‘enterprising’ bounty hunters didn’t kill the rats, they just cut off their tails and released them back into the sewers. There they continued to breed which further increased the rat catchers’ income.

In more recent times we have seen another example of the ‘cobra effect’. In the 1980s, the USA provided money, military equipment and support to the Mujahideen insurgents fighting to overthrow the Russian army and the Marxist government in Afghanistan. One of the insurgent leaders was al-Qaeda’s Osama Bin Laden. With the fall of the government, Bin Laden was provided a base from where to plan the 9/11 attacks in 2001. This in turn lead to the US invasion of Afghanistan and the subsequent misery and death that continues to this day.

In conclusion what is the ‘cobra effect’?

It’s an anecdote where a problem’s attempted solution only makes it worse through unintended consequences.

As managers how can we take into account the ‘cobra effect’ in our jobs?

It’s important to remember that there is a section of any group of people who have a tendency to take advantage of a solution that tries to effect how people behave, like breeding cobras or cutting off the tail of rats. This may not be intentional, although it often is. They take short-term advantage of the system, even though it may lead to unintended consequences and more complex problems.

In our logistics business we had a major Australian retailer as a customer. They used our services to manage the opening and stocking of their new flagship store. One of the KPIs for retail store managers was sales per square metre. The ‘whiz kids’ at head office deemed that in-store replenishment storage of stock should be negligible as this reduced the sales per square metre. As a result, insufficient space in the new flagship store was allocated to in-store storage. The result was stock could not be replenished in time by store staff, overall sales decreased, and additional staff were employed to manage stock flows into the store. The new store had to be redesigned and modified. We continued to manage an offsite replenishment warehouse of the retailer until the store was reconfigured. Good for our business, but not for the retailer’s shareholders.

How can you prevent the ‘cobra effect’ on your organisation?

It’s easy to have a bright new idea on paper. First order effects are easy to identify, second and further effects require much deeper consideration and are much harder to identify.

When you have a ‘brilliant idea’, I would recommend you get your best and brighest people together and ask them about the possible ‘cobra effects’ before implementing. An idea can be fine-tuned by spending the time as suggested and hopefully any negative impacts will be minimised.

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What are the foundations of a good business?

What are the foundations of a good business?

“You can’t build a great building on a weak foundation. You must have a solid foundation if you’re going to have a strong superstructure”

Gordon B. Hinckley – American religious leader

Deciding to go into business is the first step. The second step is to ensure that from the beginning the business has solid foundations. This is critical and is relevant whether your business is a start-up, or you are purchasing an existing business. Like a building constructed on solid rock, a business with a solid foundation will have a better chance of surviving the inevitable challenges, than one built on unstable foundations. Cracks will inevitably appear in a business over time, as they do in a building. By solid foundations I don’t mean a market niche, systems and processes, skilled employees and loyal customers which can be easily found in ‘how to’ management books, and on the internet.

When my partners and I were going into business, it involved a management buyout of an unprofitable business. We were eager to ‘have a go’ on our own and prove we could build a successful business. This leap of faith meant mortgaging our houses to raise the capital, not an unusual practice for funding new businesses. This certainly focussed our attention. Failure could mean losing the family home and all the implications associated with family life.

As with an elephant’s legs supporting the world’s largest land animal, having a solid foundation on which to build and support a business is essential. Luckily the previous owner had an excellent financial director who provided us, with some practical and useful advice;

”Protect your assets and limit your risks and liabilities”.

We also sought advice from external experts. As owners and managers, we didn’t know what we didn’t know. Seeking external expertise is essential. From our experience in setting up in business, the disciplines where external assistance is required in the following disciplines:

  1. Legal advice in setting up the business’ legal entities, including each owner’s private company which were shareholders in the business, establishing corporate structures that reduce the exposure to legal claims from avaricious ambulance chasing lawyers, completing shareholder’s, agreements, terms and conditions and suppliers’ agreement.

One of the lessons learnt was whilst the structure of the founding team set out the entitlements of each founder, we did not clearly outline our roles and responsibilities which lead to. performance and accountability becoming issues and was complicated by two family tragedies. This could have been managed more effectively if roles and responsibilities had been more clearly set out and a company board that held the executive team and founders to account had been established.

  1. Financial advice from a chartered accountant on business related finance issues, including insurance, taxation, banking and recommended corporate structure in combination with legal advice .

The main lesson learnt was to separate the business entity from personal affairs is essential. Unfortunately, I have witnessed some businesses getting into financial difficulty by not separating private and business affairs as well as a lack of discipline and  no clear understanding of the importance of keeping this separate. This is particularly relevant to family businesses.

  1. Strategic business advice from an advisor with business owner experience. There are two issues here;
    • seeking external advice
    • ensuring it comes from a consultant or advisor who has practical experience in managing and owning a business.

Too often there are consultants who do not have this experience and do not understand what it is like to have their money and house on the line.

In retrospect we should have sought in our logistics business external assistance in strategic planning.  Our annual budgets were built from the ground up and served as our business plan. The weakness became apparent in the vital areas of values, vision and a mission statement which underpin the budgets and business plan. These were missing. We did not recognise their importance. Values, vision and mission statement were only created when we established a webpage. We would have benefited immensely from engaging an external advisor earlier in the piece. The business although profitable would have been more profitable and would have developed more strategically. Professional external advice would have opened up opportunities through identifying strategic long-term customers, obtaining government grants and developing new networks.

In conclusion, the message is seek advice from those with expertise so the business has solid foundations, so when inevitably the storm comes the business has a greater chance of survival. Seeking external advice is not a sign of weaknesses. Elite athletes and sporting teams all have coaches. A business is no different. Also as a manager and business owner, on-going education is essential for continual success.

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Management lessons from the sinking of the Bismarck

Management lessons from the sinking of the Bismarck?

“Sink the Bismarck”

Quote attributed to British Prime Minster, Winston Churchill in 1941

Just over 80 years ago this month, the Bismarck was sunk.

What was the Bismarck?

The Bismarck was a World War II German battleship. With over 2000 sailors, it was the flagship of the German Navy and was the largest battleship then commissioned. In late May 1941, the recently launched Bismarck and another German warship, the Prinz Eugen evaded the British Navy and escaped from the Baltic Sea into the Atlantic Ocean. Their mission was to destroy as much Allied shipping as possible, and together with the U-boats, force the suspension of the supply convoys from the USA, vital for Britain’s survival.

The Bismarck was the most advanced battleship at the time. More modern, faster and more heavily armed than any ship in the British Navy. The Bismarck had a special anti-torpedo belt made of nickel-chrome steel. The Germans believed that no torpedo could penetrate the shield and were convinced that the Bismarck was almost unsinkable. Furthermore, the Bismarck had a sophisticated anti-aircraft fire control system to protect it from attacking aircraft.

The British Navy sent the flagship of the Home Fleet and their largest warship, the HMS Hood and another ship the Prince of Wales to hunt down the Bismarck. In the ensuing battle in the North Atlantic, the Hood was sunk within three minutes and over 1400 sailors lives were lost. Only three survived. The loss of the Hood was a significant blow to British morale. Although also hit, the Prince of Wales managed to damage the Bismarck before retreating from the battle. This forced the Bismarck to abandon its raiding plans.

The British Prime Minister Winston Churchill then issued the order “Sink the Bismarck!” and the relentless pursuit of the two German warships by dozens of British Navy ships began.

The damaged Bismarck, leaking oil, limped towards Nazi occupied France where protective air cover and a destroyer escort were waiting. However, by a stroke of luck an RAF Catalonia flying boat sighted the Bismarck’s oil slick and reported her position. From then on, the British Navy used radar to track it and over a dozen warships followed the battleship.

One of the British ships shadowing the Bismarck was the aircraft carrier Ark Royal. On it were 16 obsolete open cockpit Swordfish bi-planes. With time running out, and with the Ark Royal being the closest ship to the Bismarck it was decided to attack the Bismarck from the air. In atrocious weather and in the fading light the slow-moving Swordfish attacked using torpedoes. Bismarck’s sophisticated anti-aircraft guns were too advanced to shoot down the slow-moving bi-planes. In the final attack, a single torpedo hit the Bismarck’s rudder and steering gear, and from then on it was unable to maneuver. It could only steam in a wide circle.

Unable to repair its rudder and steaming in a circle the Bismarck was doomed. The next morning the British Navy opened fire on the crippled battleship. With its large guns partially out of action, and unable to maneuver, the Bismarck was sunk within two hours, on its maiden voyage, with the loss of over 2,000 men.

What do you think are the management lessons from the sinking of the Bismarck?

Here are three lessons to consider.

1. Do not rely on technology.  The Germans considered the Bismarck as virtually unsinkable with superior firepower, advanced torpedo shields and sophisticated anti-aircraft guns. However, the low-level technology of the Swordfish bi-planes managed to cripple the Bismarck.

2. Technology is an enabler. It indirectly resulted in the sinking of the ship. The British used radar, which was a very new technology to track the Bismarck. Without it, the Bismarck would have escaped to the safety of Occupied France.

3. Persistence pays off. Despite the superiority and perceived danger of the Bismarck to Britain and its navy, a well-planned and persistent chase managed to find and sink the Bismarck. Furthermore, in the dying light in atrocious weather and against all odds, a single outdated Swordfish bi-plane managed to damage the Bismarck just when it looked like the Bismarck would escape the Royal Navy.

What other lessons can you find?

Remember: We can learn from history.  The use of well-known historic examples helps paint a more vivid picture and storytelling helps communication.

What is a KPI?

Key Performance indicator

What is a KPI?

‘The most important performance information that enables organisations or their stakeholders to understand whether the organisation is on track or not.’

Bernard Marr – author and futurist

What is a KPI?

A KPI (Key Performance Indicator) is used to measure the process towards an organisation’s goals.

Most managers and business owners know what KPIs are, based on the concept that ‘what gets measured gets done’. However, in many instances, organisations do not know what to measure and this results in poor management, mixed messages and focusing on the wrong things. One mistake is to confuse KPIs with goals. The goal of a business may be to increase sales to $20 million – however, it is not a KPI.

One of our first customers in our logistics business was a major Australian retailer who built a new store in a major shopping centre. Retailers normally have a KPI which measures sales per metre of their retail area. The ‘whiz kids’ at the retailer’s head office decided to minimise the ‘in-store’ storage areas to increase the total sales area. Within weeks of opening the new store, sales were suffering. The stock could not be replenished from the back of the store because not enough stock could be stored there. This resulted in reduced staff morale and new requirement to operate an off-site warehouse to replenish the store daily, which increased costs considerably. This is an example of a poor implementation of a KPI. The challenge is to select the right KPIs.

Why are KPIs important?

KPIs, if structured correctly and measuring activities towards a business’s goals, can have a positive impact on performance at all levels of a business. For example, KPIs can empower staff by showing how they can make a difference to the business, as well as holding them accountable.

In our logistics business, we designed a system that collected productivity data by customer, job and product category. The warehouses were divided into sections, each headed by a supervisor responsible for the customers and staff in their section. Each week, we produced productivity data by job and customer – which we called ‘the marking rate’. This information was shared with the supervisor, empowering them to make a difference to the business, holding them accountable, involving their team and demonstrating how important their team was in the business. They were empowered, which increased their levels of job satisfaction immeasurably. The marking rate was a measure which drove the business’s profits.

Not only do some organisations have the wrong KPIs, they often too many KPIs. In my experience, the number of KPIs should be restricted to between three and five, otherwise they can become too hard to measure and manage. I have seen large companies with literally dozens of KPIs, which rarely relate to the company’s goals. The challenge is to identify the key indicators that help the business succeed.

What are the three main considerations in setting KPIs?

  1. Ensure they are simple and are easily measurable and understood.

For example, in long-distance road transport, KPIs could be revenue per kilometre, kilometre per vehicle and fuel cost per kilometre. These performance indicators are easily understood and measurable.

  1. The measures must be key indicators of performance and directly linked to strategy.

Using road transport, the strategy is to maximise both kilometres travelled and revenue – so measuring revenue per kilometre is sensible.

  1. Minimise the number of KPIs, thereby making them relevant to all.

KPIs can be more precisely developed by using Key Performance Questions (KPQ), which assist in objectively developing activity measures that lead towards meeting the business’s goals. Here are some examples:

  • What are the activities we should measure that lead to high customer retention?
  • What should we measure that indicates profitability by customer?
  • Are the current productivity measures linked to the business’s goals?

 

Can we learn anything as managers from the 1975 film, Monty Python and the Holy Grail?

Can we learn anything as managers from the 1975 film, Monty Python and the Holy Grail?

“I am invincible!” said the Black Knight

This British comedy film concerns the legend of King Arthur travelling throughout Britain seeking men to join the Knights of the Round Table in the search for the Holy Grail.  In medieval British legend, the Holy Grail was the cup that Jesus used at the Last Supper. Beliefs at the time said it could heal wounds, deliver eternal youth and grant everlasting happiness. Today, it is a term used to describe a goal or object that is elusive and can never be found or achieved.

It is one of my favorite movies which I must admit I have watched at least 10 times and has a cult following. In watching it again last month, I realised that it had some important lessons for us as managers.

  1. The Black Knight. 

King Arthur approaches the Black Knight who says: “none shall pass”. Despite pleas to be reasonable King Arthur is forced into a joust, resulting in the Black Knight losing all his limbs in the ensuing sword fight. He refuses all offers by King Arthur to cease the one-sided contest. One of my former business partners refused to accept that a manager was having detrimental effects on morale and profitability, despite being presented with the facts. It was only when the partner went on holidays that we were able to take action and dismiss the manager.

What is the lesson for managers here?

Clearly, the stupidity of the Black Knight resulted in him losing all his limbs. Stubbornness, refusal to face facts, bloody mindedness, denial and continuing poor decision making is not a sound managerial strategy. Managers should be realistic when confronted with facts, however unpalatable.

  1. The Man called Dennis. 

King Arthur approaches some peasants on the way to a castle on the horizon and mistaken calls one of the peasants an “old woman”. He then makes excuses for not knowing the peasant’s name (Dennis), age (not old he’s 37) or the fact that he was a man.

Can you spot the poor management here?

Managers should make the effort to know their staff. It’s the attention to detail and often the small things that are important and appreciated. I remember witnessing a manager whom the staff had no respect for walking around a warehouse pretending to know their names and be interested. It became a game to get him to call the person the wrong name.

  1. The Rabbit Cave

King Arthur and his Knights are directed to a cave by Tim the Enchanter. Inside the cave are the directions to the site of the Holy Grail. The entrance to the cave is littered with bones and is guarded by a killer rabbit. Tim warns the Knights that rabbit is a killer and they ignore his advice. They choose to ignore, they attack, which results in the deaths of several knights.

As managers, what can we learn here?

Why did the Knights attack despite being warned and seeing the bones outside the cave? Because they didn’t listen to advice and ignored the evidence. Often as managers we make these fundamental errors, sometimes because our egos get in the way or we don’t wish to face the facts. When managing a transport business, I remember discounting the option that theft from motor vehicles was occurring in our depot even though the evidence seemed to suggest otherwise. A private investigator proved me wrong

In conclusion, the final lesson is within the film itself. Faced with budget constraints, the use of real horses was deemed prohibitive. Instead the Knights ‘travel’ on invisible horses with the sound of the horses’ hooves clopping coming from the clapping coconuts. The idea came from an old radio technique of  using coconut halves as sound effects for horses. Yes, as managers we should all be prepared to compromise, improvise and find solutions that could be just as suitable and more affordable. In our logistics business we were confronted with excessive waiting costs at a retailers’ distribution centre and could not recoup the costs. After some experimentation initially with shipping containers we negotiated a drop-out system for a van trailer, thereby eliminating waiting time and significantly increasing our returns.

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