Methods (and the software technologies that support them) such as business intelligence, analytics and balanced scorecards have proven benefits when it comes to improving an organization’s ability to quickly and accurately make decisions. However, organizations seem hesitant to adopt them. Is it analysis paralysis or brain freeze or just resistance to change?
In our personal lives, many of us have no problem making everyday decisions, such as whether or not to purchase a smartphone or join a social network. How can individuals make decisions so quickly, while organizations often struggle and are slow to react?
What’s the Difference: Early Adopters vs. Laggards
The field of marketing scientifically examines influences on the rate of adoption of products, services and technology. Everett Rogers, a business researcher, developed his “Diffusion of Innovations” model with five categories of adoption: innovators, early adopters, early majority, late majority and laggards.
Which category best describes many organizations’ adoption of modern managerial and analytical methods? My observation is that most fall in the laggards category. One might presume that laggards are at the tail end of a distribution curve. However, I view the distribution curve as being similar to cyclists in a race. There are high-performing cyclists out in front, and then much further behind is a large pack of riders – called the peloton. The distribution of cyclists doesn’t follow a bell curve, but rather one shaped like a camel with two humps: a short one followed by a broad, tall one with a long tail.
So what are the differences between organizations that lead the pack and those that fall behind? My observation is that innovators and early adopters quickly move forward for two reasons:
- They are having financial difficulties and will try anything that might help them survive; or
- They are very progressive and driven to continuously seek a competitive edge.
On the other hand, the late majority and laggard organizations are either risk averse with resistance to change, or have weak leadership with little vision. But I believe there is another possible explanation for the laggards - they are too distracted.
Worldwide Volatility Distractions
There is no doubt that volatility is on the rise, and it results in distractions to an organization. Examples of volatility include changes in consumer preferences, foreign currency exchange rates, commodity prices, etc. New trends contributing to volatility can develop quickly, such as oil dependence, emergence of national economies (e.g., India and Brazil) and instantaneous, Internet-based global communications.
Unanticipated shocks can come from occurrences like the Asian tsunami in 2004, H1N1 virus outbreak, Euro currency shocks, civil unrest in North African Arab countries, and the Japan tsunami and subsequent nuclear crisis. The Internet, global communications, social networks and relaxation of international trade barriers have introduced big, sine wave vibrations and turbulence compared to relatively smooth rises and falls of the past decades.
But is increased worldwide volatility reason enough to not adopt or at least test modern managerial methods? I am not talking about innovation, where you have to come up with new ideas. I am talking about implementing proven methods and techniques, such as pilot projects, rapid prototyping and the balanced scorecard.
Modern Management Examples
Business analytics and enterprise performance management methodologies can be adopted by late majority and laggard organizations, regardless of the volatilities they are experiencing.
In my December 2010 column “Geeks are Chic,” I described how popular Harvard Business School Professor Michael Porter’s accepted, generic strategies for a company (i.e., cost leadership, differentiation and focus) are all vulnerable today because competitors can more quickly take actions (such as reduce costs), imitate a company or invade a company’s market niche.
An organization’s best defense against the competition is the ability to quickly make smart decisions, which can easily be accomplished by implementing business analytics. Organizations that achieve competency with business analytics are able to sustain a long-term competitive advantage. But late majority and laggard organizations are often too distracted to recognize this.
A similar case can be made for adopting enterprise performance management methodologies. The early adopters are already well ahead. Their executives have properly communicated their strategy to employees through appropriate key performance indicators and achievable targets to align behavior. They have robust predictive analytics that reduce uncertainty and allow them to take smarter and quicker actions.
Early adopters understand their cost and profit margins by product, service, channel and customer - as well as optimal actions needed to retain and grow customers and acquire the best target customers. They have driver-based budgets and rolling financial forecasts using modeling techniques.
Take the Lead – or Follow Way Behind
When executive teams are distracted with firefighting, reacting to surprises or internal politics, then the urgent crowds out the important. Business and government face a vastly different environment than they did 30 years ago. The Internet was not part of our daily lives. The Cold War was on. China was a small economic player. European countries had their own currencies. During that time, the global environment didn’t play as much of a factor in their decision-making. Today, organizations operate as though perpetual crises are the new normal, so multiple distractions when trying to react are a given.
But such distractions aren’t an excuse for always being reactive instead of proactive. A focus on solving problems is not mutually exclusive to seeking opportunities to improve management and performance. Organizations that want to move beyond the laggards category must take on the mentality of the early adopters; they understand the importance of using business analytics and enterprise performance management methods to enhance decision-making and align employee behavior and priorities to execute the executive team’s strategy. Most importantly, remember that it’s never too late to go from being in the middle of the pack to taking a commanding lead over your competitors.
Gary Cokins is the founder of Analytics-Based Performance Management LLC, an advisory firm. He is an internationally recognized expert, speaker and author in advanced cost management and performance improvement systems previously a principal consultant with SAS. You can contact him at email@example.com. For more of Cokins' unique look at the world, visit his website at www.garycokins.com.