The only we know is that we are uncertain about the future

Are we facing a boom, a double dip, or a potential break-down of the global environment? No one can know for sure? The degree of uncertainty is higher than for a long time. We probable has to go back as far as the industry revolution to experience the same degree of uncertainty. Can we learn from history? Yes, but there are also differences making the assumptions and risk mitigation harder and less likely to be based on past experience. A connected world, 3 billion people demanding same level of standard as the Triad regions in terms of consumptions, energy, and experience and education, have changed the fundamentals of our world system. It is faster, less predictable, scared resources except from brain power which has an increased supply.

What now? Should we believe in faith or actively taking control over our situation as entrepreneurs, investors or as employed?

A strong tool for handling uncertainty is scenarios planning – which is a way of painting possible future scenarios comparing and contrasting possible strategic decisions towards. Several of the world leading experts in scenario planning are working for Shell, who also publishing their results/scenarios in publicum. For inspiration, have a look at their work with Shell’s new world scenario recently published on their site.

A method for identifying, elaborating and describing scenarios (based on Wikipedia http://en.wikipedia.org/wiki/Scenario_planning) can be outlined in 13 steps:

1. Decide on the key question to be answered by the analysis
2. Set the time and scope of the analysis
3. Identify major stakeholders
4. Map basic trends and driving forces
5. Find key uncertainties
6. Check for the possibility to group the linked forces into two
7. Identify the extremes of the possible outcomes of the (two) driving forces and check the dimensions for consistency and plausibility.
8. Define the scenarios, plotting them on a grid if possible.
9. Describe the scenarios in text, choice powerful names
10. Assess the scenarios. Are they relevant for the goal? Are they internally consistent? Are they archetypical? Do they represent relatively stable outcome situations?
11. Identify research needs
12. Interate
13. Use scenarios ion your strategic decision making process

Is the Indian IT miracle over?

Driving back and forth to you job in Munbai is like smoking a packaged of cigarettes, and nothing become better. Indian government spend 17 dollar per capita and year in infrastructure while China spend 116 dollar. The Indian mentality is pretty much having a back-up plan for the back-up plan while China is straighter forward, which both impact business life as well as infrastructure and the sociality in general. In an interview, published in CIO.com, we could read the other day that a director from AT Kearney’s predict that Most Indian providers will be sidelined or subsumed while the fate of seemingly stalwart U.S. players will hang in the balance.

At the end of the day it will be about innovations and disruptive technologies, like Scott Anthorny writes on his Harvard Business review blog yesterday; The ease with which a company’s core business grows can mask the need to invest in innovation. Growth inevitably slows. Indian companies should be investing in innovation now, even though they appear not to need it. If they don’t, they will ironically leave themselves open to disruption from Western companies who find disruptive ways to compete domestically.

The winner of the global war for wealth will be the most innovative companies in the most well structured and supportive environment, the long term moment of the winner will most likly be:

bureaucracy and corruption => transparency

too low tax and quick fix => sustainability in environment

cost cutting => innovation

transaction => relation

Why is it hard to be a good manager?

The world seems slowly to recover, we are back in black again. Even banks in the UK are back, Greece are progressing and maybe there is a light of hope. There will always be tuff times, good times and new challenges to deal with. As a leader you know that. But why is it so difficult to act on long term objectives? I think we can see the answer in what happening in the world in general. Let’s take Greece as an example, people go nuts about what has to be done just as we can see in the business society where owners and employees demand quick fixes and turn a deaf ear to. Long term perspective, strategic thinking, risk assessments, contingency plans (B,C and D) as well as living your values every single day is sometime considered as inefficient, fuzzy and uphill’s.

So is this it? Shall we give up? Of course not. The key lies in the agenda of the owners and the senior management. If you want to be a good leader delivering sustainable results building value over time you should openly take a debate about what value means, to whom and what’s important short term, midterm and long term. Also make sure you focus on, and win, the stakeholders with influence and power making sure they understand the layer of objectives and how they are interlinked as well as the imperative of sticking to one’s over all objectives. Its hard work constantly enrolling and building confidence among owners, employees, your management team, customers and the society in general. Or as cynical friend once said to me; as CEO, choice your owners carefully…

When will the nation of Facebook have their own police force?

July 21st Facebook announced it had 500m users. According to the Economist Facebook have started to act like a country having diplomatic relationship with nations and top politicians such as Britain’s prime minister David Cameron . I agree with the economist, Facebook is beginning to act like a nation with their own rules and laws. Like when they were asked to remove a tribute to a murderer, they refused. The question is when will we see the police force of Facebook, and when will we see the court of law?

Venture Capital in Scandinavia

Just got introduced new interesting site, www.scandinavianinvestmentnetwork.com. An online matching service for angel investors seeking investment opportunities and entrepreneurs seeking capital. It is part of Angel Investment Network Ltd, a London-based company that was founded in 2004 having 30 networks all over the world. It is an amazing source of knowledge if you are interested in venture and entrepreneur trends. I asked the founder, Mike Lebus, for some data to explore the different perspective on entrepreneurship and investment between UK and Scandinavia. It was rather interesting; Scandinavia is at the moment focusing agriculture, mobile and telecom while UK is focusing entertainment, film and construction. My feeling is  that Scandinavia also is starting up a lot of professional service companies at the moment – but the need for venture capital is the same and thereefor not shown in the data.

Read about my updated investment philosopy

Dear reader, I have updated my investment philosophy as many of you have posted questions about what kind of investments I am interested in. Please visit http://www.penker.se/investment-philosophy/ for an update.

Posted from my summer hammock
Magnus

The complete value creation model

As promised, here comes the complete value creation model I have developed over the years – all development made in real and challenging business development cases. The purpose of the model is to be used as a semantic framework in order to explore and understand the creation of superior value creation.  Please use it and refer to it as ‘Penkers Value Creation Model 2009’. Also let me know how it can be used, areas for improvements as well as learning’s made when to apply it, the results and future guidelines.

Penkers Value Creation Model 2009

What is value – a definition that helps!

The tricky thing when selling is that you think you can sell on the right price or on value, but that´s not true at all. All people buy on value, the perceived value. However, if your offer s equal your competitors then the price will be the only discriminator but still the customer or client buy on value. If you can differentiate yourself then it is possible to adjust the price to a level close to the value for the buyer. But what is value? Last year I made a model defining value and at the core it is the difference between benefit and sacrifice for getting the benefit, the value might be of functional use, or symbolic use, an experience or strictly monetary. However, there are also different receivers of value, the market, the own organization and the shareholders of the company.  In my next blog post I will post the complete model linking the receivers to value and how value is created.

Charging for value – Sure…

Over the last decade it has been a lot of discussions about pricing based on value. However, there are several issues related to that and not an easy task. To begin with your company must be committed to really go for value creation meaning down prioritize other activities that might be short term valuable for the organization but not long term value crating for the customer. Let´s give an example:

Assume that you are running a consultancy company and to differentiate you develop concepts and best practice charging for results in the deliveries. Since all my portfolio companies are charging based on value created I have notices the trade off that has to be made compared with traditional consulting business selling heads. Here are some very tangible tradeoffs:

1. All contracts has to limited in time, otherwise you do not create sustainable value. The contract might very well be extended or complemented, but always with the objective of doing yourself redundant.
2. No contract should be less than 2 years.  In my experience. everything sustainable take two years to create.
3. You should share your risk with the client, otherwise you do not believe in your work. It can be a success fee, monetary, options or shares. But must certainly, you should not get fully paid if you do not deliver expected value to the client.

Now you might wonder why paragraph 1-3 are tradeoffs? Well they are because in traditional consulting you try to sell the same consultant to the same customer as long as possible expanding with more consultant creating a dependency where your people know more about the customer than the customer itself. Selling on value is diametric to selling heads; you might have to say no to a deal because you know that you will not be able to create the value. You might even be force to say no because you know that you will only compensate for the clients incompetence and not developing sustainable changes in the business. It is hard but true. On the other hand, you will probably be better off in margins and interesting assignments. The other route to take is selling heads on a global market with global supply and global demand, where the competition is perfect and the only discriminator is price, volume and location.

However, there is another major issue as well… But that will be my next post, until then have a nice summer holiday…

Why HR people has difficulties getting attention in Sweden

As late as the other day I got it confirmed again. A lot of Swedish HR people does have a dominating PA perspective (PA=personal administration; employee admin) on their function, meaning less business-orientation. Which I also believe is the reason why Swedish HR people complain that they do not get the right attention on C-level. If you are a Swedish reader you can also read an interesting post on Magnus Dalsvall´s blog about the different HR perspective n the Swedish debate http://hrsociety.blogg.se/2010/may/605-tva-vagar-for-hr-vilken-vag-tar-du.html#comment

If people are the most scarce and valuable resource (which I happen to believe) then it is crucial working long term and on a strategic level not playing to role of administration or service office. If you want the C-level people’s attention you need to act, not taking the seat in the back complaining about the ride. Grab the wheels instead, or at least act the map-reader.

To give a flavor my perception regarding strategic HR, I would say it is about:

1. How do I maximize bottom-line impact from attracting, recruiting, retaining, developing and push forward the global talents
2. How to we nourish a company culture empowering and enrolling the business strategies; E.g. languages, stories, symbols, rituals, and values. Getting all people on the boat
3. Deploying a reward framework. Fairness and motivation.
4. Building and strengthen the psychology contract within the organization
5. Defining and developing the line of sight – what actions and values lead to what and why
6. Career planning and careers paths linked to the future business objectives and need of resources
7. Building transfer mechanisms for transferring skills, knowledge and know-how to structural capital making the operation scalable, efficient and less vulnerable

So, please with sugar on the top – stop complain that CEOs and other C-level peoples does not listen or show interest and start acting strategic aligning the most valuable resources with the business objects and vice versa.