The metaphor of a game is apt when designing scenarios, and can especially be applied to business. Like sport, business has competitors, rules and game-changing uncertainties; and just as you can win, lose or draw in sport, you can make money, lose money or break even in business. The art of succeeding in business is to choose the right game, and to realise when the game has changed!
There are further challenges in business, though, because there are always games within games! There are games within an organisation - which require a 'looking in' approach; and these are played within a large and highly complex market involving competitors and other players and to which the organisation must look outwards. Moreover, the industry is part of the regional, national and international games within which we all have to operate. A sustainable business can therefore only be achieved through a correct balance, or alignment, between the organisation's inward and outward focus.
Sport versus business
However, the games of sport and business (and indeed, life) differ dramatically in the time it takes for the game to change. Most sports like soccer, baseball, rugby, tennis and golf have not changed that much in 50 years. In sport a referee's rulebook is clearly laid out and easy to understand for any situation unfolding in the game to which the rules apply. By contrast, the rules of business are fraught with uncertainty, they can differ from country to country, and they can change in a blur.
Advances in technology, for example, can turn a business game upside down overnight. Digital cameras killed film; the iPod and iTunes have changed how people access and listen to music, thereby affecting the radio and music retailing industries; the internet and the rise of social media have forced newspapers to reconsider the economic feasibility of their print models; traditional book retailers are under threat from online e-books; e-shopping has transformed the High Street; and mobile phones and electronic wallets may soon make credit cards redundant.
As the social philosopher Charels Handy observes, most business games go through 'S' curves. The bottom of the 'S' represents the early adoption of new technology; the middle is the growth phase; and the top of the 'S' is where intense competition kills the game but for a few players. The mobile phone industry is a good example.
However, the lesson seems to have been lost on some. One of the things we have noticed in the sessions we've facilitated is that the more successful a company is in the business game, the more blind it is to the flags that are changing it. Also, the larger a company and the more it has invested in a particular game, the more willing it seems to put its head in the sand to developments which could cause the game to die. As one manager memorably remarked, elephants do not make good foxes.
For all these reasons, and as we have said elsewhere on this site, while a company may benefit from a visionary hedgehog leader, it also needs the bright-eyed foxes to spot how the business game is changing in order to adapt to it.
To get businesses up to speed on the state of the game they are in and how they are faring in it, we have developed a business gameboard to make the conversation more searching and intense. We believe that the two most important factors affecting the bottom line of a business is the strength of the markets it is in and how competitive it is in those markets. Here, as can be seen in the pictorial representation of our gameboard to the left, we have made these two factors the principal axes of our business matrix. We have four quadrants in which a business can be located. We will start with the worst and move to the best:
This is the worst case, where your competitiveness is declining in a weak market. In old military slang, 'Fubar' is a more extreme condition of 'Mubar' - mucked up beyond all recognition! Your only options are to close the business down, sell it, or conduct major surgery to bring it back to profit.
As the name suggests, this is an unsustainable position where the strength of the market covers the faults of the company's business model or its weak performance. Many companies were living in a 'Fool's Paradise' before the crash of 2008 and swiftly fell into 'Fubar' during it, either going bankrupt or having to be totally restructured. As we have already intimated, size and success play a major role in moving companies into this quadrant.
We've all been here - a situation where you put your nose to the grindstone and grind out better efficiencies than your competitors in a tough and hostile market. The length and depth of the recent recession has even created an extreme version of 'Grindstone' called 'Empty Wheels'. It is where the hamsters quit the wheels because they are too exhausted! Seriously, though, workplace stress caused by retrenchments and fatigue through too many working hours can be a real downside in this scenario. The upside is that you can launch a takeover bid for a competitor in the 'Grindstone' scenario because harsh market conditions have made its shares cheap.
In this quadrant you are winning the game and getting all the accolades. The growth of your markets combined with your exceptional product and service offering make you the champion among your competitors. The challenge is to maintain your spirit of innovation and foxy adaptiveness and not fall into the trap of complacency arising from all your success. So many companies feature in the 'Gold Medal' quadrant for a time and then succumb to the belief that it is their rightful place to be. Alas, they decline into 'Fools Paradise' and after a few shocks some are unlucky enough to go further down into 'Fubar'.
Use of the gameboard
The first question we ask when facilitating strategy sessions and getting to the point in the conversation where we introduce the business gameboard is the following: Where would you put your company now, where have you come from and where are you heading? Then, drilling further down: Where would you put your underlying business units in order to have a feel for your stars and dogs? Some executive teams prefer to answer these two questions in a secret vote around the table where each participant writes down his or her opinion and we give the results.
Interestingly, both axes combine elements within your control with those that are completely outside it. An economic boom moves everyone to the right, and a general recession shifts everyone to the left. However, depending on the business games you choose to be involved in, your movement to the left or the right can be equally affected. Some markets do very well in a recession - such as cut-price clothing and other discount stores. Other games die in a boom because technology has moved on. Hence, in terms of our definition of strategy being about the direction and scope of a business, horizontal movements on the gameboard are partially governed by the quality of your strategic decisions: What games should I be in and in which countries?
Vertical movements on the gameboard are more about the tactical decisions you make to enhance your performance within the games which you have chosen. Obviously, one element which is beyond your control is the performance of your competitors: a rising star can cause you to sink into the lower half of the gameboard, while competitor errors can elevate your fortunes. Some companies use their key performance indicators (KPIs) as flags to measure where they are and the vertical direction in which they are going - particularly if they can measure their KPIs against industry norms.
The whole purpose of our gameboard is to influence strategic thinking by giving the decision-makers a clear view of the current state of the business and its various units. If you are in 'Fubar', the strategic choices are totally different to 'Grindstone' and 'Gold Medal'. That is why in our Conversation Model we introduce the gameboard before considering the options and making decisions. In addition, when we are facilitating conversations for non-business organisations like NGOs and schools, we change the parameters that constitute the axes of the gameboard.
For example, with schools the favourite choice is to have 'relevance of product' on the vertical axis, with 'financial sustainability' on the horizontal axis. One of the critical flags in the educational game is the changing nature of work beyond school. In the old days, good exam results assured you of a job in a big corporate organisation or government. Now, most young people have to become entrepreneurs. Many schools are still educating their pupils for the job market that existed 50 years ago, not the one of today. Hence we have many robust conversations around where a school should be placed on the gameboard according to the relevance of its product.
Finally, foxes use the gameboard as a tool to measure progress - bringing it out on an annual or even quarterly basis to assess where on the gameboard the business, and its competitors, might have moved. In that sense, it becomes a key component of the dashboard that any company should have as it makes its way into the future.
The NGO Gameboard
As we said above, the Business Gameboard can be adapted to any strategic conversation on the future of any organisation. We therefore think it is useful to provide an example of how our gameboard works in combination with our Foxy Matrix for a non-governmental (NGO) or charity organisation discussing its future.
1. Rules of the Game
We have come across six rules of the game that apply as much to the NGO as they do to the donors giving it money:
For any NGO to be a success, there has to be a passionate champion behind it. Without passionate leadership, an NGO is bound to fail;
Like businesses, an NGO has to have a sound business model which ensures the financial sustainability of the organisation. We are even finding some NGOs who apply a mixed model of living off donations but supplementing this with revenue obtained from paid-for services where they can;
The product offering must remain relevant for the social needs of the community which change over time;
The donor base needs to be diversified so that the NGO is not too dependent on a single donor;
Expenses of the NGO as a proportion of the overall revenue raised for its cause should never exceed 10%. Otherwise there is a public perception that contributions are going towards the NGO rather than its beneficiaries; and,
Every NGO should present its donors with a list of measurable outcomes against which its performance can be measured. Regular reports of progress need to be given to donors.
2 (a) Key Uncertainties
In our experience, the following uncertainties need to be monitored by the NGO:
The economic climate, because unfortunately during an economic downturn the first thing that is cut by governments and companies are their donations. It is a rule of the game that the latter should give adequate notice to an NGO if cuts are in the offing so that it can adjust to more straightened circumstances;
Internal financial requirements versus donor contributions, so that adjustments can be made either up or down to cope with the inevitable fluctuations;
The actions of the competition, as even in the field of NGO work rivals compete for the funds available; and,
Succession planning, since rather like a family business founders of NGOs often think they are immortal and fail to build up the next generation of leadership.
2(b) The NGO Scenario Gameboard
This is a scenario where the NGO does not have a sound business model and no clear idea of what its product offering should be. It is destined to die unless major surgery and reconstruction take place.
This scenario depicts an NGO that has had a strong track record and continues to have a strong brand, but which is failing to adapt to either the community's needs or advancements in technology. Its financial sustainability will gradually be undermined, moving the organisation into Fubar.
This quadrant is where many NGOs are located - having an excellent product, but starved of funds on an account of an indifferent fund-raising programme. The challenge is to widen the donor base.
The NGO is a winner in both the value it adds to society as well as in achieving a stable donor base which has pledged long-term funding to keep the initiative sustainable. The challenge is to remain innovative and adaptive despite the current success the NGO is enjoying.
Two kinds of options should be considered at this stage: 'doing the right thing', which entails a strategic look at the scope of the NGO; and, 'doing things right', which requires an examination of the business model and operational efficiencies.
This step concentrates on who is going to do what by when in order to initiate the selected options.