The MBA Meathead: Strategic Decision-Making

TAGS: strategy, strategic decisions, future outcomes, corporate buffoonery, the mba meathead, mesocycle, Elitefts Legacy Log, training

elitefts™ Sunday Edition

Strategy, Systems, and Decisions

Strategy. If this word is uttered in a boardroom by a CEO, everyone nods furiously in agreement with whatever the ultimate man-in-charge blathers. Throw it out in a meeting room full of middle-management types on one of the lower floors of the building and everyone will do their best to out-quote McKinsey Quarterly in a feeble attempt to sound smart. Around the water cooler, it is used by lowly analysts to smugly deride senior management for being old and out of touch.

No other concept is used so pervasively and perversely with so little factual support than the ‘S’ word. Mostly because strategies are big behemoths that, barring a risky and abrupt repositioning, take much effort over many moons to shift and are very difficult to clearly establish cause and effect as to their correctness.

At the end of the day, business cycles, macro-economic trends, and socio-political happenstances lay waste to the best of strategies and make millionaires out of idiots who ended up in the right place at the right time- with a boat that rose with the tide around them. In my opinion, the best one can do is to create a quantitatively-focused decision support capability to help choose strategies and projects that provide the highest probability of positioning the company for success. The theory being that, over time, your portfolio of decisions should yield superior results.

I cringe when I hear the old standby that a something can’t be quantified because it is strategic. What beautiful logic– the strategy is strategic and needs no justification. This is an absurd crutch used by people who don’t understand what they are doing. Everything can be quantified. The question only becomes to what degree of certainty. The spread of that confidence interval will depend on how well, either through research or experience, the person proposing said strategy understands the underlying system in play.

In large corporations, big-dollar decisions are typically supported by estimated returns on investment put forth by a financial analysis function. Unfortunately for many corporations, financial analysis exists primarily to provide variance analyses of historical events and does not spend nearly enough time focused on understanding, quantifying, and explaining potential future occurrences. Explaining the past is easy. Understanding risks and rewards in the future is where great companies make better decisions and gain competitive advantages.

System, for me, is a key concept here (and I’m not talking about computer programs – think of it as a business ecosystem). When trying to determine whether a project or strategy is sound, I try to put the decision in context of a system and capture the quantitative impact of everything in that system.

Let’s say someone wants to implement a growth strategy to build a manufacturing plant and enter a new market. In order to quantify the investment returns, we must define the system in the status quo (current state), and then capture all relevant impacts the new investment would have as it disrupts that system (future state).

First and foremost, you would be introducing new supply. If new volumes are significant relative to the existing market, the supply/demand curves will find a new equilibrium point, driving down prices. You could also be driving up the price of your inputs, as your new purchases strain the availability of raw materials. This might cause competitors to act. Customers may enter or leave. Governments could intervene. Locusts and hailstorms could disrupt shipping lanes.

This is where many analysts and decision-makers fail. They fail to understand the system and how it will react when you introduce change. Margins are assumed to hold constant, costs remain status quo, competitor supply does not change, etc. Think of it as a big dumb guy who has never been in a fight, other than in his head where he always dominates his adversary. When he finally does get into a scrap, he quickly realizes that the opponent doesn’t just sit back and gladly receive punches to the face. In the real world, competitors fight back and will pummel you if you are not able to anticipate those reactions.

I like to view each system as containing a multitude of potential events, each having its own influence on the future state. Actions and reactions represented by dozens or hundreds of statistical distribution curves floating around in space. Through financial modeling and scenario analysis, I try to identify which of these distributions will have the greatest impact on success or failure. I then narrow the analysis to the handful of uncertain scenarios that will truly move the needle. This allows efforts to be focused appropriately and avoid paralysis by analysis that happens when decisions are tough and people claim that quantification is impossible.

In the end, the will of the probability gods shall come to pass. The job of a decision-maker is to consistently make decisions that have the greatest chance of succeeding. Success or failure should not be defined by any one decision. Over time, a pattern will develop across a portfolio of projects and determine the truly good, bad, and ugly.

Corporate Buffoonery

Enough of the strategic rambling. Time for some old fashioned bitching about a couple random things that aren’t important. I fully acknowledge that if these are the types of things that bother me, then I don’t have any real problems.

At some point, everyone started talking with mealy-mouthed inflections at the end of sentences making everything sound like a question. And, I don’t understand why. I think it came from a Consulting 101 handbook to ensure the highly-paid visitors who know nothing about your business or your culture are viewed as non-confrontational by the companies paying absurd hourly fees to retain them. Middle-management types heard the consultants doing it and adopted the practice in a lame attempt to sound like the consultants. STOP IT! You sound like an insecure pussy. And you don’t garner respect by sounding like a pussy. Speak with some bass in your voice and finish your sentences with authority.

At the end of the last MBA Meathead column, someone commented that they were sick of bring-your-own-lunch work meetings. Low and behold, as I look at my calendar for tomorrow, I have 12-1 p.m. blocked for a ‘Brown Bag Lunch Series’ on safety. The agenda recommends that everyone “bring your lunch and a co-worker.” What bullshit is this? You want me to skip lunch and sit in a meeting room listening to some nameless supply chain hack read slides about how to not fall down in the parking lot of our office complex? And you won’t even spring a couple bucks for a Jimmy John’s sub? No thanks.

Training

I am knee-deep in the Power mesocycle of the meet training cycle. Training has been solo in the garage, but I have been taking video of every main lift, reviewing real-time, and asking others to review from time to time. This has helped immensely. By the time I finished my last meet cycle, my form had degraded to the point that I bombed for the first time ever. This time, I have nipped a few mistakes in the bud and should be ready to hit the platform when the time comes. The general training template is shown in the following table:

 

The first eight weeks were successful, and I feel the base has been laid. Training was starting to become a grind until recently, when new supplements were layered in. I can now feel the bloat returning to my face, low back pumps make standing for more than thirty seconds difficult, and strength is improving. Physically, I feel the clock turning back as energy levels rise and basic urges become stronger (just ask Mrs. MBA Meathead).

This is also my favorite time to come to work. People ask if I have been getting outdoors more. Sorry folks, that is not sunburn. That pinkish-purplish hue is from increased blood pressure. I was conversing with Dave Tate a couple days ago, and I described it as follows:

“I know to the average co-worker I look like a fat turd spilling out over his waistline, but in my head I am jacked and awesome.”

Oh glorious days.

Looking Ahead

I’m a month and a half from the meet. Training gets very intense from here on out. I hope to post another update beforehand; however, a large amount of my time will be spent trying to find camera angles that make my high squats and unlocked benches on meet day look legit. Thanks for reading.

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