Balancing Current Performance with Future Growth
Finding a balance between current performance and future growth is a critical element of your strategy. Too much focus on either the present or the future can lead to disaster.
Today’s post is by Jeffrey Saltzman and Scott Brooks, co-authors of Creating the Vital Organization (CLICK HERE to get your copy).
What is the difference between companies that succeed and those that fail?
The answer lies at least partly in the concept of vitality. All organizations have daily operations that help create or deliver the goods and services that make up the core of their business – current performance. Yet no matter how strong or successful an organization may be at delivering their current performance, they run the risk of stagnation and even failure because eventually competitors, changing marketplace realities, or new technologies will render their current performance irrelevant or obsolete.
In order to stay competitive and relevant, an organization must constantly explore future potential opportunities and ideas. These efforts require investments of time, resources, and specifically money, yet despite all this, many of them will fail.
Nonetheless, it is critical that organizations work toward building new capabilities. Eventually, one of the future potential ideas will succeed, and will become current performance that helps support even more future potential exploration. In other words, it is a cycle of using current performance to support and fund future potential that will one day become the organization’s current performance.
We first came across this idea years ago when listening to a company’s CEO discuss how his company refreshed its products lines. After determining that the life span of their product was roughly five years, they realized that they needed to refresh 20% of their product-line annually to stay relevant and competitive. The concept of constant renewal stuck with us, and we started researching just how important renewal is to an organization’s success.
Vitality has deep roots. Over the past 25 years, many academics have researched a concept called organizational ambidexterity. Ambidexterity is when you are performing well in the present, maintaining a level of current performance that guarantees day-to-day success, enabling future potential explorations. In other words, it refers to organizations that make enough of a profit on current products or services that the organization can chase new ideas, explore possible opportunities, get innovative, and eventually bring to market the next product or service.
This underlying principle is pretty simple, but actually striking the right balance between current performance and future potential is tricky. Organizations need to understand how much of their resources should be devoted to current performance, and how much can go to fund future potential efforts. A start-up, for example, will likely lean more heavily toward future potential, while more established organizations may be weighted more towards current performance. An organization that is either all current performance or all future potential is likely going to find itself in jeopardy; the latter (unless it’s a start-up funded by venture capital) won’t have enough capital to sustain itself while the former will likely have trouble adjusting to meet new challenges or marketplace demands.
To figure out the correct balance, the Vitality Model (see figure) incorporates the six critical areas to an organization’s success. These are: leadership, employees, processes, offerings, service, and customers. Through each of these elements runs both the current performance (how they operate in the present) and the future potential (how they apply to exploration of new ideas, opportunities, and innovations).
Here are some of the core questions we ask clients about each of these areas to get them to understand the current status of each element and the role each plays in the organization’s success:
Do you have the right leaders in the right seats today? Are your leaders articulating a compelling vision for the future, why and how the organization must evolve?
Are your employees currently well connected to both their work and to the organization? Are they being trained or do they have the necessary skill sets for the future?
Do you have effective and efficient business processes in place? Are you continuously improving on them?
Are your current products attractive to current and potential customers? Do you have a healthy pipeline of new products?
Are you service oriented? Are you continually improving on your abilities to service customers?
Do you have a customer base that will repurchase from you? Will they act as advocates for your products or service?
It is important for an organization’s leader to fully understand the answers to these questions in order to determine the specific challenges that may affect the organization’s vitality. Once these questions are asked, leaders can begin to make better decisions that affect the organization’s future. They can focus on speed, predictability, efficiency, cost control or consistency in an effort to improve execution by fine tuning policies, practices, or standards that help people get things done, or they can explore to find that new breakthrough product, service, or approach. Exploration involves more creativity, play, risk, and even failure.
It’s the tensions between these two separate elements that is the heart of vitality. Achieving the right balance is challenging, but not impossible. Understanding the difference between execution and exploration is an important first step on a journey that doesn’t really ever have an ending point. You’ll never be able to kick back and relax because once you’ve found that balance between current performance and future potential. Even more importantly, once your future potential efforts succeed and you hit upon your next great product or service, you need to begin the work of cycling that future potential into current performance. Vitality in a never-ending journey of using your current performance to support future potential that eventually becomes current performance. It may not be a five-step checklist or quick fix, but it is the foundation upon which successful organizations stand.
– Jeffrey Saltzman, CEO of OrgVitality, and Dr. Scott Brooks, Partner and Vice President of OrgVitality, are the co-authors of Creating the Vital Organization: Balancing Short-Term Profits with Long-Term Success (CLICK HERE to get your copy). To gauge how well your organization manages the vitality balance, visit the authors’ online assessment center at www.OV-CVO.com.
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Photo: balance by Hans Splinter
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