In the day of trouble, your balance sheet, if it is strong, will serve you. If it is weak, it will expose your nakedness.
In accounting, a balance sheet is an important financial report that shows a snapshot your assets and liabilities.
However, there is also another non-financial balance sheet that is important which determines the success your strategy.
This is the invisible balance sheet. It is often ignored, usually not talked about, but it is there. Hidden assets like brands, intellectual property, know-how, mental models, customer relationships, networks and information catapult greatness. Hidden liabilities hinder progress, stunt growth, inhibit initiative and frustrate strategies.
Many organisations raise issues regarding the execution of their strategies and plans. The plans could be good, but they somehow do not get executed.
One of the most important reasons is the hidden liabilities. The fact that something is unseen and not discussed in the open does not make it disappear.
Realities do not go away because they have been ignored.
Cultural hidden liabilities
There is more to success than what meets the eye and there is more to failure than could be explained logically.
There is more to strategy implementation than the documents that are compiled.
Two organisations operating in the same field could both have the same strategy but their culture will never be the same. An organisation’s culture could be a hidden liability that stunts strategic progress. A key tenet of the culture is the corporate mindset.
Individuals that think like victims will always feel that they are being victimised.
A group that thinks it is a victim will always be outward looking and think it is powerless to act. Organisational hopelessness and cultural malaise is a product of the corporate mindset.
Your corporate mindset must be aligned with your strategic intent. How your organisation thinks and behaves could easily be a hidden liability.
Plans without a soul will never be implemented because they are still-born. Some organisations see opportunity everywhere, while others see limitations being put by everyone everywhere. What you see is determined by the “looking eyes”.
Unguarded, your culture and history can be a hidden liability. The words that you speak are important, they create a hidden wall or a runway.
Every time you open your mouth you are creating a culture. Every word of a leader is a teaching point. Review your culture and how aligned it is to your strategy.
If they do not match one has to change – either the culture or the strategy, or else, nothing happens. Culture develops daily but not in a day.
Culture is fed by history. To understand the attitudes and behaviours look closely at people’s historical experiences.
While history is important and gives many valuable lessons, you have to choose the lessons of history that you will carry into the future with you.
Carrying bitter hurts is too heavy a toxic burden to carry. Never let history harden you so much that you become a frolicking cynic.
Never let history obsess you so much that you become irrelevant in the present. Never let it occupy all of your thinking that you fail to be strategic in your execution. History lessons badly told inspire fear and timid action. History lessons well told become empowering strategy narratives that inspire enlightened action and reflection.
Leadership is important and determines the success or failure of any strategy. Committed leaders inspire strategic action. Uncommitted leaders are just empty gongs going nowhere.
Poor leadership can be a hidden liability that holds back progress. A strategy requires committed and visionary leaders to make it happen.
A strategy without leadership is an orphaned effort. Strategy development is not just an exercise to fulfil a corporate governance requirement.
Strategy is the eyes through which leaders see the future. A leader without a strategy is blind. A strategy without a leader has no feet.
An organisation with leadership that is not committed to the strategy is disabled. Inept leadership can be a serious hidden liability that pulls an organisation back.
Structural hidden liabilities
Going through strategic analyses is an important exercise which is necessary but not sufficient. It is important to commit time to looking at the structural premium on strategy.
Factors like the organisational structure, skills and capabilities, measurements and incentives, resource allocation and budgeting, information systems and communication could be hidden liabilities that could stifle an otherwise brilliant strategy.
The structure of the organisation and the distribution of power can help or hinder the strategy. It is important for the structure to be aligned to the strategy.
Jim Collins, the author of “Good to Great”, used a powerful analogy of a bus.
He compares many leaders to bus drivers who just get onto the bus, decide the destination and start driving.
This is akin to developing a strategy and then you start attempting to implement the strategy only to be frustrated before going far because of poor execution.
Collins suggests a different approach. He says that you must first get the wrong people off the bus and then get the right people onto the bus.
He then suggests that you then place the right people who are on the bus in the right seats. After that you can decide where to drive the bus to.
Any strategic bus that is speeding with the wrong people, without capacity and seated in the wrong seats is speeding to doom.
Rewards and measurements are important. At the core we are all selfish. People by their nature are interested in themselves.
It is important that measures, goals and rewards are aligned with the strategy developed. Incentives that are not linked to strategic direction encourage the strategy to be ignored.
An un-resourced strategy is a failing strategy. Some organisations have strategy sessions and then unrelated budgeting sessions. Unless a strategy and the budgeting process work in tandem, nothing meaningful will arise from the strategy. A strategy without a supportive budget has no legs. A strategy that does not speak the language of money fluently will soon be mute.
External hidden liabilities
Apart from internal issues like structure and culture there are external liabilities that could easily hold your strategy back.
External liabilities include your brand’s authority and positioning, the supplier and customer relationships, your distribution channels and key alliances.
Brands simplify choices and are an important competitive weapon. A brand that has no authority is a weak lever.
A brand with confused positioning is a limiter. Branding and strategy should not be two separate postures.
Customer readiness is an important invisible liability. Move too early and you leave your customers behind.
Move too late and your customers leave you behind. Do not move at all and all you will be is a pillar of salt.
Any organisation can dream all it wants, the real test is customer acceptance and readiness. Many strategies have everyone else’ voice except the voice of the customer. An ignored voice of the customer could be a hidden liability. Quiet customers are not foolish.
Without a strategy you have no direction. Set your strategy and then look at your invisible balance sheet.
In particular do not ignore the hidden liabilities because they are a hidden tax on your strategy. Keep stretching and challenging your limits. Refuse to park in the past and become irrelevant. Run fast, but guard your pace to ensure that those that you must run with are with you.
Run far but never forget that what is hidden will never be hidden forever.
Committed to your greatness
Milton Kamwendo is a cutting-edge international transformational and inspirational speaker, author and coach. He is a strategy and innovation consultant and leadership coach. His life purpose is to inspire people to release the greatness trapped in them. He can be reached at [email protected] and WhatsApp number 0772422634.
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