Personal Finance

Smart thinking is about simplicity, strategy, adapting

finance

Summary

  • First stride forward is getting clear in one’s thoughts, following three straightforward steps: simplify, strategise and adapt.
  • Whether creating a new business plan, or injecting a dose of clear thinking on how to address a business problem, it helps to follow these three steps.

“To get to the top, you pretty much have to do what … no one’s doing” writes Robin Sharma. To be in the top 5percent of achievers, one has to be ready to recognise — and act on — what 95 percent of people miss. What is certain is that uncertainty and volatility are on the menu, served perhaps with a cool glass of Corona, that thankfully, is becoming increasingly scarce.

First stride forward is getting clear in one’s thoughts, following three straightforward steps: simplify, strategise and adapt. Whether creating a new business plan, or injecting a dose of clear thinking on how to address a business problem, it helps to follow these three steps.

On the savannah of Simplify, it’s important to clear out the confusing undergrowth, and focus on the absolute essentials. In the mountains of Strategy, one has to chart out the path through the valleys and peaks.

Faced with the constantly shifting trade winds, on the seas of Adapt, to make progress it requires an ability to quickly change tack, to pivot.

Simplify

Time to clear out the clutter, weed out the garden of messy thinking. Strange thing is: simple is harder than complex. Now there is a need to cut through the confusing complexity, and drill down to the essentials of the business problem at hand.

“A well defined problem is 90 percent solved” is how Albert Einstein expressed it. Make the distinction between symptoms and the root cause of the problem, using a visual problem logic tree. Sit down with your management team to reach a Quaker meeting like consensus on what the problems are.

One way to begin is to have everyone write [in confidence] on index cards what they think are the problems. Then post them on the wall and cluster theme by theme. With discussion, you will soon be able to narrow it down.

Paradox is that it easy to be confusing and long winded, but much more difficult to get to the heart of the matter. This is not something you do in your cubicle, it’s a process, and the answers may come to you at the most unexpected of moments.

Aim for managers is to get their thinking clean, to reach a statement of Zen like simplicity. Outcome in this first step is a clear and simple problem statement. Likely, that there is one overriding issue that dominates everything. Ideally, it may be possible to limit the problem statement to three items. Simplicity breeds clarity, leading to the next step.

Strategy

Strategy like elegant simplicity is a rare earth commodity. There is an ‘ah ha’ eureka moment, when you make the distinction between an operational plan, and a strategy. Very few businesses and NGOs have a strategy.

What they have is a ’to do’ list, like a plan on how to get from point A to B, with an annual rolling budget. Reason that operational planning dominates in that creating a profitable strategy requires hard work and insight. Good strategy is often counter intuitive, it’s not the obvious.

Strategy at its heart has what Richard Rumelt calls the ‘kernel’ — the essence – supported by diagnosis, guiding policy and coherent action.

For both the large corporate and the small entrepreneurs, strategy is more about being resourceful, making creative use of the limited financial, material and people resources at hand. One of the best examples of strategy comes from history: How an astute 23 year old Alexander the Great, with an army of 50,000 defeated Darius with his forces of 1 million. Click on YouTube to see how this stroke of brilliance was achieved.

Adapt

“It is not the strongest of the species that survives, nor the most intelligent. It is the one most adaptable to change” suggested Charles Darwin.

In the last ten years, ‘pivot’ is a word that has become part of everyday business language. That ability to shift, to make a change in direction on the turbulent ocean called Adapt.

Eric Ries, author of The Lean Start Up writes about “...a seemingly simple question: are we making sufficient progress to believe our original strategic hypothesis is correct, or do we need to make a change?” That change is called a pivot, a structured course correction, based on hypothesis, a best guess on what one thinks is happening.

Who does not preach about change and the need to adapt ? But why is it that we are often so resistant to making that change in a business, or more personal setting ?

A large part of the reason is ego, and yes, corporates like the small business person have egos. Ego consumes a tremendous amount of energy and wastes resources. That desire to be right can be all consuming, where it’s easy to fall victim to the ‘sunk cost fallacy’, afraid to shift the approach, given the size of the investment already made.

Yes, it’s important to be goal oriented and have a sense of grit, determination, but sometimes one has to admit one was wrong. All this is a balancing act between an ability to aim to achieve set targets, and to have the acuity of mind to realise something is not right. You can’t push the river. Trust your intuition. Deepak Chopra’s tiny book: The Seven Secret Spiritual Laws of Success is an eye opener.

And so, as the business adapts and evolves, one goes through the cycle again. Back to simplify, seeing what worked and what did not, and again trying to be a bit of a minimalist, trying to focus on just the essentials. More formal study of business and management has been in play for roughly the last 100 years.

In Kenya, in the last 20 years, since the explosion of the alternate reality of the internet, answers are there in abundance. In business, what can’t you find the answer to via Google ? Future progress lies not so much with those who find the answers, but more with those who can ask the right questions.

Applying this three step process can help set the framework, the supporting scaffolding for asking the right questions. “Education is kindling of a flame, not the filling of the vessel” was how Greek philosopher Socrates said it.