Managing realistically

RAM CHARAN

The fact is that the strategic plans of most companies don’t work. A key reason why is that little time, if any, is spent harmonising the facts of the external environment, the financial targets that are set and the internal capabilities of the business so that these discrete activities work together… Your business model is incomplete and ineffective unless you debate and harmonise your external environment and financial targets with your internal capabilities through a process we call “iteration”.

As we will show throughout the book, iteration is not a one-shot meeting that gathers up key people for a review, but a mentally challenging recurring activity to get things right.

Once you start to practice it, you’ve confronted reality and built a platform for profitability, growth and prosperity in synch with what is going on in the world. The process of iteration makes you confront the world the way it really is, not how you would like it to be. It is intimately tied to the idea of “business savvy”… Our analysis of business savvy shows that its essence is the use, intuitively or explicitly, of the business model in choosing where and how to make money.

People with business savvy have specific financial targets in their minds. These targets are the reference point for everything they do…such as operating processes that will enable them to capitalise on the opportunities. Guess what? People with a well-developed sense of business seldom have astrategy ahead of time.

From “Confronting Reality”