There are many ingredients required to develop and execute a successful strategy; none more important than discipline. Disruptive innovations that reshape an industry are rare. Most innovation is incremental, and successful execution is a function of hard work, time and patience.

Jeff Bezos’s insight about selling books online (which resulted in the formation of Amazon) was conceived while he worked as an analyst at an investment bank. His conversion of strategy into tactics will go down in history, as Amazon took on all the best in retailing, seemingly overnight.

Bezos remains hungry and focused. Amazon’s top 5 managers meet every Tuesday for four hours to review and rebake strategy. Not once a year, not once a quarter – every Tuesday. Twice a year his team has a two day off-site to think about “big ideas” that may require 2-3 years to implement.

Alan Kay once said, “Perspective is worth 80 IQ points.”  Where the rubber meets the road in strategy is maintaining the right perspective – the intersection of strategic thinking and tactical execution.  Business owners can easily lose perspective when they spend too much time muddled in solving day to day operational problems.

To maintain strategic discipline:

Create a strategy committee, task force or executive management team (EMT).

Each member should have a role in strategy formation and implementation and be accountable for key initiatives of the company. Meet with the EMT monthly to review progress versus goals.

Engage mid-management in strategy formation and execution

Mid-managers are often insightful in identifying latent needs as they are often closer to the customer than their senior counterparts.  Many entrepreneurial companies lack management depth. They are well served to include mid-managers in executing strategy.  Provide learning opportunities for junior managers by delegating tasks for them to complete.

Hold your teams accountable

Results oriented organizations are built from the ground up to support execution, rigorously using scorecards that drill down to individual performance. Best-in-class organizations orchestrate goal setting for individuals that align with the broader goals of the organizations.

Include outside variables in your dashboard

While most successful companies measure internal activities, few score external variables. Seek out external metrics that may be predictive of future demand. Leverage the data to plan capacity, labor, facility expansion, procurement of equipment, etc.

Bezos said, “We are willing to plant seeds and wait a long time for them to turn into trees. Every new business we’ve ever engaged in has initially been seen as a distraction by people externally and sometimes even internally.”

Great strategies convert into initiatives that become the unifying vision of the strategically successful organization. Ideas that lack resources, energy and concentration are just a distraction.

Being Opportunistic in a Volatile World

Last week my post drew considerable attention, perhaps because of its shock value at a time when the news was truly shocking. While the tsunami was a natural disaster, the response on the part of the Tokyo Electric Company was a human calamity. Lack of preparation will invariably lead to unintended consequences, if you are managing a nuclear power plant or any other business.

The reverse is also true. The entrepreneur capable of understanding seemingly unrelated external forces, and weaving them into a thoughtful strategy, will clearly realize strategic advantage. How might the strategist consider social, technological, economic, ecological and political factors to gain insight on how to take advantage of ever changing market conditions?

Scenario planning is a methodology whereby the entrepreneur considers converging factors that (in combination) creates a tipping point. Consider some of the following predictions, based on facts already in evidence today.

In the next decade, we are likely to see:

Predicative Modeling-Cloud computing enables the migration and cross-referencing of large institutional databases.  For example, actuaries, using sophisticated algorithms are able to model ailments based on lifestyle choices monitored in real time. They are able to calculate your risk of a heart attack based on which smoothie you tend to order at Jamba Juice, your frequency of exercise, prescriptions you use, etc. Offered as a benefit of a health care plan, the member is offered incentives to opt-in and receive preferential rates. Such tools slow down rampant health care inflation.

A Cashless Society-The majority of transactions amongst big banks are managed by exchanges where no money actually changes hands. Coins of small denomination are nearing extinction. Today, you can download an iPhone app that serves as a debit card, and can be swiped within Starbucks locations.  For most transactions, cash is already irrelevant.

Smart Infrastructure- Automobiles come preinstalled with all of the features of an iPad (the 2011 Hyundai Equus will come with one) and all the benefits of the internet. Smart grids control the flow of traffic, directing drivers to particular lanes at a given speed to optimize drive time and reduce accidents. Traffic signals are regulated based on traffic volume. Sensors predict bridge and rail failures.

Of course, rapid change will occur in every industry, and the strategist must weigh various opportunities based on an organization’s ability to take advantage of them. As a general rule, organizations should seek to achieve scale and reach within its core (at least 30% market share) before expanding into new endeavors. As Jim Collins points out in his sequel to Good to Great (How the Mighty Fall), many companies fail because of an “Undisciplined Pursuit of More”.  In their zeal for diversification they often leap too far from their core competency.

Each opportunity must be assessed within the context of the organization’s resources, bandwidth, and human capital.  For every opportunity there is a cost, and an opportunity cost. To pursue any new opportunity an organization must leverage resources which dilutes focus on the core business.  Choose your opportunities carefully.

This week, I want to expound on a series of unrelated events shaping our world:

Last year, a deluge of rain in Australia and Canada, and drought in Argentina and Russia sparked a worldwide rise in food prices.  On Dec. 17^th, after months of poor supply, Tunisian produce vendor Mohammed Bouazizi was mugged by police and then set himself on fire in protest.  Reaction to his plight set off a revolt in the Middle East. Beyond the radar to us overly indulgent Americans is that the world is on the verge of a global food shortage.

Ironically, the U.S. growers have reaped the rewards of higher prices for U.S crops and futures contracts. Wheat prices were up as much as 74%, (corn 87%[i]) and net farm income is up 20% this year. Demand is rising for dairy, meat and poultry to support a burgeoning global middle class.[ii] Spring planting of key crops will dictate food prices later in 2011 but farmers may be hesitant to plant in a period of high fuel and fertilizer costs.

While unrest continues throughout the Middle East, social states who provide strong entitlements such as UAB, Kuwait and Oman will likely not be threatened. Similar protests in oil rich Iran or Iraq would be more unsettling to world markets.

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As Motorola revealed its Xoom tablet this week, the Microsoft vs. Apple war took on a new dimension. The real war may be tablet vs. PC as a new generation of devices operating on Honeycomb-Android (Google) and other operating systems hit the market[iii].  Electronics makers are currently developing over 100 designs of new models, many of which sport more business friendly applications.

The second generation of iPads has been somewhat under wraps but is expected to be lighter, faster and include a camera and video conferencing capabilities. Apple’s advantage is its burgeoning iTunes and App Exchange platform.  Apple only spends about 7% of revenue on R&D, about half of what Google and Microsoft[iv] spend, providing a significant competitive advantage. I was in a meeting last week with 7 other people; everyone had a tablet.

Meanwhile, Microsoft (Office 365) and others are developing new Small Business Enterprise applications to better leverage the combination of mobile devices and low cost cloud computing options. The paradigm shift to storing all documents on the internet is emerging as a revolution coined as “cloud productivity.”

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Cisco’s new “telepresense” conferencing systems are all the rage, providing a far more realistic teleconference then the 1^st generation systems. With concerns over fuel costs and the environment, more companies may be moving towards adopting such technologies.

If you want to see an amazing video on future technologies, see “A Day Made of Glass…Made Possible by Corning” on YouTube.

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It is expected that the U.S. post office will eliminate Saturday delivery by the end of 2012.

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It is “hurry up and wait” for small businesses looking to minimize their insurance costs.  The health care bill requires that each state set up “health care exchanges” by 2014[v]. Most states are dragging their feet, and waiting to see what legal challenges emerge.  California has already pushed through legislation but other states are dragging behind.

It is expected that “exchanges” once enacted may actually bring about market conditions that will lower costs for small groups (in the neighborhood of 50 lives)  who will be better able to leverage buying power and have more predictable premiums. Let us pray.

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[i] Hungry for a Solution  Bloomberg Business Week 2/11/11

[ii] The Kiplinger Letter Vol 88 No.

[iii] Motorola’s Xoom Starts Tablet Wars by Walter Mossberg WSJ 2/24/11

[iv] Mobile Wars Bloomberg Business Week 2/21/11

[v] The Kiplinger Letter Vol. 88, No. 7