How Your Board Can Create Your Organization‘s Central Idea and Avoid Blockbuster’s Fate
Your Board of Directors need to do this before you develop your annual strategy.
Your board needs to do this before you develop your annual strategy. And why do so many boards get it wrong? Don’t let your board be one of them.
Hi everyone. This is Michael Barrick, founder of Board Director, the board portal for high-performing boards.
There is an old proverb; Where there is no vision, the people perish: and that is very true for companies as well. Without a vision, without a central idea, the company will perish.
Blockbuster went from over 9,000 worldwide locations at its peak in 2004 to just one in 2019. Blockbuster lost almost everything seemingly overnight.
From Forbes.com article, “A Look Back At Why Blockbuster Really Failed And Why It Didn’t Have To”
“In 2000, Reed Hastings, the founder of a fledgling company called Netflix, flew to Dallas to propose a partnership to Blockbuster CEO John Antioco and his team. The idea was that Netflix would run Blockbuster’s brand online and Antioco’s firm would promote Netflix in its stores. Hastings got laughed out of the room.”
“We all know what happened next. Blockbuster went bankrupt in 2010 and Netflix is now a $28 billion-dollar company, about ten times what Blockbuster was worth. Today, Hastings is widely hailed as a genius, and Antioco is considered a fool. Yet that is far too facile an explanation.
“Blockbuster failed because its leadership had built a well-oiled operational machine. It was a very tight network that could execute with extreme efficiency but was poorly suited to let in new information. Antioco’s fatal flaw wasn’t one of intelligence or capability, but a failure to understand the networks that would determine his fate.”
How can your CEO develop an annual strategy if it doesn’t have a clear mission, clear vision, and its annual plan doesn’t include potential risks?
The first step your board needs to do is to define the central idea of your company.
You see, the central idea is the DNA of your company. It’s your north star, it’s your guiding light.
So what is a central idea and how do we create one?
Let’s dive into the book by Harvard Business Review Press, “Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way.”
“Boards should author a short, but definitive statement with clear and persuasive language setting forth the central idea of why the company exists, how the company will compete ethically and win, and linkages between the resulting strategies, components, including specific and sequenced actions that would be taken to execute consistently. That is the core of a central idea, and that is one of the board’s premier duties of leadership.” Your central idea must be clear and compelling for everyone in your organization, starting from the top of your board of directors, to your CEO, all the way down to your employees.”
“The central idea is the bedrock on which the enterprise is raised and how its resources are spent. The central idea is practical, readily translated into action. It is simple, tangible, graphic, not lofty.”
“It draws and melds strategy, execution, and capital and decoupling them from one another.”
Board of Director’s Checklist for the Central Idea:
- Is the central idea clear and compelling?
- What is distinctive and compelling about the central idea?
- How sound is the central idea’s value-creating proposition?
- What is the company’s advantage over each of its primary competitors?
- What are the risks, and how will they be mitigated?
- Has the chief executive considered all the viable alternatives?
- How good is the strategic fit between company and leadership?
- Is the central idea tracked and measured?
Your board and management team must define its risk management goals and risk management objectives and define your organization’s shared vision. Once the shared vision is articulated, overall risk management goals and objectives must be defined.
While a vision statement is often aspirational, the goals and objectives should ordinarily describe in simple terms what is to be accomplished. They should be actionable by the organization. They should be defined in the context of the organization’s business strategy.
Here’s how to write the three main components of the central idea. The mission statement, the vision statement, and the value statement. Listen, my attempt to show you how to do this with pale in comparison to Erica Olsen’s videos from OnStrategyHQ.
“So starting with our mission, I’d like to start it with “our mission”, because it gives us a place to go and keeps us thinking about the mission. You might get rid of it later, but start it there.”
“It has a verb with present tense, to organize. We explain what we do, organize the world’s information. For whom in this case, the world. And what’s the benefit to us existing? What’s the benefit to the world? To make information universally accessible and useful. Really straightforward. We know mission statements are not that easy to write. So here’s a checklist to make sure that yours is great.”
“Starting with it needs to be original. This is really clearly original to Google. They didn’t rip it off from somebody else. It doesn’t sound like anybody else’s mission statement. It sounds like Google’s mission statement. So make sure yours is original.”
“It’s foundational. I already mentioned that, but you don’t want to change it all the time. Maybe a few word tweaks, but ideally not. You want a mission statement that sustains over time. So it needs to be foundational. Connect with staff.”
“A great mission statement and you know yours is great when every single staff member wakes up in the morning and knows that their purpose and the reason they come to work every day is expressed in your mission statement.
“And to do that, it needs to be memorable, memorable means short and concise. And of course, that’s the balance to strike with a great mission statement. So here’s your litmus test. It needs to fit on a t-shirt and your staff would wear it. If it achieves those two goals, you know you’ve got a great mission statement.”
So how do you write one?
“Sometimes it can be hard. So it’s great to get input or ideas from your organization. So gather staff input, if you’d like via a survey or maybe focus groups. Take all that information, synthesize it down and create a couple of versions. You can do it yourself or use one of those folks in your organization who loves to copyright and have them write a couple of different versions. Take those versions and either has your planning team pick one or put them out to your organization and have people vote on them. So that simple process will help you not go in all kinds of different directions and spend forever doing mission statement development.”