Although the techniques for being a great boss apply widely across different firms and industries, we don't want to suggest that there are any universal truths about how you should act. Good management is situational, which means that the right thing to do depends on the particular needs of the people we are managing and the specific circumstances we are facing. For example, you need to manage introverts and extroverts in a subtly different way, and your style of management in a crisis will be different from your style when times are good.

In this last part of the book, we therefore shift toward a more outward focus. We describe a range of tools and frameworks that help you navigate your way through the wider organization and the world beyond. If you have a good understanding of this external context, you will be able to make better choices in terms of how to focus your own attention and how to prioritize the time of your team members. You will also impress those above you, which can only be good for your longer-term career prospects.

This section is about improving your overall commercial and strategic awareness. We could put an entire book together on this topic, but in the interests of space, we focus on five particular techniques.

Every business needs a strategy, by which we mean an explicit set of choices about where and how to compete. Strategy is how a business translates its mission or purpose into practical operational choices. These choices then empower people across the organization to align their day-to-day work in a focused and efficient way.

The starting point in developing a strategy is to understand the organization's mission and values (#81), which clarify why it exists in the first place and what success looks like. The next step is to develop a point of view on the changing business environment, which is best done using the PESTLIED framework (#82). Devising a strategy then involves two further pieces of analysis. One is to understand customer needs, how competitors currently serve them, and what your business might do differently, which is a piece of analysis that is best done using value curves (#83). The other is to understand your organization's core competencies and how you can fully take advantage of these (#84). A useful way of bringing together and summarizing these external and internal perspectives is to use SWOT analysis (#85).

81. Understand Your Organization's Mission and Values (Mission Statements)

We have seen many times in this book how important it is for people to have meaning and purpose in their lives, and we have seen how you, as a manager, can provide meaning to others through the way you lead them.

Most organizations have some form of mission statement that reflects its guiding purpose – we quoted Ratan Tata, the patriarch of India's Tata Group, earlier when he called it a “spiritual and moral call to action.” When mission statements are well crafted, they express why the organization exists – they provide guidance to employees and other stakeholders in terms of whom the organization serves and what it does to help these people. Such statements articulate the organization's “good character” to the outside world.

A mission statement is important not only as a statement to the outside world but also as a way of clarifying goals and priorities inside the organization. Everything that happens internally, as measured through formal goals and objectives, should be linked back to the broader mission. The mission ultimately guides the work that individuals do, it channels decision making and allocation of resources, and, as we saw in #77, it influences managers' judgment as to whether people's behaviors are right or wrong.

If you are in a senior executive role, you may find yourself involved in developing or refreshing your organization's mission statement. The process for doing this involves conversations with a wide variety of stakeholders – employees, customers, shareholders, suppliers, communities in which you work – so that you can understand how your organization is currently perceived. It then involves some brainstorming and discussion among a smaller group of senior people to develop an integrated point of view. Remember, a good mission statement should be grounded in reality (i.e. consistent with current views) but also aspirational (i.e. suggesting a desired future state that is better than today).

The outcome of this process is a simple summary statement, typically structured as a goal expressed in the first-person plural (“Our mission is to…”). Don't worry about making the wording elegant – it's more important that there is some real substance to the statement – for example, think of Google's desire to organize the world's information to make it universally accessible and useful or IKEA's mission to make a better everyday life for the many people.

Once the mission statement is in place, it is important that you as a manager understand how you (and your team) can contribute to delivering it. It's also important to understand the organization's values – the ways of doing things that people think are important – that underpin the mission. If you manage according to these values, you are likely to be seen as a good corporate citizen. What's more, if things go wrong as a result of following the mission honestly and applying these values, you have something of a defense that you can rely on.

If, however, you act in a way that goes against these things, whether deliberately or ignorantly, you can expect negative consequences. This will particularly be the case if something goes wrong as a result!

82. Scan for External Changes That May Impact Your Organization (PESTLIED Analysis)

A good mission statement has a timeless quality – it addresses some sort of societal need that should still be valid decades from now. But the business world is evolving very rapidly, and the choices your organization makes in terms of how it adapts while continuing to deliver on its broader mission have to take these changes into account. This is why you need to develop an awareness of the wider business world beyond your organization's boundaries.

The acronym PESTLIED (political–economic–sociocultural–technological–legal–international–environmental–demographic) is very useful for this. It is a handy way of structuring your analysis of the biggest drivers of change affecting the business world today, and it helps you think about the most important changes that could affect you in the future. To use PESTLIED, bring together people with a good knowledge and experience of the organization and the outside world, along with people with specialist knowledge of the relevant domains. Then brainstorm (#48) the most important trends in each of the PESTLIED areas:

• Political – How is government policy evolving, and how is it likely to change? Are levels of taxation, funding, or subsidy likely to increase or decrease? Is the ethical or corporate social responsibility climate likely to change? When are your country's next elections, and what is the outcome of these likely to be? And are other political factors relevant?
• Economic – How stable is the economy, and is it growing or contracting? What is happening to exchange rates, the supply of credit, and the price of commodities? How much disposable income do people or companies in your market have? How easy will it be to recruit a skilled workforce? And are other economic factors relevant?
• Sociocultural – How are levels of education, health, and social mobility changing? How is technology impacting social change? How are attitudes to human rights, religion, politics, and culture changing? And are there other sociocultural factors that will affect your organization?
• Technological – What new technologies are emerging that will impact your organization or your industry? What technologies are your competitors developing, and what patents are they registering? Are there technology hubs or educational or governmental programs you could align with? And are there other technological factors you should consider?
• Legal – Are property rights and the rule of law secure? Are any proposed changes to law, standards, consumer protection legislation, employment rights, or business regulation likely to impact your organization? Are competition or monopoly rules likely to change? And are other legal factors relevant?
• International – Are security alliances stable, or is there a threat of serious instability? What is happening with respect to regional trading blocs or political entities? What is likely to happen with respect to tariffs, sanctions, and the free flow of finance, goods, and services? And are other international factors changing?
• Environmental – How are climate change, climate legislation, and renewable energy technologies likely to affect your organization? Is clean air or pollution likely to be an issue for your business or for technologies you use? Are there other environmental factors that are relevant?
• Demographic – What shape is the country's population pyramid, how is this likely to change, and what does this mean? What is happening to immigration and emigration, and what ability is there to bring in foreign workers? What other demographic factors are relevant to your business?

Having done this brainstorming, you'll likely end up with several long lists of the changes going on around you. Bring these together into affinity groups (see the link to affinity diagrams below) and then prioritize your results to identify, say, the top 10 changes most likely to affect you.

Then, for each of these changes, ask, “So what does this mean for us?” several times over until you've explored its full potential consequences for your organization. Scenario analysis, which we looked at in #46, can also be very useful here.

Source: Adapted from Harding and Long 1998.

83. Understand How Companies Compete in Your Market (Value Curves)

At the heart of business strategy is the concept of differentiation – the idea that your business should offer a product or service that, compared to the offerings of your competitors, is sufficiently distinctive and valuable that customers will pay a premium for it.

There are many ways of analyzing competitive positioning. The one we recommend is called value curves, as described by W. Chan Kim and Renée Mauborgne in their 1997 Harvard Business Review article “Value Innovation: The Strategic Logic of High Growth.”

Value curves help you understand the competitive factors that matter most in your market, how your competitors are addressing these, and what you can do to develop a distinctive offering (or unique sales proposition, USP) that your customers will value.

USPs are important from a sales and marketing perspective for helping customers understand why they should buy your product, but they are also a key driver of business strategy in that they highlight capabilities that you need to focus on, defend, and enhance.

You can see an example of a value curve in Figure 15.1 showing competition between a budget airline and a traditional airline.

This shows the range of things that customers value on the horizontal axis and the extent to which a particular business delivers on these values on the vertical axis. In this example, the traditional airline offers a relatively luxurious service to its customers and flies into and out of convenient airports. By contrast, the budget airline is less convenient and offers a very basic service, but it does this very cheaply and then sells ancillary services as add-ons.

So, how can you use value curves to improve your business's competitive position? First, identify the key factors of competition, that is, the things that customers value, and then plot lines for your own company and for your key competitors. Then think about where you want to be. Start with where you are now, and ask yourself these questions:

• What factors can you reduce well below industry standards while still meeting the needs of a segment of your market? (See the link below for more information on segmentation.)
• What factors can be eliminated altogether?
• What new factors can be created or added that people in your market will value, thus making your product more attractive?
• What factors could you increase to enhance your competitive edge?

Even if you are not involved in decisions about strategy, it's important to understand the factors of competition in your industry and, in particular, the ones that your business is focusing on. This will affect the decisions you make and help you ensure that these are aligned with the overall strategy of your organization.

84. Understand Your Organization's Core Competencies

Although a clear understanding of customer needs and competitive positioning is central to a good business strategy, there is a third element that you should always take into account, namely the internal resources and capabilities of your organization.

A good understanding of your capabilities helps you figure out what you can actually deliver – for example, it makes no sense to position your organization as a high-end service provider if you have poorly trained and minimum wage employees. Understanding your capabilities can also help you define new products or services that might be developed in the future.

A useful way to think about this is to use the notion of core competence, developed by C.K. Prahalad and Gary Hamel in their classic 1990 paper “The Core Competence of the Corporation.” The idea is that organizations should focus on improving the things that they do uniquely well and that are most valuable to customers – their core competencies – and should outsource the things they don't do so well to other organizations.

By doing this, a business will create distinctive products and services that command a premium position in the market and will avoid the “me too” world of commodity products that compete only on price.

So, what are the core competencies of your organization? You can probably come up with a long list of things that your company does well. Prahalad and Hamel offer three tests that you can use to separate “nice-to-have” capabilities from genuine core competencies:

1. Breadth of application – The core competence needs to be something that can be applied to many different markets or generate a range of potentially successful products. This breadth allows you to sustain growth beyond your initial market success.
2. Relevance – The competence needs to be valuable to customers in a direct or indirect way. Competencies often lose their significance over time. For example, many traditional retailers had competencies in store location and design, but these became increasingly irrelevant as online retailing took off.
3. Difficulty of imitation – The competence needs to be something that is hard for other organizations to imitate; otherwise, your advantage will be quickly eroded.

Often, you'll find that your most important competencies are actually bundles of related things rather than one narrow and specific thing. A well-known example is IKEA, which has developed a core competence in user-friendly furniture design through a combination of deep market knowledge, skilled designers, well-refined business processes, and strong relationships with component suppliers.

So, how can you use the idea of core competencies to improve your business and to advance your own career? Do the former by identifying competencies that will make the greatest positive difference to your organization's future and by looking for opportunities to develop them further.

From a personal career perspective, it pays to align your work and your self-development with your organization's core competencies. There's little point in becoming an in-house expert in an area that your company doesn't particularly care about (and may ultimately outsource) when you could use the same amount of effort to develop skills that help you succeed in a highly visible, business-critical area.

Source: Adapted from Prahalad and Gary 1990.

85. Organizational Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis)

We looked at personal SWOT analysis in Chapter 1 as a great way of understanding your personal strengths and thinking about which career direction you should take.

It's also useful in an organizational context as a way of thinking about what your business does well and what sort of opportunities it should focus on and as a way of exploring weaknesses and countering the threats it faces. You can think of SWOT as a summary analysis of all the different elements that make up a business strategy. Strengths and weaknesses are linked to the resources and capabilities of the organization (#84), whereas opportunities and threats are linked to the external trends in the environment (#82) and the offerings of competitors (#83).

The fundamental approach is the same, whether you use SWOT analysis on a personal or an organizational level, so we won't repeat ourselves here. However, you need to ask slightly different questions at the organizational level of analysis:

• Strengths – What does your organization do better than its competitors? What unique, highest-quality, or lowest-cost resources can you draw on that they can't? What core competencies (#84) do you have access to that they don't?
• Weaknesses – Why do you lose sales to competitors? Where do they enjoy cost advantages that you don't have or access to resources that are not available to you? Where are customers unhappy with your offerings, and what do they complain about? And where do you struggle to deliver effectively? Now's the time to face any unpleasant truths so that you can do something about them.
• Opportunities – When you look at your strengths, what good opportunities do these open to you? And what opportunities would arise if you could eliminate your weaknesses? What opportunities for growth do you see in your market that you are particularly well-placed to exploit? And what relevant changes in technology, societal trends, economic environment, or government policy can you see that create good opportunities (#82)?
• Threats – What are your competitors doing that you should be worrying about? Are standards changing for your type of work, or are expectations of it increasing? And, as with opportunities, are there changes in technology, societal trends, economic environment, or government policy that could cause you problems?

If you're involved with setting strategy for your organization, SWOT analysis is often a useful starting point, and if you're a business, you can use it to understand your competitors as well as your own organization. Even if you are not involved at the strategic level, the insights from SWOT analysis will complement those you get by thinking about core competencies and value curves. This will help you make better decisions and keep your work aligned with where the organization is headed.