Tuesday, November 21, 2017

Strategic Planning Analogy #574: Don’t Be a Jack Strategist


THE STORY
Early in my career I worked for a retailer who was considering expansion into Utah. The company was concerned, because most people in Utah at the time were Mormons (members of the Jesus Christ of the Latter Day Saints religion, or LDS). We did not know how the culture of the Mormon religion would impact our success. I was given the task of investigating this concern.

I found out that, yes, the majority of those in Utah claimed to be Mormons. And yes, many of them took their religion very seriously. But there was also a very large percentage of these Mormons who were referred to as “Jack Mormons.”

A Jack Mormon is a baptized member of the LDS Church who rarely or never practices the religion, but is still friendly toward the church. Alternatively, it can be used to refer to someone that is of Mormon descent but unbaptized or non-religious. For these people, the culture of the outside world has more influence on how they lived their lives than the teachings of the Mormon Church.

Given the preponderance of Jack Mormons in Utah (especially in Salt Lake City), the culture in Utah was not as different from the rest of the western US as one might originally think. The differences were more subtle. And they tended to be something that would benefit our company. So we expanded into Utah and had success.


THE ANALOGY
This phenomenon is not just limited to the LDS Church. Most religions have these two types of adherents: the zealots and the Jacks. The zealots become fully dedicated to the religion and are transformed. All that they think, do and say is influenced by the teachings of the religion. Then there are the “Jacks,” the ones who claim the religion in name, but are only minimally influenced by it.

The zealots are the ones that are so passionate for their beliefs that they go out and try to change the world. These are the ones who impact the culture around them. Just look at the zealots today in Islam. People may not agree about whether their impact is good or bad, but the Islam zealots are definitely having an impact on the world.

By contrast, the Jacks are more influenced by the outside culture than that of their religion. They just sort of drift along and just do the minimum necessary to keep from getting kicked out of the church.

Employees have a similar types of relationships with their company and its strategy. Some are strategy zealots, who are passionate about the strategy. Everything they think, do and say is highly influenced by the strategy.

Other employees are only “Jack Strategists.” They may claim to believe in the company strategy, but they act as if it doesn’t exist. The outside world influences their actions more than the internal strategy.


THE PRINCIPLE
The principle here is that the role of the strategist does not stop when the strategy is completed. The strategist needs to go to the next step and create a company full of zealots for the strategy.

The Benefits of Having Strategy Zealots
There are three major benefits to having a company full of employees who are zealots for the strategy. First, strategy zealots are better employees than Jack strategists. The strategy zealot has passion for the company and what it is trying to do through its strategy. For the zealot, their occupation becomes more than just a job. It becomes a mission. The strategy zealot will work harder and longer to accomplish the strategy than others, because of this passion for the mission.

By contrast, the Jack strategist is mostly at the company just to get a paycheck. They work because they need to, not because they want to. Their passion centers more around their life outside of work than inside of work. They will essentially ignore the strategy and just do what is in their own personal best interest. There is not enough money in the company to afford to pay the Jack strategists to be as incented to work as hard as the strategy zealots.

This is one of the advantages of companies like Google. Technology zealots are drawn to them because they have the reputation of being a place where these types of zealots can thrive. As a result, Google gets to choose from a pool of the best of the best employees.

The second benefit of creating a company full of strategy zealots is that it makes the strategy self-perpetuating. When a company is full of strategy zealots, the strategy group does not have to keep reminding people of the strategy and coming up with ways to get the strategy embedding into the everyday actions of employees. The zealots are already doing that for them. The zealots have already passionately bought into the strategy, so they will naturally keep the strategic momentum going without additional prodding on your part.

The third benefit of a company full of strategic zealots is that it tends to make your company’s brand more desirable to customers. Studies have shown that if all other things are equal, customers prefer to buy products from brands demonstrating a mission to do more than just make a profit. This phenomenon is just getting stronger with each succeeding generation. Zealots will show the world that your company stands for a higher purpose, and will improve customer preference and loyalty to your brand.

Implication for Strategists
Since having strategic zealots is so important to strategic success, creating a company full of these zealots needs to be a part of the role of the strategist. This can take three forms.

1) The Mission Statement

Do you see the mission statement as a bunch of fancy-sounding words that look good on paper or do you see it as the call to a mission that people can be zealous towards? You won’t get people zealous towards your strategy if it has nothing in it to inspire that kind of passion. If your company’s mission is little more than just to make a lot of profits, then you will attract Jack strategists. However, if you can combine profits with attaining a higher purpose, then the zealots will be knocking at your door begging you to hire them.

This year, protestant Christians celebrated the 500th anniversary of when Martin Luther nailed his 95 theses to the door of the church. This began the protestant reformation of Christianity, which changed the world.

If you want a world-changing strategy, you need to think of your mission statement as being more like those 95 theses written by Martin Luther. Think of your strategic writings as something that sets the tone of a new “religious” movement.

2) The Hiring Process

What does your company screen for when looking for new employees? If you’re like most companies, you are screening for people with the skills necessary for the position. But is that really the best way to screen for employees?

People with the requisite skills might be natural zealots, but they may just be “Jack” employees. At some point, it may be irrelevant if the employee has the skills if they do not have the passion to use them to the benefit of the strategy. Therefore, it may be more important to screen for zealousness than to screen for skills.

After all, it has been shown that companies can teach people skills. However, it is almost impossible to teach people passion. As a result, it is easier to hire people with natural passion and teach them the skills than it is to hire those with the skills and teach them to have passion.

So how much input does the strategist have in your company’s hiring process? Are you screening for people who would naturally have more zealousness towards your strategy. If you aren’t, then you are missing a huge opportunity.

3) Strategy “Evangelism”

As mentioned earlier, creating the strategy should be just the beginning of the role of the strategist. The next step is to convert Jack strategy employees into strategy zealots. This is more than just making sure everyone knows what the strategy is. It is making people so believe in the strategy that they are willing to become zealots for it.

Are your strategy meetings more like a church revival meeting or more like a dull review of stacks of words and numbers? Stacks of words and numbers do not inspire zealots. Inspirational stories do. Have you turned your strategy into an inspirational story that motivates zealots?


SUMMARY
Just as there are both dedicated Mormon zealots and Jack Mormons, there are those who are dedicated strategy zealots and “Jack” strategists. Successful companies tend to have a higher proportion of strategy zealots. These zealots make a company more successful because they tend to work harder, they are more committed to following through on attaining the strategy, and they make a company more desirable to its customers.

To get a higher proportion of strategy zealots, strategists need to:

a) Create a Business Mission people can get passionate about;
b) Get their company to screen for zealots during the hiring process; and
c) “Evangelize” their company in order to convert more Jacks into zealots.


FINAL THOUGHTS
There’s an old saying that “Culture eats strategy for lunch.” The implication is that cultural norms have more impact on how your employees act than what your strategy says. Well, that may be true if your company is full of Jack strategists. But if your strategy becomes a true mission, it will form its own culture. The zealots will then make sure that this new culture replaces the old cultural norms. When that happens, strategy will eat culture for lunch.

Monday, October 9, 2017

Strategic Planning Analogy #573: Aldi Adds Frills?


THE STORY
Today I went to the grand re-opening of an Aldi store. As you probably know, the reason for Aldi’s existence is to offer a limited assortment of groceries in a bare-bones, no-frills environment. By cutting all the costs of assortment and frills, they can offer their food cheaper than the competition.

Well, the newly grand-opened Aldi moved the store a little bit more up-market. The fixturing and signage looked a lot nicer. It didn’t feel as “no-frills” as it used to.

What’s this world coming to when a store whose success is based on a no-frills image decides it has to look a lot nicer?


THE ANALOGY
Aldi claims that they need to make their stores nicer because the competition is making it harder for them to provide prices low enough to get enough customers to put up with the low-frills atmosphere. Almost everybody sells groceries at low prices now, so Aldi can’t create a price gap sufficient enough to get lots of people to give up the niceties of the other stores to go to Aldi.

This is typical of a market in maturity. It gets difficult for companies in mature markets to make the old levels of profitability using the old models that made them a success in the first place. So the companies start tinkering with the formula. If they are not careful, the tinkering may end up destroying the business model.

Is there really a place for the “More Upscale No-Frills Store”? I guess we’ll see.

Why should we care about this? Well, the overwhelming majority of companies are in mature businesses. They have pressures to rebuild profitability and growth. Those pressures could lead to the kind of tinkering that—instead of fixing things—ruins things.


THE PRINCIPLE
Since most businesses are in mature businesses, they need to have strategies for maturity. Strategies in maturity aren’t as sexy as strategies for growth industries, so they tend to get less attention than they deserve. As a result, companies may be missing out on how to optimize in a mature business.
The major problems in maturity are threefold:

1) Over Capacity (Too Many Competitors)
Barriers to exit can be so high that mature industries can end up with too much capacity. I saw a statistic a while back that said that there is so much excess manufacturing capacity in the automotive industry that there is no scenario that would allow you to get enough auto sales to have all those factories running near capacity.

Not only is there too much production, but too many brands and companies fighting in the space. When you spread all that overcapacity over too many companies, you end up with a lot of companies that are teetering on the edge of bankruptcy.

2) Too Little Growth
The over-capacity and over-abundance of companies might not be so bad if the market was growing rapidly. Unfortunately, there is very little growth in mature industries. Often, the costs of doing business in the mature industry may be growing faster than sales. This is a formula for disaster.

3) Not Enough Differentiation
By the time you get to maturity, all the weak players are gone. The remaining companies have a quality offering in the marketplace. In fact, the remaining players tend to have fairly similar offerings. They are all good enough to be a viable option, but not different enough to get significant preference over the alternatives. They are almost certainly not different enough to command much of any price premium.

Two Disastrous Outcomes
Low growth, overcapacity and insufficient differentiation often lead to two disastrous outcomes. Either you get into a profit-destroying price war or you make compromising changes to your core strategy that can destroy your reason for being (like trying to be the upscale low-frills alternative). By trying to be more things to more people, you can end up being adequate for many, but best for none.

Better Alternatives
Here are some better alternative strategies when faced with maturity.

Alternative #1: Flee the Industry
Just because an industry is mature does not mean your company needs to be mature. You can shift your portfolio to areas less mature. GE has succeeded for over a century by constantly shifting its portfolio. It routinely leaves problematic mature businesses and adds businesses that are less mature. (I spoke more about this concept here and here).

The more mature an industry gets, the less valuable a company in that industry tends to become. Therefore, if you want to get out, get out early, when you can command the highest price for your business. Early exit is often the best alternative.

Alternative #2: Consolidate the Industry
If you are the market leader, the best approach may be to accelerate the consolidation of the industry. Do what you can to reduce the number of players and the amount of capacity. This often requires buying up a lot of the more marginal players. At the end, you may end up with a near-monopoly. 

Even in a very mature business, you can usually make money if you have a near-monopoly. This was the approach taken by Macy’s in the US. It essentially bought up all the major full-line department store brands, closed a bunch of them down, and converted all the rest under the single brand of Macy’s. Now it has a near-monopoly in the space.

Alternative #3: Move From Mass To Niche
The mass market may be mature, but there may still be great growth and opportunity on the fringes. Fast Food restaurants may be mature, but the upscale niche Shake Shack is growing. Traditional supermarkets may be mature, but the organic/produce/health food niche stores like Sprouts and Fresh Thyme are growing. The traditional automotive market is mature, but the niche taken by Tesla is growing like crazy. The leadership at Proctor & Gamble is trying to move their company further away from the mature mass into the growing niches.

Alternative #4: Create a Mature Infrastructure
There are a lot of costs involved in running a business operating in a growth industry. Many of these costs are no longer necessary when a market hits maturity. Places to cut can include:

·         Extensive marketing organizations, and marketing budgets
·         Extensive sales organizations
·         Large engineering and product development organizations
·         Large R&D departments

You can probably get away with lower-priced executives across the board, too. In essence, you make your headquarters as no frills as Aldi’s stores used to be. By gutting the headquarters, you can now survive on the amount of business and margins a mature market provides.

A few years back, Home Depot got a big bump up in profitability when they decided to essentially no longer build new stores. They got rid of all the costs associated with new store growth (including the cannibalization of sales from older stores). When they eliminated all those costs associated with growth, it all flowed to the bottom line.

In another example, who do you think bought up all the Fast Moving Consumer Product Group brands when the big, bloated companies divested all the marginal and most mature parts of their portfolios several years back? It was the no-frills companies who were built specifically to survive in maturity, like Pinnacle Foods.

This type of strategy has to be more than just cutting costs. It needs to include changing the corporate culture to embrace no-frills management. Otherwise, the costs will just creep back in.


SUMMARY
The conditions of a mature market tend to severely squeeze industry profitability. This can force a company into considering a change to their strategy. But not all change is good change. Bad change is to start price wars or damage your appeal by trying to be everything to everyone and end up not being preferred by anyone. Good change includes strategies like fleeing the industry, consolidating the industry, moving from mass to niche, or redesigning your infrastructure for maturity.


FINAL THOUGHTS
I had stopped writing this blog last year because I thought strategic planning had gotten too mature and did not need this blog any more. However, I got some feedback asking me to bring the blog back, so I will periodically add new blogs. Thanks for your support.

Tuesday, September 12, 2017

Strategic Planning Analogy #572: Outcomes Vs. Objectives


THE STORY
There is a company I know of that desired two outcomes. First, they wanted a product mix skewed towards new products. Second, they wanted high returns on their investments.

So this company turned these desired outcomes into their goals. Then they set metrics around these goals in order to encourage compliance in new products and high returns.
Here’s what they got:
  1. In order to meet the metric of having a high percentage of their products being new, the management discontinued a number of very viable and profitable older products, merely because they were old.
  2. When they looked at the risk profile of their portfolio, they discovered that the riskiness had skyrocketed. As it turns out, high returns tend to come from high risks. By bypassing wonderful projects that would have exceeded their capital to focus on only the highest return options, they horribly skewed their riskiness.

So even though the company tried very hard to focus on the right outcomes, they created an environment which ironically created the wrong outcomes.

THE ANALOGY
Desiring great outcomes is a wonderful thing. There is nothing wrong per se in wanting lots of new innovations and having high returns on investments.

The problem occurred when this company turned their desired outcomes into company objectives.
Objectives are the things you want people in the company to do. Outcomes are net results of what happens in the marketplace based on what you did.

Objectives and outcomes should not be the same thing. When companies try to make them the same thing, they end up like the company in the story: They get lousy objectives and undesirable outcomes.

This distinction is critical for strategic planning. Strategic Planning tends to have a great deal of influence on what are the outcomes and objectives pursued by the company. If strategic planners get this wrong and make them the same, the company is doomed to repeat the errors in the story.

THE PRINCIPLE
The principle here is that if you want great outcomes, you need to have objectives which are different than the outcomes.

Why it’s Wrong To Make Higher Profits an Objective
Let me give you an example. Let’s say you want an outcome of higher profits. In most cases, that is a good outcome to desire. However, the best path to higher profits is rarely to make higher profits your objective.

Here’s what typically happens when you make profits your objective.
  1.       A group of managers go crazy on cost reductions. They’re so busy cutting costs that they ruin your quality or ruin your service or stop investing in the future or have product shortages or miss deadlines, etc.
  2.       Another group tries to get incremental sales at any cost. This usually results in unprofitable price wars, actions which alienate core customers, trying to be a one-size-fits-all solution which results in being a never-the-best-solution-for-any-customer solution, etc.

The problem is that higher profitability is too abstract and too numerical. It leads people to work on moving the numbers rather than doing the things that actually lead to higher profitability. In most cases, enduring higher profits come the following types of activities:

  1.        Having a superior solution to what is being offered in the marketplace.
  2.        Having a unique business model which produces this solution in a way that is both better than other people’s business models AND is difficult for the competition to imitate.
  3.       Having superior access upstream to suppliers/partners and superior access downstream to distributors/customers.
  4.       Having the best employees.
  5.       Having a clear and simple message as to why your offering should be preferred as well as an organization focused on being the best at delivering on the promises of that message.

You don’t see the word “profitability” in any of those activities. However, if you want enduring profitability, these are examples of the types of activities you should be focused on. Therefore, if you have higher profits as your desired outcome, don’t also make it your objective. Instead center your objectives around tasks like those in the second list.

Have the Metrics Match the Objectives, Not the Outcomes
It is a well-known fact that people tend to focus on achieving the metrics which trigger their rewards. If your metrics are focused on the outcome, then you will get the mess we saw in the beginning story. However, if you focus the metrics on the objectives, then you will get people working on the very activities which lead to your desired outcomes.

Yes, I know that outcome-related metrics are typically much easier to set and to measure. Profits are a lot easier to measure than the superiority of a business model. But just because it is easier to do doesn’t make it right.

As we saw in the story above, when you measure “% of product sales that come from products less than 5 years old” you get people eliminating great products merely because they are more than five years old. Although this metric sounds like your outcome, it does not achieve your outcome.

To get the desired outcome, you may need measurements focused more on objectives. It could be something like “the number of products in the innovation pipeline today that are successful launches over the next two years.” Yes, that is a much messier metric, but it gets closer to the core of what you really want people to do to ultimately achieve your outcome.

I worry about this point a lot, because these days a lot of strategic planning departments are housed in finance. Finance people have a natural inclination to want to measure outcomes. That is what a CPA is trained to do. But is the absolute wrong thing for a strategic planner to do. They need to measure the inputs—the things that create the great outputs.

If you are measuring outputs as your metrics, not only are you measuring the wrong things, you have the wrong time frame. By the time you have the outcomes, it is too late. You cannot have any strategic impact on them. Once you know the profits for the year, it is too late to improve them. That’s why you need to measure the tasks or objectives which impact profits.

Wells Fargo
Wells Fargo recently got into a lot of trouble because they did not heed the advice of this blog. Wells Fargo desired the outcome of having a lot of customers with multiple accounts. There are many reasons why this can be a very good outcome. It creates economies of scale and it makes customers a lot stickier (harder for them to leave).

The problem occurred when Wells Fargo made getting customers into multiple accounts the company objective. By placing the major incentives around creating multiple accounts, employees did whatever it took to get those accounts established, including the creation of millions of accounts without the authorization of the customer. The end result was executives losing their jobs, destruction of the quality of the brand name, significant losses (customers and profits), etc.

Instead of having an objective be to create a lot of multiple accounts, the objective should have been to so be in tune with their customer’s needs and desires that the customers willingly want to sign up for those multiple accounts. That could include measuring activities like:

  1.       Finding out what types of additional products the customers want.
  2.       Coming up with more efficient ways to create and deliver these products than other alternatives.
  3.       Making sure the benefits of bundling for the customer are clearly superior to the customer getting these services from multiple suppliers.
  4.       Making sure the portfolio of offerings is consistent with the brand and improves the brand (and does not confuse the customer as to what the brand Wells Fargo stands for).
  5.       Making sure people are not turned away from Wells Fargo due to heavy pressure sales.


SUMMARY
Outcomes and objectives are both important to a business. But that doesn’t mean they are the same thing. Objectives are what you want people to do. Outcomes are the results in the marketplace based on what you have done. Ironically, if you want to achieve your outcomes, you need to develop objectives which are different from your outcomes. And this includes developing your metrics around objectives rather than outcomes. If you don’t, people will chase the wrong numbers in the wrong way and destroy the business.

FINAL THOUGHTS
Getting a company to properly grasp the difference between outcomes and objectives may be the single most important thing a strategic planner can do. I guess we can put that on their list of objectives.

Wednesday, November 30, 2016

Strategic Planning Analogy #571: Creators Vs. Craftsmen



THE STORY
Back in the early 1970s, pianist and composer Claude Bolling had the original idea of recording an album that was a mixture of classical and jazz music. It was to feature Bolling on piano accompanied by someone on flute (with drums in the background).

Bolling was fortunate to get Jean-Pierre Rampal to play the flute part. Rampal was considered to be one of the very best (if not THE very best) classical flute players of his generation.

Bolling showed Rampal the basic music and asked Rampal to do some jazz improvisation around it, like bending the notes or modifying the rhythm. It was reported that Rampal was a gasp at the suggestion and replied something like this:

“I am the world’s greatest flautist and will play your music to perfection. But I do not improvise. If you want me to play in such a manner, you will have to write it into the music.”

So Bolling meticulously incorporated “improvisation” into the musical score. Rampal played it as written and it sounded like improvisation, even though it was anything but.

The album was released in 1976, called “Suite for Flute and Jazz Piano Trio.” It topped the charts for about two years and stayed on the Billboard sales list for 530 weeks (nearly 10 years). It became one of the largest selling albums ever released on a classical music label. Little did most people know that the great jazz parts on flute were not improvisations, but just excellent technical reproductions of a musical score.


THE ANALOGY
You’d think that all great musicians would be great creative artists. After all, what is more creative than music? Well nothing could be further from the truth. Jean-Pierre Rampal was not creative with his flute. He could only play what was put in front of him.

Yes, Rampal was the best at playing the classical flute, but that does not make him creative. It just meant he was a great craftsman. He mastered the craft of playing the flute. That was an excellent skill..but it was not creativity.

Compare Rampal to Ian Anderson, the flute player in the band Jethro Tull. Anderson may not have had the same level of technical craftsman skills as Rampal, but he had extreme levels of creativity. Anderson can get creative sounds out of a flute that virtually no one had done before him. Anderson also wrote all the original music he performed. Anderson was a true creator.

I’ve known many musicians over the years. Many of them are great at their craft, but only a few are what I would consider to be musically creative.

The same is true in cooking. There are people who are excellent at the craft of cooking and can prepare great meals. However, all they can do is follow a recipe. Yes, they follow it to perfection, but they have no aptitude for creativity in the kitchen. Others, can go into the kitchen without a recipe, look at the ingredients in front of them and invent a marvelous new dish from their creative mind. This second type of cook is harder to find.

The point here is that we should never assume that just because someone can do a job at high levels of perfection that they are naturally creative. He or she might just be a great craftsman. Creativity is something very different and the most creative ones may not have the best skills at performance.
This is especially true in the world of business. Top performers in their fields—like operations, sales, accounting, and personnel—may have excellent skills in their particular craft, but in all likelihood, they are not the most creative ones in their organizations.  

Part of the strategic planning process requires creativity. If you load up the strategic planning team with your top performers, you may only end up with a bunch of craftsmen…great people, but not the ones that can invent a truly creative strategy. They could all be like Jean-Pierre Rampal, ready to execute with perfection, but waiting for a creative Claude Bolling to put the notes in front of them. 

Make sure you look beyond excellence at a craft and enlist some of the more creative ones in your organization to help with strategy.


THE PRINCIPLE
The principle here is that the complete strategic planning process requires a variety of skills. Therefore, you need to seek out a variety of people to work on the process. Otherwise, you may not get all the skills you need.

One of those skills is creativity. Your most creative ones are not necessarily your best performers. They may just be great craftsmen.

Instead, the truly creative ones may be hidden in your organization. They may not even look like your best performers. Rather than wearing formal apparel like the craftsman Rampal did when performing, they may wear shabbier clothing like the creative Ian Anderson did when performing.

The most creative ones may be among your youngest employees, without much experience. After all, your most seasoned employees may be so wrapped up in the status quo that they cannot see anything new or different. Instead, it may be the fresh face that is most likely to question the status quo and see a different way to approach the business.

Indeed, the employees at the top with the most experience are probably the ones with the most to lose if the status quo (which they have perfected as a craft) is replaced by something new (and requires new skills to execute). Therefore, if you load up your strategic process with only older, experienced people, you may end up with the opposite of creativity—resistance to change and barriers to new ideas.

No, it is the younger group that has more of a vested interest in the future and may be closer to understanding what the next generation of customers want.

As Gary Hamel says in his book, “Leading the Revolution”, if you want a revolutionary new strategy, you have to have revolutionaries on the team. Or, in Hamel’s words:

“Most companies are not led by visionaries; they’re led by administrators. No offense, but your CEO is probably more ruling-class than revolutionary. So don’t sit there staring at the corporate tower hoping to be blinded by a flash of entrepreneurial brilliance. Administrators possess an exaggerated confidence in great execution, believing this is all you need to succeed in a discontinuous world. They are accountants, not seers.”

If your corporate tower is full of craftsman administrators, you may need to look outside the tower to find your creative revolutionaries. They may be out there in some remote outpost far from corporate headquarters. They may not even be employees. Wherever they are, find them and put them on the team. The level of creativity in your strategy depends upon it.

This is not to say that unconventional creative young people are all you need to do strategy. No, you need both the Claude Bollings and the Jean-Pierre Rampals to create success.

My point is that you need a variety of skillsets to pull off a great strategy, and the skillset of revolutionary creativity may be the hardest to find. They are probably not the person in the office next door. They may not even have an office or cubicle at headquarters. In all likelihood, you probably don’t even know their names.

Therefore, if you do not take pro-active effort to seek them out, they will not be found. And that will be to your great loss.

Don’t think you can avoid the hard work of finding the creatives by hiring one of the big strategic consulting firms. My experience in working with them is that the big consulting firms probably have even fewer creative types than you do. These big consulting firms may be the most skilled craftsmen at running the process, but I wouldn’t rely on them for the big, new idea. That’s your responsibility.

Take your responsibility seriously and seek out the right mix for your strategic team.


SUMMARY
It is a mistake to load up your strategy team with only your top performers. Top performers may only be great at their particular craft. They may be lousy at out-of-the-box creativity. The truly creative revolutionaries are probably hidden in your organization. If you do not take the time to seek them out, you will miss out on their insights. That will probably result in a poor strategy. And no matter how good your top performers are at executing their craft, great execution of a poor strategy rarely leads to success.


FINAL THOUGHTS
I received an autographed copy of Leading the Revolution directly from Gary Hamel. To reciprocate, I gave him a copy of my book Fast Forward. Hamel just threw my book into a pile of old boxes, presumably to be tossed out. I guess he was not seeking to hear new voices to help with the revolution. So much for practicing what he preaches. Don’t do the same. Please put the ideas of this blog into practice.

Saturday, November 12, 2016

Why Most Strategies Fail: Reason #3

BACKGROUND

I recently saw a blog by the Cascade strategy software company entitled “The 5 Reasons Why 70% of Strategies Fail.” You can read it here.

Since I disagree with their conclusions, I decided to write my own blogs on why strategies fail. I came up with three major reasons. The first reason why most strategies fail is because they are too internally focused at the expense of an external orientation. I covered that topic in the first blog.

The second major reason why strategies fail is because they focus too much on “doing” rather than “being.” That was covered in the second blog on this topic.

The third reason I feel most strategies fail is because they fall victim to the “Tyranny of the Immediate.”

PROBLEM #3: FALLING VICTIM TO THE TYRANNY OF THE IMMEDIATE
I feel so strongly about the evils in the tyranny of the immediate that on my blog site you can see links to 15 other blog entries I have done on the topic. In fact, I wrote an entire book on the topic which you can download for free here.

What is the Tyranny of the Immediate
So what is the tyranny of the immediate? Think of it as the daily fires at your business which demand your immediate attention.  It could be something like an angry customer, or a production line mistake, or a disgruntled employee, or a bad report in the media. Not a single one of these types of minor crises will permanently cripple your business. So why see them as a major source of strategic failure?

The reason is because there are so many of them. Executives typically encounter at least one of them a day. If the executive is not disciplined, he or she will find themselves totally consumed with putting out the fire of the day.  And therein lies the tyranny. We become captive to their demands on our time every single day. If getting the immediate crisis resolved captures too much of our time, then there is no time left for long term strategy.

In a sense, any strategy is worthless and bound to fail if people in the organization are such a prisoner to the tyranny of the immediate that nobody has enough time to adequately put the strategy into practice.

Successful Strategies Take Time
In the classic strategy book “Competing for the Future,” Prahalad and Hamel say:

“As a benchmark, our experience suggests that to develop a prescient and distinctive point of view about the future, a senior management team must be willing to spend about 20 to 50% of its time, over a period of several months. It must then be willing to continually revisit that point of view, elaborating and adjusting it as the future unfolds.”

Unfortunately, Hamel and Prahalad’s research found that most executives spend less than 3% of their time to building that corporate perspective of the future. It is no wonder that strategies fail when so little time is devoted to them. And in my opinion, the tyranny of the immediate is the biggest culprit causing so little time to be devoted to this core act of strategy.

Tripped Up By Distractions
That is why I wrote the book “Tripped Up by Distractions.” I wanted people to see all the subtle ways in which time and effort are stolen away from doing the work of strategy. They may only look like minor distractions, but when you add them up they can rob us of the time needed to do strategy properly. Until we tackle the distractions, we cannot build successful strategies.

In the book, I identify five major sources of distractions:
  1. Having our head down looking at individual numbers so much that we lose sight of the big picture; 
  2. Sending so much time trying to produce perfect documents or in trying to check off the items on the documents that we don’t have time to anticipate and adjust to realities surrounding us.
  3. Putting the wrong people in the wrong places doing the wrong things.
  4. Getting so focused on accumulating money today that there is no time left to strategize about how to build an enduring money-making enterprise.
  5. Spending so much time reacting to change that there is no time to anticipate change and build a strategy to take advantage of change.


Some of these look at first like innocent activities. But when you add these issues to the normal crises of the day, you can see why companies have a tendency to spend insufficient time on building and executing a good strategy.

The book then has three major recommendations of better ways to spend one’s time:
  1. Spend more time asking questions. If you ask the right questions, you can more efficiently get to the root of what is strategically important.
  2. Spend more time on broad issues rather than narrow crises. If you get the big issues right, a lot of the daily crises disappear.
  3. Change your actions. Not all activity is equally productive in tackling strategy effectively. If you keep doing what you did before (falling victim to the tyranny of the immediate), don’t expects your outcomes to get any better.

Warning Signs that Your Strategy is on a Path to Failure
So, what are the warning signs that one is falling victim to the tyranny of the immediate?
First, do a time study of what your executives do. Is core strategy work closer to Hamel and Prahalad’s ideal of 20 to 50% or is it closer to their findings of less than 3%? The lower the number, the harder it is to build and execute a successful strategy.

Second, look at what your company chooses to put as top priority regarding where time is spent. What do people get most in trouble for if they don’t spend time on it? What are the consequences if someone spends too little time on strategy? People will spend the time on that which they perceive management wants them to spend time on. Send the right message. Reward good strategic behavior. 
Punish those who fall victim to the tyranny of the immediate.

Third, is strategy work treated like a real job or more like a hobby you do on the side in your spare time? If there is never enough time in the day to do your day job, how can you expect much from tasks relegated to doing in your spare time? If you truly believe that designing and executing the right strategy is the difference between long-term success and failure, then intentionally carve out time for it. Have people on staff for whom this is their full-time responsibility Make at least some of the strategic work the day job of people.

Finally, how well do your executives delegate the little crises so that time is freed up for the work of strategy? If delegation is not occurring, then strategic work is not occurring either.

SUMMARY

Depending on which study you look at, somewhere between 60% and 90% of strategies fail. If we don’t address the deep-seated reasons why strategies fail, we will not be able to raise the percentage of strategic successes. I believe that there are three major reasons why strategies fail and my reasons do not always agree with conventional wisdom. The third reason I believe most strategies fail is because not enough time is being spent on the subject. Real success occurs when a company takes the time to get strategy right and keep it relevant. Without a proactive commitment to spend the time it takes to get strategy right, the tyranny of the immediate and a whole host of other distractions will get in the way. If your strategy is a half-hearted effort barely worked on to accomplish, you will get what you deserve: failure.

FINAL THOUGHTS

Thomas Jefferson said, “All tyranny needs to gain a foothold is for people of good conscience to remain silent.” As a strategist, it is your responsibility to be noisy and fight so that the crisis of the day and other such distractions do not become tyranny to your organization.