Saturday, April 14, 2007

The Room is Smaller than You Think

The Story
There’s an old joke about a man who is going to paint the wooden floor in one of his rooms with varnish. He begins in one corner of the room and starts painting the floor in a diagonal direction towards the opposite corner. Because the job is rather dull and repetitive, the man just moves along quickly, not thinking much about what he is doing.

As a result, before the man realizes it, he has painted himself into a corner at the opposite end of the room with no place to go. He cannot walk out of the corner without stepping into the fresh varnish he has just painted and thereby ruin his work. He cannot stay in the corner and wait until the varnish dries without suffering damage from breathing the varnish fumes. He is stuck in a bad situation that’s only going to get worse.

It’s too late to go back and there is nowhere in which to go forward. The man is stuck. What is he to do?

The Analogy
Strategic Planning is a lot like painting that floor.

The goal of strategic planning is to provide a path to get from where you are today to where you want to be tomorrow. If you do not pay attention to where you are going, you may end up in a place where you do not want to be. You may find yourself “painted into a corner” with no escape.

In such a situation, the strategy you have been using has lost its ability to work any longer. You can no longer profitably move in that same strategic direction. You have hit a wall. Worse yet, your old strategy has left you in a position where you do not have any desirable options for change. You cannot alter your strategy to get to the doorway to your brighter future without destroying the work you have already accomplished (i.e., walk on and destroy your varnish). However, if you just stand in place, the vapors will cause you to slowly die.

When the painter in the story above was painting the floor, he was facing towards the corner where he started and painting in a direction towards the area behind him. He was working backwards, moving in a direction which he couldn’t see. He felt he had to do it that way, because if he tried to paint the floor in a direction moving forward, he would end up walking through the area he had just painted. By not looking behind himself, he could not see that he was painting in a direction that would eventually trap him.

While it is true that companies need to focus on the task in front of them today, like painting the floor directly in front of them, it is also true that sometimes you have to look up and turn your head so you can see where your current path is taking you. Is it leading to a door or to a corner?

This sounds like an elementary principle of strategy that shouldn’t need mentioning—make sure you are moving your organization in the right strategic direction so you do not get trapped. However, you’d be surprised how many times I’ve seen senior executives painting themselves into corners. Just look at how many senior executives have recently gotten themselves and their companies into serious strategic difficulties that are hard to escape from.

Why do so many executives fall into this trap? The reason is simple…they think the room they are painting is enormous in size, perhaps even infinite in size. The feeling these executives have goes something like this:

It doesn’t matter which direction I’m painting the floor as long as I do a good job of painting it. After all, the room is very large. I will be wealthy and retired long before we ever end up running out of flooring to varnish in this room. When it’s my turn to exit the company, I will just walk across the large expanse of yet unpainted surface to the nearest door and leave. Let my successor worry about whether he is painting in the direction of a corner or a door.

The fatal flaw in this reasoning is that these rooms are smaller than we think. We end up painting ourselves into a corner because we think the wall is a far, far away, when in reality it is right behind us. It came upon us by surprise because we did not look up in time to see where we were going and how soon we would reach the wall.

The Principle
The most important principle to learn here is that all strategic initiatives eventually fail. Since all strategic initiatives eventually fail, you must look for new initiatives to replace the old. And since strategic initiatives tend to die faster than we think, we cannot put off the task of finding the replacement to some time in the distant future.

Just because all strategic initiatives eventually fail does not mean say that all companies need eventually fail. Companies can outlast strategic initiatives if they continue to adapt their strategies to the changing marketplace. Even the most successful strategic initiatives will eventually fail. Changing consumers, changing competitors, changing technologies, and changing desires will eventually cause even the best initiative to eventually become out-of-sync with the environment and fail. Something better always comes along.

It is like a lifecycle. Strategic initiatives are born, grow, and eventually die. The role of strategic planning is to help you optimize your position on the current life cycle and help you to get to the next lifecycle before the first one dies.

Going back to the story of our painter, the room is like a strategic initiative. The size of the room relates to the lifespan of the strategic initiative. Doorways lead to the next strategic initiative. Unless we want our companies to die a premature death, we need to be looking for those doorways well enough in advance so that we can plan a way to get there before we run out of flooring.

The rooms are smaller than we think, because we do not control all of the variables that have lead to our success. Events can change suddenly on us, making our current strategic initiative obsolete, no matter how well we execute the strategy. Suddenly, the lifespan shrinks and we need to look for a door.

To illustrate this principle, let’s assume, for a moment, that you run a very successful bookstore. Your store’s image is so strong that nobody else would ever dream of building a competing bookstore in your area. Those who tried to build bookstores in your neighborhood in the past have all failed. As long as people continue to want literature, you believe you are all set. You believe your strategy can go on practically forever.

However, even if you run the best bookstore, that doesn’t mean your store will last forever. What if, for instance, an internet company like Amazon appears, who does not need to build a bookstore in your neighborhood in order to compete? It can offer better selection, better prices and better service than you and potentially make your strategy obsolete.

Or what if a large hypermarket or superstore like Wal-Mart builds a store next to you and decides to sell books at a loss in order to get customers in the store to purchase clothing? It’s not playing by traditional bookstore rules, so it does not need to be a better “bookstore” in order to put you out of business.

Or what if people decide they would rather purchase digital books downloaded from a computer rather than buy paper books from a physical store? Or what if people decide they would rather see their literature in the form of movies rather than in the form of books? Or what if the demographics of your neighborhood change and all of the educated book readers leave town and are replaced by illiterates who have no desire to buy books? There are still people who want literature, but they aren’t in your neighborhood any more. Or what if we hit a deep economic recession, where people can no longer afford to purchase books, but instead borrow them from a library?

In every one of these cases, the bookstore does not lose because it failed to execute perfectly on its strategic initiative to be the best bookstore in its neighborhood. It has continued to be the best traditional bookstore in the neighborhood. Instead, it loses because the concept of a traditional bookstore has suddenly become obsolete for its neighborhood. The strategic initiative has died. You have run out of flooring and painted yourself into a corner.

If the bookstore owner had looked up, he or she could have perhaps anticipated some of these threats to your bookstore and found doorways to new strategic initiatives, such as:

• Building an on-line presence

• Expanding your retail mix to be less dependent on traditional books

• Moving your store to a better neighborhood

• Selling out before the threats became reality and using the money to do something different.

The sooner you look up and see the threats to the lifespan of your strategic initiative, the better able you are to develop a strategy that gets you to the doorway to another room. Those seemingly uncontrollable factors that suddenly shrunk your room are more controllable if you find out about them early enough. This will give you ample opportunity to find all sorts of doors. As long as you keep finding doors, you can paint floors forever.

Just as you cannot paint a floor forever without eventually running out of room, you cannot do the same strategic initiative forever without it eventually starting to fail. All strategies eventually fail, and they tend to fail sooner than you think. Therefore companies need to look up from the daily task at hand make sure they are heading towards a door that leads to another room of strategic opportunity. Otherwise, before they know it, they will have painted themselves into a corner with no escape.

Looking for the next strategic initiative is not a luxury. It is a necessity, if you don’t want to get stuck.

Final Thoughts
You’d be amazed how many executives I have talked to who have said something along these lines:
“I know our strategy is heading for a fall, but I don’t care because I plan to be at another company or retired before the end comes. Besides, if I start making significant investments in a new strategy today, it will only serve to decrease earnings during my tenure and will not provide benefits until after I am gone.”

As a result, instead of investing in the future, these executives tried to coast on the old strategy until they left. In reality, more often than not the fall came before the executive was able to leave or retire and they suffered the consequences. The room was smaller than they thought. And they paid a heavy price.

No comments:

Post a Comment