Wednesday, September 23, 2009

Strategic Planning Analogy #278: Just a Few Words

Let’s say I had some land I wanted to sell. I could put one of two “For Sale” signs on the land. The first option is a sign that says “Farm Acreage For Sale.” The second option is a sign that says “For Sale: Zoned for Future Luxury Condo-Golf Complex.”

I suspect that I would get different results depending on which sign I put out on the land. The “farm acreage” sign would draw in farmers as potential buyers, who would evaluate the land based on its ability to produce crops. The “Condo-Golf” sign would appeal to resort developers, who would evaluate the land based on its luxury appeal.

The selling process would be entirely different, the offering prices would be entirely different, and the resulting use of the land would be entirely different. In both cases, the land is the same. The only thing I changed is a few words on a sign.

Pretty powerful words.

A lot of people pooh-pooh the idea of Vision or Mission Statements. They say they are just a bunch of meaningless words on a piece of paper.

Yes, it may be true that there are some poorly written mission statements. But don’t blame the mission statement; blame the author of the mission statement.

As we saw in the story above, by changing a few words on a sign we can change the destiny of how land is developed. The words on the sign changed the way we looked at the property and how we envisioned its value. One sign caused us to look at the land as a place for growing crops. The other sign caused us to look at the land as a future resort complex. By changing our thinking about the land, each sign changed how people acted with the land.

Same land; different actions. All because of a few words on a sign.

The same is true with vision or mission statements. The words we use can frame the way we look at a situation. Depending upon the point of view those words evoke, we will act differently.

Same company; different actions. All because of a few words in a mission statement.

Some actions are far more profitable than others. As a result, it is important to choose the words in your mission statement carefully, so that they help us envision the right future.

The principle here is that how we think about a situation impacts how we act. If you want the right actions, you have to properly frame the way people think about the situation. The mission statement is one way to create the right common mindset among your people, in order to end up with the right actions.

To illustrate how important a mindset is in determining actions, we will look at the Walgreens company. Walgreens recently changed the mindset for management. As a result, the actions now are totally different from before.

In the past, Walgreens envisioned itself as being a convenience-driven drug store company. Today, it sees itself as a consumer-driven health-care professional. By changing those few words, Walgreens has started a significant transformation of the entire company. This transformation is not dissimilar from the difference from seeing a plot of land as a place to grow crops to seeing it as a place for luxury condos.

The Convenience-Driven Drug Store
If your vision is to be a convenient drug store, you look for ways to make your drug stores more convenient. How is that done? Primarily by building a lot of drug stores. The more stores you have, the more convenient you are. So store growth is the key action which came out of that vision.

At its peak in 2008, Walgreens was building stores so rapidly that it was opening roughly one store somewhere in the United States on an average of every 16 hours. Walgreens now has 7,000 drug stores. Now that’s what I call convenience. I have one within walking distance of my house (as do many others).

The second aspect of convenience took place inside the store. The idea was that once they got you in the store, Walgreens would bombard you with as many impulse items as they could. The stores were crammed from floor to ceiling with a hodge-podge of whatever high margin item they thought you might purchase out of convenience. Again, vision dictated action.

Seeing the company as “convenience driven” also meant that Walgreens did not see themselves as “price driven.” This worked reasonably well for years at the pharmacy, where those with pharmacy insurance paid the same out-of-pocket price no matter where they went. However, the rest of the store was relatively non-competitive on price; but when you view yourself as in the convenience business, that is not seen as so bad.

The problem with this strategy is that the marketplace has redefined convenience in a way that puts drug stores at a disadvantage. First, mail order operations like Medco, Caremark and Express Scripts put the pharmacy in your mailbox, which is more conveniently located than the drug store.

Second, supercenter operators like Wal-Mart have redefined convenience from “locational convenience” to “one-stop shopping convenience.” They have all the basic drug store needs plus food needs, plus general merchandise needs all conveniently under the same roof. And this type of convenience is not a tradeoff with price. These supercenters can offer both. In fact, they have started pricing some pharmaceuticals at a lower retail price than the co-pay associated with insurance programs.

Suddenly that vision for Walgreens doesn’t look as good. It’s time for new actions. To get new actions, Walgreens needs a new way to envision themselves.

The Consumer-Driven Healthcare Professional
As a result, the new Walgreens CEO (Jeff Rein) has envisioned a new way to think about Walgreens. Instead of the product being the store, the product is now healthcare. Instead of the key attribute being convenience, the key attribute is consumer advocacy. Once you take down the “convenience-driven drug store” sign off the headquarters and replace it with a “consumer-driven healthcare professional” sign, change happens. New visions dictate new actions.

Here are some of the major changes.

1. Building fewer stores
The store is no longer the star of the show. The idea now is to serve the customer better, no matter where that takes you. Through the Complete Care and Well-Being program, Walgreens is putting pharmacies and health clinics right on employer campuses and worksites.

2. Re-merchandising the stores
When the focus moves from convenience to professional health care, the way the store is merchandised changes. In the new Walgreens test stores, the clutter of convenience-based products that have nothing to do with health are significantly reduced. Areas where health is relevant are expanded, to create destination-based assortments. New health-based categories are added, like the Take Care in-store health clinics, which tackle many of the health care needs that you used to have to go to a doctor for.

Rather than pushing a lot of high-margin general merchandise, the goal is to find ways to reduce overall costs in health care by leveraging the Walgreens infrastructure.

3. Re-deploying the pharmacist
Instead of being primarily an order-filler, the new role of the pharmacist is to be a health care expert and advisor. Walgreens is pushing much of the order-filling tasks upstream to regional centers, so that the in-store pharmacist can do other activities, like consulting with customers, administering immunizations and vaccinations, perform medication therapy management services, and improve patient compliance.

In addition to pharmacists, the stores are adding nurse practitioners and infusion therapists to the service mix. Walgreens is using these face-to-face interactions as a competitive advantage over competing alternatives, which rely on just telephones or the internet.

The new Walgreens currently coming about is quite a departure from the old Walgreens. It took a new way of looking at themselves to get there. Don’t shortchange the process and avoid time in crafting your mission statement. Those few words can be the catalyst to making the change happen.

Mission statements are important, because they help frame how people look at a situation. People act based on how they view a situation. Therefore, if you want new actions, you need to first change the perspective. By changing a few words in a mission statement, you can change that perspective and accelerate a consensus around the new action.

If you don’t proactively put a stake in the ground and claim the vision for your company, someone else will. And if you let the competition or disgruntled employees/customers do it, you may not like the results.

1 comment:

  1. Gerald,
    This is a splendid article. It triggered me to rephrase the mission of my life. At my age I feel that transferring my knowledge to others is overriding making money or getting rewarded. My actions change to making comments (like this one), making presentations and giving training regardless of how much money I make.
    I encourage all readers of this article to rethink their visions and missions so that they may change their actions.