Monday, November 30, 2009

Strategic Planning Analogy #295: Bonus Backlash

Many years ago, I was working at a company that was having mediocre (at best) performance, yet paid its top executives quite well. I complained about the high pay relative to the performance and was told, “You have to pay a lot to get this caliber of management.”

My reply was, “Are you saying that if I pay less I can get a better caliber of leaders?”

My point (half in jest) was that if a company pays too much money to top management, they will attract people who are primarily there to satisfy their personal greed. Pay less and that caliber goes away, replaced by people who are more motivated by doing a good job for all the business stakeholders.

Before throwing me overboard as a heretic, consider an article published today in the Wall Street Journal in collaboration with the MIT Sloan Management Review. The article advocated eliminating the executive bonus, using words which echoed some of my assessment. In particular, the article said,

“It has been claimed that if you don’t pay [bonuses], you don’t get the right person for the CEO chair. I believe that if you do pay bonuses, you get the wrong person in that chair. At the worst, you get a self-centered narcissist. At the best, you get someone who is willing to be singled out from everyone else by virtue of the compensation plan.”

This article was not written by some young anti-capitalist revolutionary. It was written by Dr. Henry Mintzberg, a long-time business professor at McGill University.

While I disagree with Mintzberg’s ultimate conclusion to eliminate bonuses, I agree that the current system is a bit broken. And my biggest concern is not about the greed. A little greed can be a useful motivational tool. My key concern is that compensation influences action, and long-term strategic actions tend to get little emphasis when the compensation plan is created.

The principle here is that people act based on how they are rewarded. Therefore, if you want leaders to act in the best interest of the strategic plan, make doing so a key part of the reward plan.

Now some might argue that long-term strategies are already well baked into most executive compensation plans. After all, most of them have a large component tied in some way to stock price. Doesn’t a rising stock price represent some sort of approval of long-term future strategic performance?

The problem is that there are a large number of causes for rising/falling stock prices which have virtually nothing to do with implementation of a strategic plan. These causal factors can include everything from short-term financial manipulations (that have nothing to do with strategy) to stock buybacks to macro-economic factors outside a company’s control. Given all the factors which impact a stock, it is virtually impossible to isolate how much the price fluctuation has to do with strategy implementation (or lack of implementation).

In fact, there can often be a negative correlation. By cutting back on investments with more strategic, long-term impact, one can make the near-term results look better, which can temporarily increase stock prices. Of course, this is like saving money today by eliminating automotive maintenance, only to have a longer-term disaster when the engine eventually blows up due to lack of maintenance.

At best, stock is a weak indicator of strategic success. At worst, it is a false indicator which only corrects itself after it is too late and the damage is already done.

A good strategic plan is a roadmap to the future. It shows your desired destination and an action plan of steps to get there. If you want to give incentives for strategic success, then reward achieving those particular actions elaborated in the plan.

For example, your strategy could outline specific action plans similar to the following:

1) Shifting the product portfolio mix in a particular direction (less of some types of products, more of others).
2) Shifting the customer mix in a particular directions (less of some types of customers, more of others)
3) Shifting the way particular work is done, so that it is more productive.
4) Shifting the perception of the company’s position in the marketplace.
5) Entering particular new businesses, geographies, or customer segments.
6) Exiting particular old businesses, geographies, or customer segments.
7) Gaining market share from a particular competitor.

These are actions that can be measured—did you accomplish them or not? If yes, you get rewarded; if no, then no reward. Action-based compensation is more closely aligned with strategic plans than near-term financial outcomes or today’s stock price.

Step #1: Have Actions Written Into Your Plans
Of course, this assumes that your strategic plan includes concrete and specific action steps/goals. If it does not, then I question the value of your strategic planning process. Therefore, the first step is to make sure your strategy is linked to actions. Just providing a vague platitude like “We will be great corporate citizens while providing our shareholders with an adequate return” is not enough.

Somewhere in the strategic plan one needs to explain in broad terms what actions must be accomplished. And remember, numbers are not actions. Saying “We will increase profits by 50%” gives no strategic insight into how to bring this idea to reality. One needs to explain how this is to come about—what needs to be done.

Step #2: Put Actions into Compensation
Now, assuming we have actions described in our plans, the next step is to get those actions into the compensation program. Setting compensation is not just the responsibility of the Human Resources Department or the Compensation Committee of the Board of Directors. If you want people motivated to accomplish the strategic plan, then take responsibility for getting that accomplishment rewarded in the compensation program.

The idea is to reward if the action is accomplished and not reward if the action is not accomplished.

Step #3: Watch Out for Cheaters
No matter how a compensation system is set up, employees (including top executives) will try to find a way to exploit the rules to their advantage. For example, if my goal is to expand into bio-technology, I can do so very quickly if I am willing to acquire a bio-tech company for 1,000 times what it is worth. I got the task done, but in a way that could bankrupt the company by paying too much.

No compensation system is 100% free from cheaters. Loopholes can always be found. But at least with an action-based system cheaters need to at least accomplish something related to the plan.

Some safeguards can be put into the compensation system to ensure that the actions are not blatant abuses of the system. Approvals will need to look at the quality of the action, not just the quantity. Limits need to be placed on how many resources you use as inputs in order to get those outputs, to ensure that there is a positive return on investment.

This should stop a lot of the abuse. And if a habitual cheater still regularly abuses the system, then maybe the problem is not the system, but the person.

Step #4: Properly Size the Prize
If a bonus is too large a percentage of total compensation, then you are increasing the likelihood for abuse. You are also increasing the likelihood that you will be attracting people motivated by excessive unproductive narcissism, rather than people looking out for all of the various stakeholders.

Therefore, make the bonus a minority of total compensation—enough to incent the right strategic behavior, but not so much that it creates unbalanced behavior.

Bonus systems are effective at providing an incentive for action. If set up wrong, they can provide an incentive to do the wrong things. They may even provide an incentive to attract the wrong people. However, if managed properly, bonuses can create the incentive to accomplish your strategic plan. This requires: a) Putting Actions into your Strategic Plan; b) Giving Rewards when those Strategic Actions are Accomplished; c) Putting in Safeguards to Slow Down Blatant Abuse of the System; and d) Making sure that the Size of the Bonus is kept below a level which Distorts Greedy Behavior too Much.

Next time you hear someone say they are “results driven,” ask them what they mean by that. Does it mean they are driven to achieve a number on an income statement regardless of how much strategic damage is done in the process? Or does it mean they are driven to get the right tasks accomplished in the right way?

Tuesday, November 24, 2009

Strategic Planning Analogy #294: Picking Pockets

Back in 1972, Bill Barnes was at a convenience store in Grand Rapids Michigan, scratching a lottery ticket, when he felt a hand in his pocket. At the time, Bill had about $300 in cash in that pocket.

Not wanting to lose the money to the pickpocket, Bill started punching the pickpocket with his fist, over and over again. The pickpocket, 27 year old Jessie Rae, was really getting beat up. There was blood everywhere. Afraid for the pickpocket’s life, the store owner tried to protect Jessie from further harm until the police could arrive.

Jessie thought he had picked the perfect victim to pickpocket—a 72 year old man. Little did he know that this 72 year old Mr. Barnes was a former marine and gold gloves boxer.

In the world of pickpockets, the pickpocketer only wins if his victim loses. It’s a constant sum game. The more you lose, the more he gains.

This is often true in the business world. There may be only a certain amount of demand for a product or service. The more the competition takes, the less business available for you, and vice versa.

It’s like living in a world where everyone is a pickpocket. Competitors want to win by picking sales out of your pocket. Similarly, for you to win, you need to pick their pocket.

When on vacation, people are often warned of pickpockets, and so they are especially careful. They put their money and valuables into money belts, which are harder to steal. They keep their eyes open, and their handbags shut.

Since businesses operate in a similar pickpocket world, our strategies should include ways to protect our valuables as well.

The principle here is that we need strategies that help us optimize in a world where we are both a pickpocket and a potential pickpocket victim.

A. Acting Like a Pickpocket
I once worked with a company with multiple divisions. Each division was required to supply me with a copy of their long range plan. As part of the packet I gave them to help them develop their planning was the following set of instructions:

1) Assume that the overall market is only expected to grow by 1% per year.

2) If you want to grow at more than 1% per year, then you will need to take share from someone else. [In the jargon of this blog, that means that if we want to grow by more than 1%, we need to pick someone’s pockets.]

3) Therefore, if you are going to be taking share from someone else, tell me how much you are planning to take from each competitor. Then, you need to be able to convince me why your strategy is so compelling that you can successfully take that share (e.g., pick that pocket).

The point of this particular part of the planning process was to get these divisions to think like a pickpocket. In particular, a pickpocket needs to be good at two things:

1) Choosing a Target.
Pickpockets do not randomly try to go after anybody and everybody. Instead, they scan the marketplace to find the most vulnerable target. They look for people who are easy to approach, easy to distract, and easy to steal from. The pickpocketing does not start until after the scan is complete and the vulnerable one chosen.

Your strategy should be the same. If you need to steal market share, first take the time to target specific competitors (and perhaps specific customers of those competitors). Find out which ones are easiest to approach, distract and steal from.

Don’t just assume that new customers will magically show up. First, figure out specifically who you want to go after and then go after them where they are today (in the other guy’s pocket).

2) Running the Plan/Scam
Most pickpockets have an elaborate scam, or plan, to get your belongings. Often, it involves multiple people with different roles. One is the distracter, another is the pickpocket, and the third carries the goods away from the scene.

If you want to pick your competitor’s pockets, you need to design an intricate and coordinated plan as well. The money isn’t going to automatically jump from their pocket to yours. Your plan needs a compelling reason for customers to willingly switch to you. Usually there are switching costs to the consumer, so you have to provide such a compelling offer that the benefits overcome the switching costs. Just offering the same proposition as the competition is not enough. Usually it requires not only being superior, but being different in your approach to the competitor’s customers.

In addition, it helps if that plan is subtle enough that the competitor is unaware his pocket is being picked. If the competitor is fully aware of what you are up to, the competitor will make it more difficult for you to pick their pocket. Therefore, choose a path that is more indirect and harder to detect until after the pocket is picked.

B. Keeping Your Pocket From Being Picked
While you are picking the pocket of your competitor, keep in mind that simultaneously the competitor is also trying to pick your pocket. Therefore, your strategy needs to put into place barriers to protect the business you already have. In particular, there are two actions to keep in mind.

1. Keep From Being in Vulnerable Locations
Pickpockets tend to avoid people who are all alone or in protected locations. They prefer to go after people who appear a bit lost within a crowded, public location. Therefore, if you want to prevent getting your pocket picked, don’t put yourself in vulnerable positions.

This gets to the subject of your strategic positioning. A vulnerable strategic position tends to be a bit unfocused (“look lost”) and is in the middle of a crowded location where nobody solidly owns the space (a “public location”). By contrast, a protected position is a solid ownership of a particular space where you tend to be relatively uncontested (“alone” and “protected”).

Winners tend to stay out of the crowded “muddled middle” and stake out a strong ownership position at the edges. For example, you can win with a strong position in low price or a strong position in high quality. However, it is difficult to win if everything you offer is “average” (average prices and average quality, etc.). Being fuzzy and average makes you the most vulnerable to getting your pocket picked.

For example, in retailing, Wal-Mart has a solid ownership of low price and is doing well. Nordstrom has a solid ownership of high service and traditionally does well. Relatively unfocused stores in the middle, like Sears, are getting their pockets picked and are doing poorly.

2. Guard Your Belongings
To keep your belongings from being picked, you need to protect them. Put a barrier around them, so that it is harder for the pickpocket to access them.

In business strategy, there are many ways to create barriers that make it more difficult for customers to leave you. They tend to fall into one of three categories:

a. Exclusivity – If you are the only one that offers a particular product/service, then it is more difficult for a customer who wants that exclusive item to leave you. For example, in the US, if you want an iPhone, you have to get it serviced by AT&T, because they have the exclusive carrier rights to the phone. This keeps people from leaving AT&T.

b. Bribes – If you offer the best deals or the best gimmicks/perks, then people will be reluctant to leave. In essence, you have bought off the customer with a “bribe.”

c. Handcuffs – Handcuffs are tactics that make it more beneficial for customers to stay where they are than to switch. These could be things like membership fees (I’ve already paid, so I may as well stay, rather than switch and pay a second membership fee), Volume-based reward programs (the more I stay and buy, the bigger the savings), and Knowledge Benefits (this company knows me and takes care of me, while a new company does not know me and my particular needs/desires).

If you want to grow at a faster rate than the market, you will need to steal market share from someone else, like a pickpocket. The pickpocket’s strategy is to first select a vulnerable target and then run the elaborate scam on them. To protect your own pockets from being picked, find a solid position to own and then put barriers around your customers.

If a company gets too busy focusing on new initiatives, it can start ignoring the core, making the core business more vulnerable to pickpockets. Remember, thieves are everywhere, all the time.

Monday, November 23, 2009

Strategic Planning Analogy #293: Circus Crisis

Years ago, I was watching a documentary on the history of the circus. According to the documentary, the circus industry reached its peak of popularity in the 19th century. The secret to their success at that time was their image. Circuses in the 19th century had the reputation for being on the leading edge of whatever was new. Whenever the next big thing in entertainment came about, the place where you saw it first was at the circus.

Circuses were noted as places of innovation and creativity. There was always something new to see at the circus. It was forward-thinking.

But then something happened. Circuses got in a rut, doing the same thing year after year. At the same time, innovative leading edge entertainment shifted to the movies, radio, and television.

At the end of the documentary, it said that circuses were trying to survive in the late 20th century by emphasizing the “nostalgic” aspect of the entertainment. The idea was that going to the circus was a way to re-live the past and remember a piece of your long-ago childhood. It was a way to re-capture that innocence of years gone by.

In other words, the industry that became popular for being associated with everything new was now trying to survive by attempting to be associated with everything old. How’s that for a change in strategy?

You’d think that to change your image as radically as the circus, you’d have to radically change your actions. The irony is that the image changed precisely because the actions did not change. Circus acts of the late 20th century were not that different from circus acts of the late 19th century. You still had the same animals doing the same types of tricks. You had the acrobats doing the same types of stunts. The clowns did pretty much the same antics.

The difference was that in the late 19th century, this was relatively innovative stuff. A hundred years later, it was old and out-of-date. Why watch an elephant try to stand on its hind legs when you can rent a movie with state-of-the-art special effects that place you in an exciting visit to an alien world?

This same problem can happen to your business. You may have found a path to great success. Relying on the concept that “If it’s not broken, don’t fix it,” you leave the successful formula in place. However, the world around you changes. The changing environment changes the viability of that old formula. “New and Exciting” quickly morphs into “Old and Boring.” And success quickly turns into failure.
Your success changes (for the worse) precisely because you did not change.

To save the circus industry, Cirque du Soleil needed to reinvent the circus into something modern and cool. It took a massive departure from tradition to do this. Perhaps you need to do the same.

The principle here is that you do not control all of the factors which impact your image/strategy. External factors are constantly changing/evolving. As a result, your company/brand’s relevancy to that environment is constantly changing/evolving. Consequently, you have to make one of two choices:

1) Continually Update your Actions to Maintain the Same Level of Relevancy; or
2) Maintain Somewhat Similar Actions and Find New/Different Ways to Make them Relevant.

These options are discussed below.

1) Continually Update your Actions to Maintain the Same Level of Relevancy
Successful companies tend to own a desirable space in the marketplace. For example, Wal-Mart owns “low price” in the retail marketplace. As the marketplace evolves, your ability to continue to own that space can change. You may need to change in order to maintain ownership of that space.

Take Apple, for example. Apple was known as the “cool” computing company. Unfortunately, the novelty of computers was fading and just having a computer was no longer enough to be cool. Computers were progressing towards becoming a boring, commitized tool, something like a hammer.

So to maintain and grow that image of “coolness” in computing, Apple needed to change its actions. It needed to take its computing expertise to the newer, cooler places of iPods and iPhones. Owning these is really cool, and Apple was a leader in this evolving change in what constitutes a cool device.

Compare this to Dell, who is trying to look cool predominantly through just computers. It is struggling. Had Apple stayed only in computers, I suspect they would be seriously struggling, as coolness moved to Blackberries or whatever. Apple could have become like those outdated circuses had it not moved with the marketplace to maintain its cool factor.

Similarly, Wal-Mart saw that there were changes in the marketplace that could threaten their ability to own the low price space. In the 1980s, Warehouse clubs were starting to show the ability to underprice Wal-Mart discount stores, so Wal-Mart created Sam’s Club. Later, in the 1990s, supercenters were showing the potential to underprice discount stores, so Wal-Mart converted its discount stores into supercenters.

The strategy at Wal-Mart is to chase whatever shows potential for unseating Wal-Mart’s ownership of the low price space. Today, the new threat is the internet, so Wal-Mart has recently decided to get more aggressive in that space. Wal-Mart is ever-changing in order to keep is reputation for owning low price unchanging.

2) Maintain Somewhat Similar Actions and Find New/Different Ways to Make them Relevant
Sometimes, it can be difficult to do the types of changes Apple and Wal-Mart did to maintain their relevancy. Therefore, instead of changing the actions, you may need to change the way you make yourself relevant.

Years ago, I was talking to some executives at General Mills. They were telling me about the evolving relevancy of Hamburger Helper. When Hamburger Helper was first introduced, it owned the space for dinner-time convenience. At that time, the average time to prepare a dinner was about 45 to 90 minutes. Hamburger Helper took only about 20 minutes. Hence, Hamburger Helper was a huge time-saver and the more convenient way to prepare a meal.

Then the marketplace changed. Microwave cooking came about, redefining what was considered a normal amount cooking time. In addition, there was an explosion in the number of people serving meals obtained from a fast food drive-up window. Suddenly, for a large sector of society, dinner preparation was down to around 10 minutes or so. In a world accustomed to 10 minute preparation time, the 15-20 minutes it took to make Hamburger Helper no longer appeared convenient.

General Mills tried to speed things up with faster-cooking noodles and microwave versions, but for years none of the experiments met the quality levels demanded by General Mills. Therefore, General Mills had to change the relevancy of Hamburger Helper. A revised advertising campaign for General Mills stressed how the quality and taste of Hamburger was worth the extra effort. With the latest economic recession—yet another shift in the environment—Hamburger Helper is now repositioned as being the low price alternative.

Toy companies like Hasbro are finding that the older “uncool” toys in their portfolio can be made relevant again by repositioning them as movie merchandise. GI Joe and Transformers are some of the latest examples. Based on their success, all sorts of old toy brands are being licensed to movie studios, including the old board games Monopoly and Risk. If movies are where the cool entertainment factor is, then associate the toys with that movie experience.

The changing environment can change the relevancy of your strategy. You can respond in one of two ways. Either change what you do in order to regain that same relevancy or find a new relevancy for what you are doing. Doing neither will eventually make your brand/company irrelevant.

When my children were little, I took them to the circus. The most exciting part of the evening was when one of the elephants decided to have a major bladder emptying right there on stage. The circus stage crew had to truck in a huge pile of sawdust in order to soak up all of the elephant urine (during the middle of the show). My son thought that was pretty cool. The rest of the circus, though, he was not impressed with. Let’s hope you don’t have to resort to what the elephant did in order to be relevant to your audience.

Wednesday, November 18, 2009

Strategic Planning Analogy #292: Parachuting Cats

Back in the 1950s, malaria broke out amongst the Dayak people of Borneo. It was serious enough to call in the World Health Organization (WHO) to find a solution. Their solution? Spray large amounts of the chemical DDT on the island.

The good news was that this effort was effective in killing most of the mosquitoes which carried the malaria. The bad news was that there were a series of negative side effects.

First, the thatch roofs on the houses started collapsing because the DDT also killed off the wasps which ate thatch-eating caterpillars. Second, many of these insects that were poisoned got eaten by gecko lizards, which ended up poisoning the lizards. Third, cats which ate the lizards got poisoned and started to die.

Without the cats to eat them, the rat population exploded. The rats carried diseases, such as sylvatic plague and typhus. With so many rats around, there was an outbreak of these diseases in the human population of Borneo.

Hence, the World Health Organization was called back in to solve this new health problem in Borneo (which, by the way, they had created). Their solution? Parachute live cats into Borneo.

The World Health Organization was given a task—eliminate a serious outbreak of malaria in Borneo. They developed a solution which accomplished the task immediately in front of them. Unfortunately, WHO’s choice of action had negative unintended consequences.

It was not just one batch of unintended consequences, but a series of them. There were five layers in this series of unintended consequences:

Layer one: DDT killed more insects than just the ones carrying malaria.
Layer two: Lizards who ate the poisoned insects became poisoned.
Layer three: Cats who ate the poisoned lizards became poisoned.
Layer four: Without the cats, the population of rats skyrocketed
Layer five: The skyrocketing rat population infested the humans with new disease outbreaks.

Businesses have many problems to deal with, just like the WHO. In the rush to solve the immediate task at hand, businesses risk doing the same thing the WHO did—choose a path that solves the immediate problem, but has a series of negative unintentional consequences.

Just solving the problem of the moment is not enough. If we ignore the long term consequences in our decision-making, we can end up having our own version of parachuting cats.

This story touches on two principles we have talked about often—the tyranny of the immediate and the law of unintended consequences. The tyranny of the immediate occurs when solving the crisis of the day is the only task you get time to work on, leaving no time for long-term thinking. You can read about the tyranny of the immediate here, here, here, and here.

The law of unintended consequences says that decisions you make often affect more than you realize, and usually in a negative manner. You can read about the law of unintended consequences here, here, here, and here.

The first point I want to make in this blog is that the more a company is held hostage to the tyranny of the immediate, the more likely it will create unintended consequences. If the WHO hadn’t been so focused on the immediate crisis of malaria, they might have taken the time to realize that heavy doses of DDT create more problems than they solved.

The second point is that unintended consequences often come in layers. If you only look out one or two layers, you can miss the serious negative side effects. Killing a few wasps and lizards doesn’t sound too bad. It wasn’t until you got to layer five (sylvatic plague and typhus outbreaks in humans) that the really bad negative consequence appears.

The same is true in business. Often, you cannot see the real disaster ahead until you look out a few layers. Look at all the layers of unintended consequences which came out of the simple decision to bundle high-risk mortgages. It didn’t just crush the housing market. Subsequent layer after layer of unintended consequences almost lead to a total global economic meltdown.

This leads into the third point. I believe that one of the most critical roles a strategist provides a company is the ability to look for all the layers of unintended consequences. While most of the rest of the organization copes with the tyranny of the immediate, the strategist can rise above the immediate and focus on the long-term implications—layer upon layer. This expertise will be an invaluable contribution to the discussion on how to handle the crisis of the moment. This contribution can help prevent a firm from going down a disastrous path ending in some version of parachuting cats.

In order to make this contribution, two factors must be kept in mind:

1. Avoid Setting Up the Strategist in a Position Where They Get Sucked Too Far Into the Tyranny of the Immediate.
If the strategist is given too much responsibility for near-term performance, then the risk is for the strategist to be doomed to just as much tyranny of the immediate as everyone else. When that happens, the strategist cannot provide that critical long-term perspective going out several layers, because they have no time to think about it.

I see this risk cropping up in two areas. The first is in the role of the Chief Marketing Officer (CMO). CMOs Officers are often given two roles. First, they are responsible for the long-term positioning/strategy of the brand. Second, they are responsible for the near-term sales and advertising promotions.

The first role is to rise above the tyranny of the immediate to protect the long-term brand strategy from unintended consequences. The second role dives deep into the middle of the tyranny of the immediate, trying to put out the fires that affect near-term sales.

From my observations, when someone has two roles like this, the tyranny of the immediate wins the battle for time. The long term suffers. It is no wonder that the average CMO tenure is less than one year. They are set up to fail because it is so hard to fulfill both of those requirements. For more on this, see CMOh, No!.

The second place where this problem can come about is if the strategist is in the Finance Department and also has responsibility for the annual budgeting process. There is a risk that so much attention will be placed on the one year budget and worrying about variances in current performance to this year’s budget, that the long-term concerns will be pushed aside.

The tyranny of trying to get this month’s/quarter’s/year’s numbers to turn out as budgeted can lead to hasty decision-making. You may find a way to get the numbers to work, just as the WHO found a way to get rid of malaria. However, the long term consequences could cause grave tragedy several layers into the future. You’ll be parachuting cats before you know it.

Therefore, I believe that strategists need to be protected from the tyranny of the immediate in their job responsibilities. You’ve got a whole company to deal with today. Let the strategist devote their time to examining all of those layers of consequences into the future.

2. Avoid Setting Up the Strategist in a Position Where they have No Influence on the Immediate.
Of course, if this isolation from the immediate is taken to an extreme, there can also be problems. The long-term perspective of the strategist needs to be applied to the decisions of today. Otherwise, what good is having that perspective?

Strategists shouldn’t be locked up in an ivory tower and only be allowed out in the spring for an annual planning off-site meeting. Not only does that make the strategist out-of-touch with what’s going on, it makes them irrelevant at the point in which operational decisions are made.

If the WHO had a strategist locked up somewhere, he could have come out in the spring and said, “I knew that DDT spraying would cause more harm than good. I knew those bad layers would occur.”

That does nobody any good. What was needed was to bring such a strategist into the room at the time the decision on DDT was being made and get the strategist’s perspective BEFORE making the move.

Don’t exclude the strategist from the core daily decision-making. Get that long-term multi-layered perspective. Use that perspective in your analysis before making the decision.

To avoid negative unintended consequences, one needs to include a longer, multi-layered perspective into the discussion during the tyranny of the immediate. The best way to do that is to have the strategist participate in the discussion without being held accountable for the pressures of the immediate.

Everything is interconnected. Once you realize this, it is easier to find and prevent those unintended consequences. And the good news is that the more you eliminate those unintended consequences, the less you will be held hostage in the future to the tyranny of the immediate (which is often caused by unintended consequences).

Monday, November 16, 2009

Strategic Planning Analogy #291: The Defining Moment

I friend of mine who worked in the brewery business used to like to tell this story. There was a bar across the street from a factory that made beer. A lot of the guys who worked at the brewery factory would go to that bar after work. Sometimes, the managers at the brewery would visit the bar as well.

One day, one of the managers from the factory was in the bar. He saw one of the factory workers in that bar drinking a beer made by a competitor. The manager was infuriated that one of the factory workers would dare to drink a competing brand of beer. To him, that was an act of treason.

The more he watched, the more incensed he became at what he perceived as the unloyal behavior of this factory worker. Eventually, the manager couldn’t take it any longer. He went up to that factory worker and shouted “Who do you work for?”

The factory worker answered, “The local of the International Union of Brewery Workers.” So much for the disloyalty argument.

As the story points out, how one defines themselves has a lot to do with how someone behaves. The manager defined himself as working for a particular brand of beer. Therefore, he was loyal to that brand and could not conceive of why any employee would drink any other brand of beer.

By contrast, the factory worker saw himself as working for the local brewery union. As long as he was drinking any beer produced in a union factory, he was supporting the union. His loyalty was to his fellow workers rather than to the brand of beer they made.

One of the most important strategic questions a company must answer is this: What business am I in? How you define your business will determine how you act. If you choose the wrong definition, you will wind up doing the wrong actions. This will then lead to the wrong outcomes.

The principle here is that a good strategic process needs to, at some point, define what business the company is in. I call this “the Defining Moment.” Here are three things to avoid when creating that definition.

1. Avoid Too Narrow of a Definition
If you define the business too narrowly, you will miss opportunities. Back in 1960, Theodore Levitt published what is considered to be one of the 10 most influential articles in the history of the Harvard Business Review. The article was entitled “Marketing Myopia.”

In this article, Levitt claimed that a lot of business stopped growing or failed because they defined their business too narrowly. For example, he claimed that the railroad industry stagnated because the members narrowly defined themselves as in the business of “railroading” instead of in the broader business of “transportation.” Transportation grew rapidly while railroading stagnated. Had the leaders defined themselves more broadly, they could have participated in that transportation growth. Instead, they went down with their narrowly defined product.

All products and service offerings have a life cycle. If you define yourself by today’s product or service, your company’s fate is tied to that lifecycle. You will die when that product dies. Kodak’s fate declined because it spent too long defining itself as in the narrow “analog photo business”, rather than in the broader “imaging” business. Imaging hasn’t gone away. It has grown. But Kodak missed all that growth because of defining itself too narrowly.

2. Avoid Too Broad a Definition
Of course there are also problems if you take the opposite extreme of defining yourself too broadly. If you define your mission as “making a large return on investment” you have provided no guidance to the company. The definition is too broad to have any meaning or direction.

Without direction, you have anarchy. Anarchy leads to chaos and destruction, not success. Success requires a focus. A company without focus one cannot excel at creating a point of competitive distinction that will allow them to win in the marketplace. Rather than being a team focusing its limited resources at a point where it can make a real difference, you are just a bunch of individuals working at cross-purpose to each other. A company definition needs enough detail to point at where you will focus your effort in order achieve that advantage.

3. Avoid Definitions Out-of-Sync with Your True Skill-set
In addition to finding the right balance between defining yourself too narrow or too broad, one needs to address the fit between you definition and your capabilities. For example, I could define myself as being in the low-cost transportation business. However, if I have an unusually high cost structure, I will almost assuredly fail at that mission. That definition did not match up with my capabilities.

Although it is possible to change a company’s skill-set or culture, it is extremely difficult. Most attempts fail. Therefore, successful business definitions tend to look for ways to exploit the good in the current skill-set or culture, rather than trying to start all over again from scratch.

I was reminded of this need to align with skill-sets this morning as I was reading the Wall Street Journal. There was an article on page 1 talking about firms which appeared to be on the verge of bankruptcy but were saved from that fate (or at least postponed it) due to an increased availability of refinancing options.

One of the “near death” companies getting a reprieve that was mentioned in the article was Blockbuster, the leading movie rental retailer. I believe that one of the reasons Blockbuster got into so much trouble was because of how they defined their business.

Blockbuster has traditionally defined themselves as being in the entertainment business. In 2007, the revised business mission continued this entertainment focus: “To provide convenient access to media entertainment.” Sure, Blockbuster rents a lot of movies and games, but is entertainment really at the core of their culture and skill-set?

Blockbuster has shown no real skill in creating entertainment. They have no unique skill in developing forms of entertainment media. My understanding is that within the entertainment community, most of the other players hold animosity towards Blockbuster to the point where it puts them at a disadvantage versus other partners in doing media deals.

If entertainment is not Blockbuster’s core, then what is? First, it is the ability to run small neighborhood stores. At their peak a few years ago, Blockbuster operated or franchised over 9,000 stores. Most of these were in neighborhood locations.

Second, Blockbuster is a pretty good deal-maker with outside partners. One of the reasons why the entertainment industry is hesitant to do any more deals with Blockbuster is because they did not like how well Blockbuster negotiated against them when the video rental business first started.

Now, if you define yourself as in the entertainment business, you might be prone to do many of the things Blockbuster has done in the past few years (try to align with Radio Shack, try to imitate Netflix, look into non-conventional media delivery ideas, etc.). Unfortunately, these moves have not produced very good results.

However, what if Blockbuster had defined itself as being in the neighborhood retail business? Perhaps then they would have considered other ways to leverage that retail infrastructure:

1) As a convenient pick-up point for packages purchased on the internet (so that they are not vulnerable to theft off your porch while you are at work).

2) As a convenient pick-up point for groceries ordered on-line (a place that can keep the cold items cold until you can get around to picking them up).

3) A convenient drop-off or pick-up point for items like dry cleaning, shoe repair, selling things on EBAY, etc.

Blockbuster could have focused on making deals with all sorts of non-media people and converted those stores into THE place to coordinate and protect all my neighborhood needs until I am ready to pick them up. Instead, they have been taking one of their most valuable assets—their dense network of neighborhood stores—and destroying it by closing down stores by the hundreds.

I’m not positive that this new approach would have saved Blockbuster, but I do know that their choice in how they defined themselves put this type of thinking out-of-bounds. Definitions impact decisions. Be careful in how you handle your defining moment.

The way you define your business impacts the way you think about your business. This thinking them impacts how you act. The best strategic actions tend to take place when that definition avoids the extremes of being either too broad or too narrow as well as matching the definition with the key culture and skill-sets.

The defining moment can often be iterative. It may start out broader until the right strategic path is discovered. Then the definition may be narrowed a bit more around that strategic path.

Wednesday, November 11, 2009

Strategic Planning Analogy #290: Strategy is A Location

What if we thought of our mental condition as being like a location on a map? Then, if someone said “I am in a state of confusion,” we could just tell them to “Get in a car and drive to a different state, like the state of Contentment.” The United Mental States of America could have all sorts of interesting states. I think we already have a lot of politicians from the state of Denial.

Just think of how much money you could make selling maps showing the best path for getting from a bad mental state (like the state of Despair) to more desirable locations (like the state of Bliss). Wait a minute! Isn’t that basically what travel agencies do? Isn’t that what all those psychological self-help books try to do? Is Dr. Phil nothing more than just a seller of maps?

Continuing with this idea, if someone said “I think I am going crazy,” you could reply “How can you be going to a place where you already live? You’ve been in the land of Crazy for years.”

Strategic planning tends to deal with a lot of abstract concepts. This is particularly true when it comes to strategic positioning. To make these abstractions easier to understand and work with, it can be useful to follow the example in the story.

In the story, the idea was to take abstract mental conditions and treat them as physical locations on a map. In the same way, I think there are benefits to looking at the abstract concepts of strategic planning as if they were positions on a map.

The principle here is that strategies may be easier to understand and create if we think of them as being a location. In fact, there are three different ways to apply this principle.

1. Strategic Success Depends Upon Locating Yourself Properly on the Consumer’s Mind Map
Consumers act based on how they think. Hence, if you desire a certain consumer behavior, one needs to first get the consumer to think in a particular way about that behavior. In other words, you need to locate your product or brand in a specific location in the consumer’s mind if you want your strategy to succeed.

Where is that ideal location in the brain? It will vary based upon your strategy, but all successful locations will address the three S’s. The first S stands for “slot.” Different parts of the brain are used, depending upon the type of problem the brain is trying to solve. One of your first strategic tasks is to decide what problem your product is trying to solve.

Perhaps you are trying to solve the problem of “what’s for dinner?” Or maybe you are trying to solve the problem of preparing the customer for retirement. Then again, the problem could be trying to lower the cost to run your client’s factory.

There are all sorts of problems to choose from. As part of your strategy, you need to choose the problem you are trying to solve. And I don’t mean an internal problem like “How can I make my company more profitable?” The problem is to be a problem held by your potential customer. This is an important decision, since if you cannot help a consumer with a problem, then you have no relevancy to that customer.

Once you have chosen the problem, you need to make sure that your brand/product is “slotted” into the location of the consumer’s brain concerned with that problem. In other words, whenever that problem turns up for that consumer, you want your name to fire up in that part of the brain. This is done by communicating in a manner which continually associates your brand with that problem.

For example, Crest has spent decades associating its toothpaste brand with the problem of cavity prevention. It is now solidly slotted in the brain, so that when the problem of cavities comes up, the brain immediately thinks of Crest.

The second S is “solution.” Your strategy needs to provide a solution to that problem. What is it about your product/brand that makes it capable of solving that problem? Again, there are often many ways to solve a problem. You have to choose one.

This solution choice includes both the process and the performance. By process, I mean the general approach to solving the problem. For example, if the problem is weight loss, the choice of process could include exercise, diet, surgery, pharmaceuticals, hypnosis, and many others. By performance, I mean the type of attribute emphasized in the process you choose, such as being fastest or cheapest or most comprehensive, etc.

The third S is for “superiority.” It is not good enough to just be located in the brain where the problem is being addressed. You need to be seen as the superior solution to the problem. In Al Reis and Jack Trout’s excellent book Positioning, they refer to this as being a rank ordering, like rungs on a ladder. You want your brand to own the top rung (the best) in the mind of the consumer. So, another role of strategy is to locate your brand on the top rung on the problem ladder. You have to have a convincing argument (both rationally and emotionally) for why you should own that location.

Whenever I work with someone on developing a strategy, I usually end up at some point asking the question “Why should a customer prefer your product over all the other options?” If you have difficulty answering that question, the consumer probably has even greater difficulty coming up with an answer. And if you are not perceived as being the best alternative, they will choose someone else.

For example, for the problem of dependable transportation, Toyota has firmly cemented itself to the top rung location. It is perceived as best at automotive dependability. Through years of effort, Toyota has created a strategy which gives them ownership of that location in the brain of most consumers. They are slotted as the superior solution.

To summarize, your strategy needs to develop a superior means of solving a relevant problem and then place that information on the top rung in the relevant problem-solving location in the consumer’s brain.

2. Strategic Success Depends Locating Yourself Properly on the Competitive Map.
A strategic position is not created in a vacuum. The position plays itself out in the competitive marketplace. You can think of this marketplace as being like a map. Each competitor has a location on that map. The viability of your strategic position depends in large part on where you are on the map relative to everyone else.

For example, let’s say that you are a retailer with a strategy is based on owning the low price solution. Your ability to own the low price position depends a lot on your location on price versus competition. Wal-Mart recently has started a number of price wars in areas such as toys, books and DVDs. As long as Wal-Mart is driven to be closer to the lowest possible price location on the map than you are, you cannot own the low price position, no matter where you set your prices.

So when creating the action plan for your strategy, do not think primarily in terms of absolutes. Instead, think in terms of relativity—where you are relative to others on the map. In other words, if you want to own quality, it is not good enough to just set a high absolute quality level. You need to have higher relative perceived quality than the competition. That can be a moving target.

Often times, it is best to locate yourself on the competitive map is a place that is relatively empty. For example, if everyone else seems to be fighting for space on the quality area of the map, you may be better off going to the price area of the map, which is more wide open. The lest contested a space, the easier it is to own in the mind of the customer.

Right now Chevrolet is trying to convince people that it has the highest quality, most fuel efficient cars available. That is a hotly contested space, already owned by Toyota and Honda. Chevy will have a hard time unseating those entrenched positions. It would have been better off trying to go after a less contested space.

Although Ford would also like to be seen as high quality and fuel efficient, its approach has been less of a direct assault on Honda and Toyota. Instead, Ford is trying to establish itself with superiority in high-tech enhancements. This space is less contested on the competitive map. Once Ford owns this space, it can use high-tech superiority as a justification for a secondary claim at superiority in quality, safety and fuel economy (caused by unique technology).

And when you are building this competitive map, make sure you include every competitor attacking the same problem. For example, if the problem is weight loss, you need to include every process aimed at that solution. You may claim to be the fastest exercise solution for losing weight, but if there is a pill you can take that works a lot faster at losing weight than any exercise, you have not really captured the “speed” space on the map.

3. Strategic Success Depends Upon Locating Yourself Properly on the Map of the Future
Strategy is often about creating a better position in the future than you have today. It is often easier to communicate where you want to take the company if you can visualize that future state on some sort of map. Then, not only can you show the desired future location, but also today’s location and the path you must take in order to get from the one to the other. The mind map or the competitive map may be good templates to show the new destination and transition path to get there.

Complex concepts can often be better understood, worked with, and communicated if thought of visually—like positions on a map. In strategy, some of the more useful maps would be a consumer mind map, a competitive landscape map, and a future map.

If your strategy cannot be easily translated into a visual map, then it is highly likely that your troops will get lost in strategy execution (and you will not reach the desired destination).

Friday, November 6, 2009

Strategic Planning Analogy #289: Basic Training

Many people have stories about the terrible ordeal they went through in Army basic training (also known as Boot Camp). They tell about how the Sergeants yelled at them unceasingly and how the Sergeants tried to punish and humiliate them in front of the others.

When my son went through basic training, it was relatively painless. The Sergeants pretty much left him alone. I asked him how he was able to do that. His response:

“I quickly found out that there were two groups of people that got picked on. One group was the laggards, who were having trouble keeping up with the rest. They were yelled at to get them to work harder.

“The second group was those who excelled much better than average. They were yelled at to break their egos. The ones in the middle were pretty much ignored. So I tried to be in that anonymous middle at everything we did.”

Leave it to the army to make “aiming for average” a virtue.

One of the key factors to consider in business decisions is risk. Typically, we try to develop strategies that minimize risk (relative to the reward). Even if we cannot eliminate risk, we try to find ways to manage it so that we are best prepared to withstand it.

My son found a way to minimize/manage the risk of punishment and humiliation in the army. He noticed that the risk increased the further he varied from normal, average behavior, either in a positive or negative direction. By hiding in the middle, with the masses, he could avoid a lot of that punishment and humiliation.

This same principle is true in the business world. As we will see later in this blog, many of the most dangerous risks to your business are at the points where you are the most unlike your peers. There is more safety in the anonymous middle.

The principle here is that we need to keep a careful eye on those points in our strategy where were stand out from the crowd, because that can often be the source of some of our greatest risks.

Think, for a moment, about the recent financial crisis. At first, the US government thought that the crisis would only impact the outliers who were overly aggressive in the problem mortgages. Therefore, the government was willing to let Lehman Brothers fail, because it was thought to be a rare outlier. However, once it was determined that the financial crisis was going to devastate the anonymous middle of the financial world, the US government put into action a massive bailout program to try to save as many as possible.

By staying in the middle, the risk was minimized. They got a bailout. But Lehman, by appearing to be a little more aggressive, was allowed to fail.

Or let’s suppose that most of the companies in your industry are headquartered in Country A. You are unusual in that you are headquartered in Country B. In your industry, there are many transactions between Country A and Country B. As the currency exchange rate between the two countries vary, it impacts those inter-country transactions.

For the majority, who are all headquartered in Country A, the currency risk is relatively small. Since they all have the same problem, they can adjust fees to compensate and still make about the same amount of money and still be competitive with all the others headquartered there. However, because you are headquartered in Country B, the exchange rates have the opposite impact on your business. When you adjust, you are out of sync with everyone else—sometimes for the good, sometimes for the bad. Your difference in location increases your exchange risk relative to your competition.

In October of 2009, McKinsey & Company released a paper on managing risk. One of the points made in that paper was that some of the largest risks to your business [what they call risk cascades] come at the point where you are the most different from your competition. To quote the paper:

“Companies are particularly vulnerable to this type of risk cascade when their currency exposures, supply bases, or cost structures differ from those of their rivals. In fact, all differences in business models create the potential for a competitive risk exposure, favorable or unfavorable.”

This creates an interesting dilemma. Most of the writings on strategy emphasize the benefits of differentiation. They explain that it is what makes you different that provides the opportunity to become superior in some way to some segment. To quote Michael Porter, “Strategy is about making choices, trade-offs; it's about deliberately choosing to be different.” I talked about this in greater detail in an earlier blog.

Yet, this same benefit from differentiation also increases your risk. My son avoided risk in army basic training by avoiding differentiation. Yet we, as strategists, know that this is not an option for us if we want to excel.

That is why the McKinsey article goes on to say, “The point isn’t that a company should imitate its competitors, but rather that it should think about the risks it implicitly assumes when its strategy departs from theirs.”

You may currently be taking comfort in the elaborate and sophisticated strategy you have put in place. However, a small detail, such as being located in the wrong country, could create a currency risk that puts that entire strategy in jeopardy.

Therefore, when looking for points of risk vulnerabilities, don’t just focus on the grand design of your strategy. Look for the little details where you stand out from the anonymous middle.

Perhaps you are a little more labor intensive, or a little more capital intensive, or you rely on a different set of suppliers. Whatever it is, that little difference puts you at odds with the rest of the industry. That means that when there are corresponding market shifts in labor costs/availability, capital costs/availability or supplier costs/availability, you are effected more than the rest of the market, because you have more at stake.

If you are in the anonymous middle, you adjust similarly with everyone else on these issues and get by. You might even get a bailout. But if you are an outlier, watch out, because that difference can radically decrease your competitiveness when changes occur.

It is impossible to keep track of every issue that could possibly impact your business. There aren’t enough hours in the day. As a result, you need to prioritize. Near the top of that priority list should be the issues which arise out of the points of difference in your strategy.

Although differentiation is a key aspect of a great strategy, it is also a key source of risk. Since we do not have the option of avoiding differentiation in strategy, we do not have the option of avoiding the added risk inherent in that point of differentiation. Therefore, a business’ risk-assessment process should prioritize a focus on the risk factors closely associated with their points of differentiation.

Although it is true that there is “safety in numbers,” it is also true that nothing great ever happens unless you go against the crowds. Hence, risk cannot be avoided if you seek greatness. So rather than avoid it, accept it and manage it.

Tuesday, November 3, 2009

Strategic Planning Analogy #288: Bourne to Run

One of my favorite movie franchises is the Jason Bourne series. These movies have some of the best car chase scenes ever filmed.

Typically, Jason Bourne is driving at dangerously high rates of speed on congested city streets being chased by multiple drivers. Jason Bourne is rapidly weaving around traffic and making quick, hairpin turns. He frequently shifts from forward to reverse and back. The action is moving very quickly and there are accidents and crashes all around Jason Bourne. Yet Jason Bourne manages to escape.

Sometimes the action gets so scary that someone in the audience might be tempted to close their eyes during the chase scenes. Just think of what would happen if Jason Bourne closed his eyes during the chase scenes. The chase scenes would end a lot sooner and Jason Bourne would not survive.

These days, the world of business is appears to be coming more like those chase scenes in the Jason Bourne movies. Everything seems to be moving more quickly. You feel like you are being chased by numerous forces out to get you. You feel like you have to continually change the direction you are steering your business. There are business casualties all around you and it seems like you have to act fast in order to avoid becoming a casualty yourself.

Some are using this as an excuse to stop planning. After all, when driving through a fast-paced chase scene, who’s got time for to make a plan?

To me, the idea of operating a business without a plan would be like driving through one of those chase scenes with your eyes closed. Planning provides the sight in order to see your way through to the other side. The faster you drive, the more dangerous it becomes, so your vision becomes even more essential. Hence, planning becomes more essential.

The principle here is that rapid change does not eliminate the need for strategic planning. The type of planning being done may need to change, but the function does not go away. In fact, I believe it becomes even more essential. We may need to plan more like Jason Bourne.

I think there are three strategic planning principles to be learned from the Jason Bourne movies.

1. Never Get Lost in the Crisis de Jour.
Every day has its share of crises. Jason Bourne had more than his share in those movies. Everywhere he went there was a new threat to deal with. However, in spite of all those pressures, Jason Bourne never lost site of his primary goal. He was extremely focused and never forgot the big-picture agenda.

Rather than getting lost in the day-to-day threats and car chases, he saw them for what they really were—just a series of obstacles between himself and his ultimate goal. They were not his primary focus. They were just something he had to work through in order to get to “the other side,” where his true objective was.

Jason Bourne did not try to fix or fully finish up every problem thrust at him. That would be a waste of time. In fact, he often left things pretty messed up behind him. He just did enough so that he could put the threat behind him. He never forgot that the plan is not to loiter at the crisis, but to get through so that the larger task can be put back on track.

This should also apply to us. We should never let the daily crisis so overwhelm us that we lose site of the big picture. The goal is not perfectionism on the daily nuisance. The goal should be to find a way to get it behind us quickly, so that we can once again renew the larger journey.

2. Planning is a way of Living for All, Not an Annual Event for Some
The planning mind of Jason Bourne never stopped. He was always planning. He would grab maps, look at train schedules, grab building diagrams, watch things through binoculars, and examine his environment—all the time. He never could shut it off. He was always gathering intelligence, always processing it in his mind.

Jason did not shut his eyes to planning and stop doing it. Quite the opposite—he did it continuously. This doesn’t mean that he was continually changing his goals and visions or changing his business mission. Those tended to remain fairly constant. What changed where the adjustments he had to make to get through the daily crisis in order to get to the other side.

It was a continual exercise in planning the daily detours to get back on track. If you ignore planning, not only is there no daily path, but also no track to get back to. Then you are just aimlessly wandering from one crisis to the next. Without the planning goals, you are like a pinball bouncing around. If you are clever, you can endure longer, but eventually all the balls fall to the bottom and disappear. Planning gives purpose to the way you approach the daily bouncing and lets you find the path to the larger prize.

There is a reason why the car dashboard is inside the car rather than sitting on the desk in your office. Adjustments are made while you are driving, and the information on the dashboard helps you make those adjustments while you are on the move. It would be very impractical to have to drive back home to your office every time you wanted to look at the dashboard.

What does this mean for your organization? First, don’t limit intelligence gathering and analysis to a small block of time once a year. Make it a continual process. Second, get planning out there in the field where the action is happening. Use the field people to continually gather information on what is going on. Use their eyes and ears to gather data.

In addition, feed the information you have in the office to the people out in the field. Make sure their dashboard is with them out there where they have to make adjustments. Help them see the larger picture so that they can work on getting through rather than just bouncing around. It’s easier to give your people freedom to adjust to the pressures of the moment if you are comfortable with their ability to make adjustments which keep your firm on track with the grand strategy.

Strategies and information should not be secrets hoarded from your field personnel. The value increases as it spreads through the organization. Wouldn’t it be great to have all your field people working as strategically as Jason Bourne did—all the time?

3. Have Contingency Plans
With all of the constant motion in your world making each day feel like a car chase scene, it is easy to see how your original plan can get sidetracked. When that happened to Jason Bourne, he did not stop the car and go complain about his problems. No, he just put the car in gear and took a slightly different path.

Jason Bourne lived his life assuming that problems would crop up. As a result, he was always looking for alternative paths out. He wanted to have as many contingency plans as he could. He didn’t wait until the current path was blocked before looking for alternatives. He looked for alternatives before they were necessary.

To quote Jason Bourne:

“I come in here, and the first thing I'm doing is I'm catching the sightlines and looking for an exit…I can tell you the license plate numbers of all six cars outside. I can tell you that our waitress is left-handed and the guy sitting up at the counter weighs two hundred fifteen pounds and knows how to handle himself. I know the best place to look for a gun is the cab of the gray truck outside, and at this altitude, I can run flat out for a half mile before my hands start shaking.”

Contingency planning became natural to him. It should be for us as well. Planning for today’s environment means planning contingencies for the inevitable barriers we will encounter. It needs to be a way of life.

I have a friend who has a brother who worked as an agent for the federal bureau of Alcohol, Tobacco, and Firearms. When his brother was on the job, his life was in constant danger. Preparing for that danger became a way of life. My friend said that it was a little odd spending time with his brother after that, because whenever they were out, his brother’s eyes were watching all the windows, watching all the movements of the people around him, always looking for potential danger and a way out. He couldn’t turn it off. Your people need to have a bit of that attitude in them—always watching and planning contingencies.

Just because the pace of the business world get faster does not mean that planning becomes obsolete. Just the opposite, it becomes even more critical. It does, however, require a particular type of planning. This type of planning blends a focus on the big picture with continual planning of ways to get through the crisis of the day in order to get back on track to the big picture. The planning is continuous, rather than episodic, and needs to get out into the field where the action is. Finally, it needs to look for contingencies, so that there are fewer crises of the day to deal with.

Jason Bourne was never half-hearted about what he did. He gave it his all and played to win. Not a bad way to go.