Monday, January 25, 2010

Bad Strategic Planning Doesn’t Always Work

Today’s Wall Street Journal (Jan. 25, 2010) ran an article entitled “Strategic Plans Lose Favor.” In the opening paragraph, the authors claimed that “executives discovered that strategic planning doesn’t always work.” The article then goes on to explain some of the “strategic planning” that didn’t work. After reading the article, I would like to rephrase that quote to read “executives discovered that bad strategic planning doesn’t always work.”

Strategic Planning has an image problem. If I understand this article correctly, many executives have a vision of strategic planning as being like a rigid straightjacket—something that cannot be taken off or readjusted for one to five years. The straightjacket tends to consist primarily of a set of financial assumptions and other numeric data which get frozen in time and only get reassessed at on an annual basis.

The article uses words like “distant calendars,” “rigid forecasts”, “inflexible method,” and “static five-year strategic plans.”

Naturally, if this is one’s view of strategic planning, then I can understand why you might say that strategic planning did not work during the recession. Who wants to be strapped into a straightjacket when they are drowning in the depths of a recession? Even Houdini knew that if you want to escape the drowning, you have to get out of the straightjacket.

As long as strategic planning is viewed as a straightjacket, executives will be weary of putting it on. That image needs to be changed. Instead, we need to portray strategic planning as being more like putting on running shoes that help us outrun the competition in the race to the future.

The emphasis has to shift from focusing on numbers, books and annual meetings. This is an obsolete mindset. Instead, the focus needs to be on positions, paths, points on a compass, and points of inflection.

1. Position
Just because a straightjacket is too confining does not mean that we should abandon all restrictions on movement. Random motion never leads to forward progress. Moving in all directions at once is about the same as moving in no direction at all.

Therefore, one needs to choose a basic direction for the company—which I call a position. A position explains why your business has a right to exist in the marketplace and why a certain customer segment would prefer it. It is the place where you win.

It may be a position based in price, or service, or quality, or durability, or fun, or rebellion, or convenience, or variety, or personalization, or taste, or status, or coolness, or whatever. The point is that trying to be all things to all people at all times will fail. You need to find your position in the world and make the proper trade-offs so that you can be the best and win there.

Sure, the environment ebbs and flows over time. But unless you anchor yourself to a position, that ebb and flow will toss you about until you are totally adrift and lost at sea (or at least your consumers will be lost regarding what you stand for). If you are a status brand like Gucci, you cannot suddenly become a leading low price bargain brand in the recession and then try to regain the status image again when the recession is over. Sure, you may bob a bit and adjust to more of the starting price points in your mix during a recession, but a luxury status brand needs to stay true to its position or it will destroy its reason for existence.

Positioning not only tells you who you are, but who you are not. This narrowing of options allows you to be faster and more adaptive to a changing environment, because you do not have to totally reinvent the wheel with every decision. It becomes your running shoes, helping you to move faster, because the decision-making becomes more obvious—go in the direction which is consistent with your position.

Strategic planning’s new role is to help get everyone on board as to what your position is (or should become) and what it means for everyday decision-making. It needs to be there at the decision making table every day—not just once a year—so that the tyranny of the immediate crisis does not lead to random decisions which set a company adrift.

If you want to learn more on positioning, I’ve written quite a few blogs on the topic. Just search the blog for positioning, or click on “positioning” on the topic list to the right of my blog.

2. Points on a Compass
If you want to win a race, it helps to know where the finish line is. Your position will help determine where your finish line should be (not all companies have the same finish line as we discussed in an earlier blog). For example, if your position is based on superior innovation, then your finish line is in the direction of creativity, R&D and any other way to accelerate innovation. That is the direction on the compass you follow. You would not follow the direction of excessive cost-cutting and imitating the competition. That is a totally different compass point that will probably destroy your position.

So strategic planning helps you find your direction on the compass—“Go West!”—where the direction is defined as the path that gets you more strongly positioned to win.

Now in the past, strategic plans may have tried to dictate the exact route of that path, with minute detail on precisely what gets done at what time (that straightjacket idea). However, the new approach is to focus on the general direction on the compass (go West) rather than the exact path.

This new approach improves your speed and agility. For example, if the path you are on runs into an obstacle, like a tree or a mountain, the old approach might have been to stop and cut down the tree or dig a tunnel through the mountain (got to stay true to the path of master plan, even if the tree wasn’t in the plan). However, under the new approach, the idea is to just push west. If a tree or a mountain is in your way, look for an easy way around it. As long as you are generally still moving west, you are okay.

Therefore, the role of strategic planning is to be there for everyday decisions to ensure that these little detours due to the obstacles in the current environment don’t derail the strategy and that they are generally still pointing the company in the right compass direction (or to get it back on track after the detour).

3. Points of Inflection
Every once in awhile, the environment changes so dramatically that “all bets are off” on the old strategy. For example, the rise of the internet and firms like Expedia and Orbitz necessitated new strategies for travel agents. The move from analog to digital made many strategies for analog companies obsolete. The big recession has made some lasting changes in attitude for some people and how the buy.

These mammoth changes to the status quo are called inflection points. An inflection point is when a curved line changes its trajectory. “Destiny” has taken a new direction, and it is highly likely that your strategy needs a new direction as well.

These typically don’t happen all that frequently. However, when they happen, you need to be prepared to act quickly to take advantage of the change (rather than be defeated by it).

One of the key roles of strategic planning is to monitor trends to find those early warning signs (trigger points) that an inflection point is near. In addition, strategic planning has a role in preparing the company for the change, so they can act quickly and decisively when the time is right. Again, this process helps the company move faster when times change, like putting on those running shoes.

For more information on inflection points, see my earlier blog.

If you think of strategic planning as a rigid straightjacket, then you have an outdated and not very useful tool. However, if you think of it more like running shoes, then it will be a very relevant and useful tool. Running shoes focus on positioning, compass direction, and inflection points.

The race is not always won by the fastest runner, but the runner who knows the fastest path to the finish line. Don’t abandon all planning to run wildly in all directions. Take a little planning time first to orient yourself towards the finish line.

Thursday, January 21, 2010

Strategic Planning Analogy #305: Act to Win

For Christmas, I received from my son a new board game which I had never heard of before. My wife and I opened up the game to see how you play it. Unfortunately, we did not immediately find any set of rules.

I assumed that the goal of the game is to win. Winning is nice. But if I have no idea of what I have to do to win, then the goal is pretty meaningless (and I cannot play the game).

Fortunately, I eventually found a piece of paper with the rules of the game on it. Now I know what to do.

Strategic planning is about finding a way for your company to win. Lots of the goals or mission statements companies write essentially express this desire to win. They aspire for things like being a “leader” in something, being “the best” at something or providing the “most satisfaction.” These are the way the companies define winning.

The problem is if you stop there. Then you are like the situation I was in with the game I got for Christmas. I knew I wanted to win the game, but I had no idea what I was supposed to do in order to win.

Just as that game was worthless without the rules of play, your business missions and goals are worthless if those in your company do not know what behaviors are needed to win.

Just because you tell people that the company needs to win by creating excellence at something does not necessarily mean that they will know what to do to make that excellence come about. You need to connect the goal to desired behaviors.

The principle here is that effective strategic plans outline and measure not only the final outcome (what winning looks like), but also provide an action plan of how to make this goal a reality (what to do).

To me, this seems pretty obvious—figure out what needs to happen and then make sure those things happen. Apparently, it is not all that obvious. The folks at Deloitte today held a web conference to teach what they called “Behavior-Led Strategy Execution” (BLSE). It’s a fancy name for saying that strategies need to be executed in order to be effective.

The BLSE process goes like this:

1) Make sure everyone understands the strategic goal.
2) Figure out what critical events need to happen to achieve the goal.
3) Figure out who are the key people or key departments in your organization that are most responsible for making these events happen.
4) Determine the key behaviors you want these key people to do to accomplish the key events.
5) Track and measure to see if the key people are doing the key behaviors.

In other words, give people the rules of play so that they know how to play to win. The typical rules of play that come with a board game tend to have five parts. We’ll look at each of those five parts and show how they would apply to a comprehensive business strategy/action plan (and help accomplish the BLSE).

1. Goal
Usually, the first thing the rules of play discuss is how you win the game. Usually winning comes down to either:

a. Getting the most (or least) points;
b. Getting the most money;
c. Finishing the game first; or
d. Outlasting your opponents.

Business equivalents could be something like:

a. Getting credit for the strongest brand image or most market share points;
b. Getting the most sales;
c. Being the first to capture a new market;
d. Consolidating the market in your favor.

If you don’t explicitly explain what winning looks like, then don’t be surprised when you don’t win.

2. Resources
Next, the game will tell you what all the pieces and parts are for playing the game. This will include things like the game board, playing pieces, decks of cards, dice, or whatever. You cannot effectively play the game unless you know what all the pieces are.

The business equivalent would be an understanding of the resources available to you and to others. Do you understand your own strengths and weaknesses? As in the Deloitte model, do you know who all of your key players are? Do you know how much manpower and financial resources you have at your disposal to achieve this goal? Do you understand the resources of your competition? Do you understand the “lay of the land” for the marketplace in which you are playing (your game board)?

The resources are all you have to win the game. Learn what they are and how to use them to your advantage.

3. Boundaries
Next, the rules of play for a game typically tell you what you can do whenever it is your turn to play. Certain actions may be allowed on that turn. Other actions may be unlawful. For example, in chess, you learn that each type of piece can only move in certain ways. A bishop can only move diagonally (any number of open spaces), but a king can move only one space at a time (but in any direction).

The business equivalent is an understanding of what behaviors are within acceptable bounds and which behaviors fall outside those boundaries. These boundaries may vary by individual in the organization. In the Deloitte model, it is an understanding of expectations for each of your key people (proper actions, improper actions).

It can also be an understanding of how far an individual can move before needing to seek approval. The idea is that movement is necessary for success. Unless the expectations for that movement are clearly outlined, you may not get the movement you desire.

This is not to say that you have to articulate every single step in minute detail. This is not about micromanaging. It is about setting boundaries and expectations.

4. Outcomes
The next section in a game’s rules of play is typically a description of how particular actions impact your ability to win. For example, if the goal of the game is to accumulate the most points, this section will explain all the ways you can gain (or lose) points. If the goal is to make money, it will explain all the ways to earn (or lose) money. If the goal is to finish first, it will tell you what actions speed up (or slow down) your progress.

The business equivalent is an understanding of which moves get you closer to your strategic goal, and which moves are counterproductive. In the Deloitte model, this would be understanding which behaviors you want your people to accomplish.

The idea is to connect actions to outcomes. This allows people to see which types of actions are most likely to lead to outcomes consistent with winning.

5. Keeping Score
If you want to know who won the game, then you’d better keep score. Keeping score during the game lets you know how well you are doing during the game (and how successful your style of play is). If your score is low, you may want to change your style of play.

Therefore, the rules of play let you know how to keep score.

In business, this is the idea of keeping track of how well you are achieving the desired actions. Are you getting closer to achieving your goal? A lot of businesses track financial performance. However, how many track action performance? Are the right things getting done? Who’s keeping score? This is also the important last step in the BLSE model.

Winning in business is a lot like winning when playing a board game. If you want to win in a board game, learn the rules of play. If you want your business to win, use your strategic planning process to create your rules of play. Before you can win at a game, you have to first play the game. Similarly, strategic planning needs to go beyond just defining success, but helping a company to play the game.

Over the Christmas holidays, I played a different game with my daughter which I had never played before. I studied the rules of play before playing, but it wasn’t until I actually started playing that I fully understood the rules. The idea here is that you will not perfect your playing skills by just studying the rules. You have to get in there and play the game. At some point you have to stop fine-tuning the plan and start playing the game.

Friday, January 15, 2010

Strategic Planning Analogy #304: Ignore Complaints?

Back in the 1800s, hospitals tended to create death almost as often as preserve life. Take childbearing, for example. Healthy mothers-to-be would come into the hospital, yet up to 25% of these mothers would die in the hospital from “Childbed Fever.”

A lot of time and effort went into caring for these women suffering from childbed fever. Later, much effort had to go into finding ways to raise the children without mothers. There were all kinds of problems needing solutions.

In the late 1840's, Dr. Ignaz Semmelweis was an assistant in the maternity wards of a Vienna hospital. There he observed that the mortality rate in a delivery room staffed by medical students was up to three times higher than in a second delivery room staffed by midwives.

What was the difference? The medical students had multiple duties and would often rush into the maternity operating room right after dissection lessons in the autopsy room. By contrast, the midwives would only come in to treat expectant mothers. Semmelweis suspected that the students might be carrying infections from the autopsy room into the maternity room, thereby infecting the birthing mothers.

To test his theory, Semmelweis ordered the doctors and medical students to wash their hands with a chlorinated solution before examining women in labor. This was a radical idea at the time, since doctors in the 1800s did not wash hands or change bloody gowns between patients. After mandating the hand-washing, the mortality rate in Sennelweis’ maternity wards eventually dropped to less than one percent.

It took many decades after this for the idea of routine hand-washing to gain widespread acceptance among doctors. The doctors resisted the idea that their hands might be causing disease to spread. This stubbornness lead to many more decades of unnecessary death. (You can read more about handwashing here.)

Problems seem to pop up all the time in the world of business. Every day seems to bring a new crisis demanding a solution. Precious time must be diverted to finding solutions to all of these problems.

The hospitals of the 1800s also had lots of problems. At least that is how it appeared to them. In reality, however, they had just one real problem—a lack of cleanliness. When doctors started washing their hands, a lot of the other problems disappeared.

Nobody was complaining about cleanliness. Nobody was fretting about what might be on the doctor’s hands. As a result, this was not an area of concern or attention. Instead the attention was on the patients with the diseases that were unknowingly caused by the dirty hands.

The problem was not with the patients. It was with the process. A simple fix to the process (wash hands) eliminated a huge number of problems with the patients.

This could be the same situation as your business. Perhaps you don’t have as many crises as you think. Instead, you may just have one bad process. A simple fix to the process might eliminate all those other problems.

The principle here is that strategic success is improved if you focus on goals rather than complaints.

Problems With Complaints
Complaints come at the end of the chain of activities. Something is wrong with the final outcome and people complain about it. It could be an internal complaint from the CEO, like “sales came in below plan.” It could also be an external complaint from customers, like “your product doesn’t work as planned.”

Complaints are typically resolved by trying to fix the outcome that came out of the process. If the complaint is about sales, then sales-boosting solutions are looked for to fix the problem. Recommendations could be to have a sales-boosting contest for your salespeople, or to lower prices, or to issue coupons, or some other sales-boosting tactic.

If the complaint is about how the product works, then solutions are looked for in ways to improve the product. Features could be tweaked or software could be modified.

The problem with focusing on complaints in this manner is that it is like hospitals in the 1800s focusing on dead patients. By the time you get to the end of the process, it may be too late to really make meaningful improvements. To really fix the issue, you have to go upsteam to alter the process and attack issues that nobody may even be complaining about (like unclean hands).

For example, all the sales-boosting strategies of the world are useless if your process is delivering a product or service nobody wants. Your patient (the product) is already dead, and sales contests won’t bring it back to life.

Similarly, modifications to a product out in the field that is inappropriate for its customer base seldom miraculously converts that product into something appropriate. The product is already dead.

Focus on Goals
Rather than focusing on complaints, a better approach is to look at goals. In general, the strategic goal of a company is the following:

Find a unique way (or process) to deliver a product or service which provides both a superior outcome for the customer and profits for the company.

When you focus on a goal such as this, you are forced to look at the entire process—the big picture. It is a focus on building an integrated business model and how it impacts the life (or business model) of the customer. It forces you to repair things upstream, before the complaints occur.

It is only when you examine the entire process that you find the importance of cleanliness in hospitals. It is only in examining your entire business model/process that you will find the superior strategy.

External Implications
There is a lot of talk these days about using web 2.0 technology to have more conversations with your customers. However, to make these conversations most beneficial, it is important to talk about the right things. Don’t focus the conversation around complaints. Instead, focus the conversation around the goals and outcomes desired by your customer.

The Corporate Strategy Board published a paper in 2009 about a company who took this approach. Traditional conversations, like focus groups and satisfaction surveys, had not been very useful, because they tended to focus on complaints about the mess coming out of the current process, rather than on how to build a better process.

To fix the conversation, this company focused on trying to understand the desired outcome goals of their customers, i.e. what were each of the jobs at the customer’s company trying to accomplish (and what would success look like for these jobs).

By changing the conversation to goals, they stopped trying to improve the product and instead tried to improve the outcomes of the customer. This change lead to radically different approaches and radically different products which benefitted everyone (company and customer).

Examples in the Corporate Strategy Board paper included the following:

1) Customers complained that they needed better automobile brakes. In the old days, they would have just tried to fix the complaint by designing bigger brake pads. However, when they asked about the desired outcome goal, they discovered the customer needed to minimize breaking distance in slippery conditions. Therefore they abandoned the old break pad mindset altogether and focused on antilock braking technology.

2) Customers complained that angioplasty balloons were not smooth enough. In the old days, this would lead to focusing on ways to lubricate the balloons. However, a deeper discussion on goals discovered that the true desired outcome was minimizing the recurrence of artery blockage. That moved the process away from lubricants to collapsible stents.

Internal Implications
Internal conversations need to change as well. Instead of complaining about sales, move the conversation to designing a business model so powerful that sales almost take care of themselves.

Rather than addressing each problem individually and sequentially, look for common threads which point to a systemic issue with your business model. Seek out your version of the “unclean hands,” where a simple process change can eliminate a wide range of downstream problems, even if nobody is complaining about the process.

And take a holistic approach to examining the business model. The Edsel was designed by trying to optimize every piece of the automotive design individually. Nobody bothered to realize that when all the individual pieces were put together, the entirety of the car was a disaster. Look at how the parts interrelate to impact the greater goal of superior outcomes for the customer.

If you want to make major improvements to your strategy, don’t focus on complaints. Instead, focus on the bigger picture goal—a better internal business model providing superior outcomes for the customer. Focusing on the big problem can save you from dealing with a lot of little problems (and complaints) later.

There was still some resistance to hand washing by doctors as late as the early 20th century. In 1910, Josephine Baker, M.D. started a program to teach hygiene to child care providers in New York. Thirty physicians sent a petition to the Mayor protesting that "it was ruining medical practice by...keeping babies well." It is narrow thinking like this that leads to failure.

Monday, January 11, 2010

Strategic Planning Analogy #303: Oklahoma Land Rush

Back in the late 1800’s, there was a widespread desire in the U.S. to take the vast, uninhabited areas of the western territories and populate them landowning farmers. Many felt that the U.S. government should provide that land to the farmers for free.

To make this possible, the government passed the Homestead Act of 1862. This law stated that if an individual met a small list of qualifications, they could end up owning 160 acres of former government land for free.

This law became very popular, and many used it to become western landowners. It was so popular, in fact, that there was pressure on the government to open up more even more land for homesteading.

The biggest such increase came on April 22, 1889, when 2 million acres (8,000 sq. km), was made available for homesteading in what eventually became the state of Oklahoma. The process worked like this. Those wanting to make a claim to land lined up along the exterior border of the territory. Then, at exactly noon on April 22nd, a canons were fired to signal the beginning of the rush. At that point, those standing at the border could rush into the territory to stake a claim to property.

There were at least 50,000 people rushing in to claim one of about 12,000 available plots of land. With a day or so, the initial process was pretty much completed, but not without a lot of stress and difficulties. Many drowned trying to cross the rivers to get to the land. Fights broke out as multiple parties tried to stake a claim to the same land. Many perished or gave up before meeting all the requirements needed for gaining full ownership.

Not only was land grabbed for farming on April 22nd, but there was land grabbed for building cities to support the farms. Towns sprang up out of nothing. By the end of the first day, the town of Guthrie, which did not exist before noon that day, had a population of around 10,000 people. These claims were also very difficult to get and keep. Lack of adequate food, water and money caused many to walk away from their claims only a few days later. Those who stayed typically endured much hardship for a long time.

To learn more about the Oklahoma land rush, go here.

Home ownership has always been an important desire of American society. For many Americans, the definition of personal success has included the idea of owning your own home.

Successful businesses also tend to require ownership of something—a viable position in the marketplace. If you do not own a position in the marketplace, then there is no strategic reason for why your business should exist.

There are many ways to define a position. For example, in the case of automobiles, you can define your position by the demographics of your customer, e.g., THE car brand for young adults (Scion). You can define it by the nature of the product/service being offered, e.g., THE car brand for reliable cars (Toyota). You can define it by the overall experience, e.g., THE most hassle-free experience (Saturn).

Regardless of the definition of the position, the key point is that your business needs a position and it needs to be more than just an aspiration—it needs to be owned.

Are you willing to put in as much effort as the Oklahoma land rush people did to claim their point of ownship?

The principle here is that it takes effort to successfully own a position in the marketplace. By using the requirements of the Homestead Act of 1869 and the experience of the 1889 Oklahoma Land Rush, we will demonstrate what it takes to build a winning position in the marketplace.

1) Stake a Claim
Before you can own a position, you must first stake a claim to that position. For the Homestead Act, you could not claim land that was already claimed or owned by someone else (other than the government).

The principle here is that successful business positioning tends to make claims for positions which are not already strongly owned by someone else. Once the customers associate a particular brand with owing a position, it is very difficult to convince those customers to change their mind and give that ownership to someone else.

Therefore, you must be willing to race to be first to make a position claim, just like the Oklahoma land rushers. This requires speed (to get there first) and aggression (to fight off those trying to claim the same position).

There is currently a big fight going on for staking out positions in the electronic book reader arena. At this month’s big Consumer Electronics Show, a large number of companies announced plans to get into that space. However, firms like Amazon’s Kindle, Sony and the Nook (associated with Barnes and Noble) have already gotten a head start by rushing out early and fast, staking claims to superior distribution channels and getting their names out in the public. It will be hard for the laggards to find a place to stake a claim. If you are late to the rush, like Apple, you will need to find a differentiating position not yet claimed, like coolness of design or superiority in apps.

2) Proper Match
The U.S. government did not want land ownership in the hands of people hostile to the intents of the United States. Therefore, the Homestead Act required owners to be “a citizen of the United States, or who shall have filed his declaration intention to become such, as required by the naturalization laws of the United States, and who has never borne arms against the United States Government or given aid and comfort to its enemies.”

The principle here is having the proper match between your character and the character of the position you desire to own. If you wanted American land, you needed to have characteristics in common with America. Otherwise, you were not deemed worthy of such ownership. Similarly, if you want to own a business position of “reliability,” you need to be a fundamentally reliable company in your character. Otherwise, consumers will not deem you worthy of holding such a position.

Wal-Mart has tried on several occasions to stake a claim in fashion apparel, but consumers see that as beyond the capabilities inherent in Wal-Mart’s character/image, so they do not deem them worthy of an ownership stake in that area.

It is difficult enough trying to own a position when you are skilled at delivering the promises inherent in that position. If these skills are not natural to your nature, it becomes almost impossible.

Therefore, when looking for positions to claim, simultaneously consider who you are as a company. Make sure that your capabilities and your image match up well with that position. Otherwise, you will lose the battle for ownership.

3) Longevity
The Homestead Act required that the person build a house on the property and live on the land for five years before they could apply for ownership. The government wanted the land in the hands of those dedicated to making it their home, not in the hands of opportunistic land speculators.

The principle here has to do with longevity. If you want to own a position in the minds of the marketplace, you have to stick with it—year after year after year. A position is not just some marketing slogan that changes every year with the latest fad. It is the essence of why your business exists—the unique and differentiating reason why consumers should prefer your brand over the competition on an ongoing basis.

It can take years to build a solid enough history to deserve ownership in the minds of the customer. If you keep changing your position all the time, nobody will know what you stand for (after all, it would appear that even you don’t know what you stand for). You will not appear to be serious and dedicated enough to deserve the right to ownership of any particular position. Nearly all your great brands have held steady to their positions for the long haul (e.g., Wal-Mart on Price, Apple on “coolness”, BMW on ultimate driving machines, etc.).

You need to settle in and make it your home for many years. Otherwise, you will be seen as an opportunistic speculator, someone people do not want to do business with.

4) Substance
Finally, the Homestead Act required that during the five years you lived there you must prove you used a portion of the land for faming. The government wanted these to be productive, viable farms.

The principle here has to do with substance. A position has to be more than just words. It must be backed up with actions. If you want to claim to be a farm, you have to do some farming. Similarly, if you want to own a position of quality, you’d better be capable of producing quality.

If there is no provable substance behind your position claim, you will lose the right to own it in the eyes of the customers. Toyota has held a position of reliability for many years. It was not only backed up in words, but in provable documentation by independent raters of their brand (like Consumers’ Report). Lately, those ratings have slipped compared to competition and Toyota has had some massive recalls. If this continues, Toyota could lose its position (and the market share and premium prices which go with it).

Business success typically depends upon owning a viable position in the marketplace. If you want consumers to give you credit for owning a position, be sure to:

1) Rush to stake (and defend) a claim in uncontested territory;
2) Choose a position consistent with who you are and what you represent to the customer;
3) Stick with your same basic position year after year after year;
4) Deliver provable substance to back up your positional claim.

As it turns out, much of the land in the 1889 Oklahoma Land Rush was not really suitable for farming. Many could not make a viable living as a farmer on the land and gave up before the five years were up. For those families who stuck with it, most ended up losing their farm a generation later during the Great Dust Bowls of the 1930s. As it turns out, even if you own a position, it does you no good if the position is not economically viable.

Why Strategic Planning is hard for CEOs

Here's a link to very good article on strategic planning and why CEOs have difficulty with the task. To quote the article, "A good strategy is the product of the creative combination of two disparate logics — rather than a single linear analytical logic flow — but CEOs and 'strategists' are seldom conditioned to become skilled at the requisite creative combination."

Friday, January 8, 2010

Strategic Planning Analogy #302: Strategy Paradox

Years ago, I was revising my resume. I showed a copy to an expert in resumes. This expert had two comments.

First, he complained that my resume was way too long. He wanted it to be only one page long. My draft was about 3 pages long.

Second, he complained that my resume was not fully describing all my abilities and accomplishments. He wanted me to add lots and lots of additional details about my background.

I was a bit perplexed by the advice, so I asked him, “How do I triple the detail while at the same time cut the size by two-thirds?”

He did not have any suggestions on how to accomplish this. All he said was, “Go back and re-write it so that it is shorter and has more content detail.”

After that, I no longer asked for his “expert” advice.

Writing a business plan or strategy is a lot like writing a resume. There is this paradoxical problem of trying to pack in enough content to be effective (sell the person/idea) while at the same time keeping is short enough for small attention spans (not lose the audience).

On the one hand, you want to make sure that the plan includes enough detail so that everyone truly understands it and is motivated to support it. Simple platitudes like “We want to make a lot of money by selling desirable products at a profit” are worthless. Nobody will back you with millions of dollars and teams of employees based on such flimsy puffery. There needs to be substance, based on substantiated facts, concrete objectives, and sound strategic logic.

This is similar to resume advice, which tells people to fill the resume with documented “proof” that they are capable of delivering substantial and measurable benefits to their employer. Words in a resume like “at my last company, I improved sales by 37.4% and reduced returns by 50%, and I can do the same for your company” are powerful. They convert puffery into believability and desirability.

On the other hand, experts say that the average resume only gets a few seconds of attention. If you cannot grab the reader in the first few seconds, the resume gets tossed out. Long-winded discussions in a resume are “the kiss of death.”

The same is true for business plans and strategies. Big, fat planning books full of boring tables and numbers are the kiss of death. People will not take the time to figure it all out. The book will just be put on the shelf and quickly forgotten. Twitter has redefined “completeness” as 140 characters…far less than a page of words (and much shorter than this blog).

So the dilemma for planning is the same as for resumes: How do you pack in enough detail to be meaningful while being brief enough for the audience’s attention span?

The principle here is that the only way to effectively overcome this paradox is to no longer think of a business plan or strategy as a single document or a one-time event/meeting. Think of it as a conversation—little bursts over a period of time.

Although a lot could be said about how to optimize this strategic conversation, we will briefly focus on just five points.

1) Credibility of the Communicator
Since the audience does not have the patience to fully evaluate every little detail of your plan, they look for short-cuts to get a level of comfort with what you are saying. One of those short-cuts has to do with the credibility of the strategy communicator. If the audience has developed a sense of trust over time in the credibility of the communicator, then they will transfer some of that trust over to what the communicator is saying.

In other words, not only are you selling a strategy, you are selling yourself. Everything you do every day helps to either build up or destroy your reputation as a strategist. The better your reputation, the easier it is gain the attention of your audience and to convince them in manageable sound bites that you have something worth listening to.

Why do you think companies pay so much money to all those big strategy consulting firms? A lot of it has to do with the trust in their reputation. Because of that trust, they feel they can overcome the paradox—get good substance without wasting a lot of their attention span pouring over unending boring details.

Learn from the consultants and build increasing credibility into your reputation on a daily basis through everyday interactions and conversations.

2) Consistency of the Context
Strategic plans tend to be presented within a strategic framework, or context. Michael Porter has provided strategic frameworks in the past (like the five forces). There are also newer frameworks, like the Blue Ocean approach. In the hands of a good strategist, almost any one of these frameworks will suffice.

The point here is to just pick one and stick with it. Your audience is not as enamored with all of the latest fads and fancies of the academic world of strategy. All they want is a successful plan. If you keep changing your strategic framework, then you are burdening your audience with having to learn all of the new jargon and all of the new charts and diagrams that go along with it.

It’s hard enough getting the time and understanding of your audience without complicating it with layers of new strategic gimmicks to also understand. Don’t keep changing the language. Stick with a process they have comfort in. Then they can focus their limited time on the essential details.

The other advantage is that you can use the comfortable framework in everyday conversation as a form of short-cut. For example, I have been using some version of my own 3P framework for about 20 years (Positioning, Pursuit, Productivity). Once the audience is comfortable with the substance behind these three P’s, I only have to bring up one of the words in daily conversation, and people immediately understand the strategic context of what I am trying to say…short and to the point.

3) Frequency of the Interaction
If planning is only a topic of conversation once or twice a year, it will never get integrated into the everyday activities of your business. It will just be like a book sitting on the shelf that nobody reads—irrelevant.

It’s hard to make a relationship work if you never talk or see each other. In the same way, strategy must be a continuing topic of conversation with frequent interaction. Get out of the Ivory Tower and mingle. If people will only give you a short burst of attention, then give them lots of little bursts. Build the strategic foundation one brick at a time. Build your reputation through many short conversations. Keep the framework in constant relevancy by constantly showing its relevance. Get on the agenda whenever there are decisions being made.

4) Compellingness of the Story
People love stories. They not only touch the mind, but they touch the heart and the soul. Stories are more memorable than tables of numbers. People will pass along a good story to others.

There is a reason why I start my blogs with stories—they are effective at getting points across. Don’t be afraid to use stories to overcome the paradox. When I was at Best Buy, we had a number of stories, like the Tornado Story and the Apollo 13 Story that could rally the troops and quickly remind people of what Best Buy was all about, since the lore behind the stories was commonly known within the organization.

5) Consideration of Opposing Points of View
Leaders don’t typically like having points of view shoved at them. Instead, they want to have a say in the conversation. Strategy is not a monologue, but a dialogue. A strategy is only as effective as its implementation, and so you have to get the implementers to buy-in to the strategy. You are more likely to get buy-in if the implementers feel like they had a part in the conversation.

By having a regular, ongoing dialog with the leaders, you can discover their various points of view in a non-threatening way. This gives you time to build an effective way of handling these points of view (either incorporating them into the strategy or finding effective means to disarm them) over time in future conversations.

As a result, when it comes time for formal strategic decision-making, a lot of the posturing has already taken place and been resolved, so the meeting time can be more effective.

Effective planning processes are a lot like effective resumes. They find a way through the paradox of providing adequate substance while being brief enough to fit a short attention span. This is most effective when you think of the strategy as a conversation, rather than a book or a presentation or a meeting. These conversations are most effective when a) the communicator has credibility, b) the context is consistent, c) the interaction is frequent, d) the stories are compelling, and e) Opposing positions are dealt with.

I once worked at a company that hired a new CEO. I wanted to impress the CEO with my ability to help him, so I put my thoughts and recommendations together in a big fat four-inch binder (10cm). Without any conversation, I just sent it to the CEO. That was an utter failure. I will never do that again.