Wednesday, May 11, 2011

Strategic Planning Analogy #392: Sunday Best, Part 1

Back when I was a child, I had two types of clothes in my closet. There were the “Sunday Best” clothes, which were only worn to church on Sunday, and the “Everyday” clothes, which were worn the rest of the time.

I didn’t care much for the Sunday Best clothes. I had to button the shirt tight around my neck so that I could put on an uncomfortable tie (something no young boy wants to do). In addition, since I wore the clothes infrequently, they didn’t get replaced as often. That meant that as I grew, the clothes would become ill-fitting and uncomfortable. The shoes were stiff and hard. And then I had to be extra careful not to get the Sunday Best clothes dirty or messed up.

I much preferred the everyday clothes. They fit well and were comfortable. And I didn’t have to worry about them.

Just as the clothes in my closet were separated into two categories, businesses often separate tasks into two categories—Everyday Tasks and Strategic Tasks. Everyday tasks are like the everyday clothes I wore as a child. These are the tasks you do most frequently and where you feel most comfortable. They fit well with your area of expertise. It’s the place you feel most comfortable.

Strategic Tasks, on the other hand, are more like my Sunday Best clothes. These tasks are done less frequently. The Strategic Tasks feel less comfortable because they tend to stretch beyond your comfort zone or area of expertise. Strategic Tasks tend to involve more cross-functional teams where people feel less in charge what they are doing (another source of discomfort). And strategic tasks seem to have less impact on how you are judged for raises and bonuses—so uncomfortable work seems to have little reward.

In addition, there is usually more interference and supervision from corporate headquarters on strategic tasks, which feels choking like that tie I wore to church. This also means you have to be more careful about not messing up, because Corporate is watching. And some of the strategic forms they want you to fill out feel as hard and stiff as those Sunday Best shoes.

It is no wonder, then, why so many people in a company dread working on strategic tasks. They’d much rather work on everyday tasks.

The principle here is that if you want effective strategic activity in your company, you need to avoid creating such a large separation between everyday tasks and strategic tasks. As we will see later, this large separation of how we approach these tasks leads to both sub-optimal strategic work and sub-optimal everyday work.

Instead, strategic tasks need to feel more like everyday tasks and everyday tasks need to become more strategic. You shouldn’t feel like you have to change clothes in order to switch from one to the other. It should blend together more.

I will try to illustrate this principle by looking at two tasks which tend to get separated. The goal of finding higher levels of growth beyond historical organic growth tends to be placed in the “Strategic Tasks” category. The goal of lowering expenses tends to be placed in the “Everyday Tasks” category. By labeling them this way and treating them differently in the organization, we sub-optimize. Growth is less than it could be and costs are higher than they could be, because this separation gets in the way of effectiveness. In today’s blog, we will look at the growth issue. In the next blog, we will look at the cost issue.

Growth Ignores the Core
Studies have shown that successful growth tends to be more difficult the further one moves away from one’s core strengths. Yet, when we place the growth mandate outside the realm of everyday tasks, we are almost by definition forcing the task further away from the core.

It tends to work like this. People in the everyday world of the core businesses don’t want all that uncomfortable outside process (called strategy) to get in the way of doing their business. So they wall off their organic business growth from that strategic uncomfortableness and say that this kind of growth is “everyday” work (and should be treated as any other everyday task). That way, they can be left more alone to handle it as they please.

I’ve had several experiences in my career where the operators have done everything possible to try to block my ability to add a more strategic approach to looking at their business growth. They claim that they are the “experts” and that my “interference” into their everyday work will only make matters worse. In their mind “strategic tasks” have no place in their “everyday” work world.

As a result of issues like these, the only uncontested space where the strategic work can usually take place is outside the everyday. The strategic focus for growth then looks mostly at diversifying. It can be a diversification into new products, new customer segments, new channels of distribution, new businesses, or some combination of the above. These are areas where the company is more likely to fail, because their expertise in assessing the risks and/or implementing the diversification may be lacking. Again, as I said earlier, the further you get from the core, the more problematic things usually become.

Worse yet, since “strategic” tasks tend to be less linked to compensation, you may not be getting people’s best effort on these projects. You may only get the time left over after the “everyday” tasks are first completed. There may even be attempts to sabotage some of this new growth if it is seen as a threat to someone’s core business (and the bonuses it produces) or a threat to their position of power in the current structure. Less than full dedication in an area with less than full expertise does not sound like a recipe to optimize your growth options.

The Handoff from Strategy to Everyday
And then comes the problem of implementation. Eventually all of this activity to create new growth has to become a new part of the core business. In other words, it eventually has to be a new form of everyday work. If all of the process to create the diversification was done outside of the everyday, then there eventually needs to be a time of hand-off when the work is transferred from being a “strategic” task to being an “everyday” task.

The more separation there is between these tasks, the more difficult the handoff will be. If the eventual operators of the business (the one’s charged with everyday work) are mostly left out of the loop when the business creation occurs (strategy work), they may not feel as bound to the strategic emphasis behind the startup. They could destroy all that initial effort by taking the handoff in the wrong direction.

I have personally seen this happen over and over and over again. Bad handoffs are virtually a given if the two groups only interact at the time of the handoff. Think about acquisitions (a key way to get into diversification). Most acquisitions fail. And a primary source of that failure is a bad handoff. All those great synergies and growth never happen because the integration of the acquisition into an everyday part of the company fails. The transition goes too slow, not enough cuts are made, and not enough integration occurs.

Why such a bad handoff? It is because those doing the acquiring are rarely the same people who end up running the acquisition (because they are seen as different types of tasks). The separation of tasks hurt the handoff. When you look at companies which are more successful at acquisitions, you tend to see more blending of the tasks, with the everyday people getting input into the process earlier and the strategy people sticking around later. It is shared work, not segregated work.

Making Core Growth Strategic
By contrast to task separation, consider what would happen if the walls were taken down protecting the core businesses from a more strategic approach. You could combine the expert in the area with a fresh set of strategic eyes. Innovative approaches could arise that the everyday person wouldn’t have otherwise seen, because that person may be too close to the trees to see the whole forest. Bad ideas wouldn’t get very far, because the everyday expert would provide a reality check.

Because this type of approach to growth is closer to where people are compensated, one is likely to get more intense effort. And because it is closer to the core, it is more likely to succeed. And because the business is more comfortable here, they are probably going to do a better job of implementing what it takes to create the new growth near the core.

Companies tend to separate tasks into two piles—the everyday and the strategic. Then each pile is treated differently. By doing so, the everyday becomes less strategic and the strategic becomes less relevant to the everyday. And this is a mistake. To get more value out of each task, the areas need to be better integrated.

Strategy isn’t something that happens way out there away from the everyday. Remember that who you are is just a sum of what you do. Your true position is not what was written on an easel at an off-site planning meeting. No, your true position is what the customers think of you, and most of that thinking comes based on their experience with your brand and what you do. Great strategy doesn’t separate the everyday and the strategic. It realizes that the two need to be greatly intertwined.

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