Monday, November 14, 2011

Strategic Planning Analogy #422: Hatching Chickens

Back when I was a child, the family living next-door hatched chickens in their garage. They had a number of incubators full of eggs. As long as the incubators were kept at the proper temperature, those eggs would hatch. Then the neighbor’s garage was full of cute yellow baby chicks.

Eventually, those chicks would be gone, and they’d have a bunch of new eggs to hatch. I never asked what happened to all those baby chicks…or asked why someone living in an inner ring suburb of Detroit was hatching eggs in their garage…or why they also had a machine to make ceramics in their garage. I guess as a young boy, you just thought it was cool to see a bunch of baby chicks get born and didn’t think about the rest.

Chickens are not the only things which are hatched. Companies try to get strategies hatched which will grow the firm. But just as all eggs do not lead to hatching chickens, not all strategies result in growing a firm. Instead, some just die in the shell.

To reduce the risk of failure, my neighbor put the eggs in an incubator. The incubator had a temperature level which was tightly controlled. There was a thermometer in each one, so that one could make sure the temperature was ideal for hatching eggs. At the right temperature, hatching was more likely to occur.

The same is true for strategies. Strategic success has a lot to do with the characteristics of the company where the strategy lies. If the environment is wrong, then the strategic idea will die (just like those eggs if held at the wrong temperature).

The principle here is that even great strategic ideas will die if they are placed in the wrong environment. Therefore, having great ideas is not enough. One also needs to manage environment, so that the ideas have a chance for survival.

1) Don’t Try to Hatch a Strategy Which Requires a Distinctively Different Environment
For example, one time I worked with a company and came up with what I thought was an excellent strategic idea. It leveraged a lot of the company’s core competencies in a way which could reinvent an entire industry, creating huge growth opportunities. Unfortunately, I could never get the idea to hatch within this company, no matter how hard I tried.

The problem was that the corporate culture at this company was centered on helping people have more fun. This new strategy had nothing to do with “fun.” It was more focused on alleviating pain. This incompatibility with the prevailing culture doomed the strategy. It didn’t have a chance of hatching. The corporate temperature was wrong.

As in this case, the temperature was wrong because the energy of the company was focused in a different direction. However, sometimes there just isn’t any energy at all to support change. The incubator is turned off and it is too cold to grow anything.

These are the companies who resist any kind of change. New ideas are shot down quickly. Energy is spent on protecting the power bases of the status quo rather than moving the company forward. Anything out of the ordinary gets vetoed.

We talked about the need for getting power behind a strategy in the prior blog. But if there is no power to harness, then you have what I referred to in an earlier blog as “hard clay.” Once clay has been baked hard in a kiln, you can no longer reform the clay into something new. The hardened shape stays forever. Just as you cannot remold the hard clay into a new form, you cannot remold a cold company into a new strategic reality. The efforts are a waste of time.

If you find yourself in a cold environment with hard clay, don’t waste your efforts on radical strategic change. You won’t get anywhere. Your strategic options are more limited to things like:

a) Milking the old strategy as well as one can on its way down (a harvest strategy); or
b) Divesting the operation (all or in part) (a liquidation strategy).

Although these may not be the most dynamic options, at least they are compatible with the temperature of the company, so that they have a chance of succeeding. I’d rather have a successful harvest strategy than a failed repositioning strategy—no matter how appealing the repositioning at first appeared.

2) Build Strategic Incubators
Sometimes, if the core business is not the right temperature, you can still have success if the company allows you to build separate incubators. For example, when IBM was trying to invent the PC, it was soon apparent that the core business environment at IBM was the wrong place to hatch such a strategy. The structure, the bureaucracy, the culture…they were not designed for such a radical start-up. The PC would have died before hatching. Wrong temperature.

IBM was clever enough to realize this, so they moved the PC development off-site. It was freed from the old corporate structure and allowed to incubate on its own—far away from headquarters in an environment ideally suited for such a start-up. As a result of the isolation, the diversification into PCs was a success. It hatched well because it was allowed to be put in the right kind of incubator—even if it required being separated and held at a different temperature than the core business.

Incubators work on eggs because they properly control the entire environment around the egg. They protect the egg from the wrong environment. The same is true with strategies. If you separate them from the pressures of the core business and nurture them in the right culture, they can hatch into a successful business. Therefore, pre-plan the incubator needs when proposing a strategic move which would die if started within the core. Include the incubator as part of the proposal.

Beyond that, the trick here is how one handles the strategy once it is successfully hatched in the incubator. Eventually, the project needs to leave the incubator and get reunited with the core. Otherwise, the core will never benefit from the strategy. However, the newly hatched business is still young and weak. It can still get stomped on and killed by the core if one is not careful.

Therefore, your great idea may not only need an incubator strategy, but also a post-incubator strategy.

3) Sometimes You Need to Change the Core Culture
If keeping a culture which has either gone cold or is no longer suitable to the future is not acceptable, or if incubation of a small offshoot is not enough, then one is left to change the core culture. This is extremely difficult and highly risky. The likelihood of success is low.

If this is your choice, understand the risks and enter the project well prepared. Start early and expect a long battle. Anticipate resistance and head it off early.

One of the biggest errors I have seen is leaders trying to push a new strategic agenda and think that all they are doing is pushing a strategic agenda. If the agenda is radical, one is not only pushing a new strategic agenda, but one is also pushing through a new culture, a new bureaucracy, a new corporate climate. If all your forces are lined up to push the strategic agenda, then the forces of the status quo culture will resist your effort at the cultural level.

This is a two-front war—a war of strategy and a war of culture. You have to win at both to win at all. That is why trying to change the whole corporation is so difficult and risky.

Even great strategic ideas will fail if launched in the wrong environment. To prevent this failure, one must either:

a) Limit one’s strategic options to only those options compatible with the current corporate environment;
b) Launch the new ventures in a separate incubator, protected from the core and run with a more appropriate culture; or
c) Launch a risky two-front war to change both the strategy and the culture of the core business at the same time.

When someone outlines a strategy to me and asks me if I think it is a good one, my first response is to ask them who the strategy is for. After all, strategic success depends not only on the idea, but on who is going to implement it. A strategy which is great for one company could doom another, depending on the situation and the culture. Therefore, don’t just try to seek a “good strategy.” Instead, seek out the “strategy most appropriate for me (and my culture).” Find the strategy which will hatch in your incubator.

1 comment:

  1. Gerald Nanninga,
    I fully agree and loved your analogy in this lovely post. I have just published on slideshare a presentation on Ads Dispersal. Like seeds dispersal, ads (seeds) need to have a structure that is adaptable to the transporting medium and then for the seeds to fall in the right environment.
    Seeds of strategic planning are apparently the same: they need an adaptive structure, the right communication and transport channel and then to be in the right environment to survive and grow.