Tuesday, October 25, 2011
I used to work with a company that would go into a panic the week before the quarterly board meeting. They acted as if they were totally surprised that a board meeting was coming up. They never seemed prepared. As a result, there was always a last minute rush to get ready (with lots of overtime).
I was always flabbergasted by this lack of preparedness. After all, the board meetings were put on the calendar almost a year in advance. They were mandated by law to be held quarterly and they had been holding these quarterly meetings for decades. I wondered why everyone seemed to act as though the meetings were a surprise.
I used to joke that these people are so out of touch with the rhythms of the business that they are probably shocked every morning when the sun rises in the east. They probably say to themselves, “Wow! The sun rose in the east AGAIN. What a surprise! I wasn’t ready for that. Didn’t it just do that yesterday? I wonder when it will do it next time.”
There is usually a rhythm or flow to a business. It is the way things get done on a recurring basis. Some activities seem to effortlessly mesh with the flow of the business. Others seem like a major disruption to the flow.
At the company mentioned above, board of directors meetings were treated as a disruption to the business flow. The normal flow had to stop while panicked people altered their routine and rushed to get the director’s meeting job done. After the board meeting, the normal flow returned and people acted as if the board had never met.
When it comes to strategic planning activities, we have a choice. We can either build a structure where strategic planning meshes into the regular flow or we can have it appear as a disruption—like those board meetings. As we will see below, strategic planning is better off when part of the normal flow.
The principle here is that strategic planning is more effective when incorporated into the daily flow of business. This will not occur on its own, since the “tyranny of the immediate” tends to naturally push longer-term strategic issues out of the daily flow. Therefore, if you want strategic planning to be part of the daily flow, you have to actively work to make it so. Otherwise, you will end up with a dysfunctional mess like I saw with those board meetings.
Why Strategic Planning is Less Effective When Seen as a Disruption
There are several reasons why strategic planning is less effective when seen as a disruption. First of all, the reality is that a company moves in the direction of the daily flow. It is the sum of all those little decisions and daily actions which causes a company to become what it is. You can put a business mission or vision statement in a fancy frame and place it on the wall, but if it is not a part of the daily flow, it will have no impact on the business. You may as well frame a picture of a dancing bear and put it on the wall for all the good it would do.
For example, if your strategy calls for radical change and the daily flow doesn’t change, then the change strategy will never take root and become reality. The simple truth is that you are what you do. If the implications of the strategy are not integrated into the daily flow of what gets done, then the strategy will never succeed. So if you want an effective strategy it must move beyond disruption status and get integrated into the flow, where the real decisions are made.
The second problem with strategy-as-disruption is that it is often not taken seriously. After the disruption of an annual strategy session, people go back to their routines. It’s sort of like taking a vacation or going on holiday. It can be a fun diversion—a pleasant disruption of the routine—but afterward, the old routine returns. Or it can be seen as an unpleasant disruption, like getting the flu. Once the illness is over, the goal is to get back to the normal routine as soon as possible. Either way, the connection between the disruption and the routine isn’t made because the disruption is not taken seriously enough to cause any real lasting change.
It reminds me of what the civil servant government employees in Washington DC are known for. Tradition has it that they frequently say, “Government administrations come and go. Sometimes they are Democrats; sometimes they are Republicans. They make all kinds of pronouncements about grand new programs and new ways of doing things, but in a couple of years they are gone. Then another administration shows up with their own pronouncements. Well, we were here before these administrations, and we will be here long after they are gone. So we will keep doing whatever we want, just like we have always done before.”
In other words, the government doesn’t change much, because the everyday workers of the bureaucracy reject the disruptive calls which come from the outside politicians. The daily flow stays the same because the pronouncements aren’t taken seriously, and the grand strategies go unimplemented.
Steps to Get Strategy Into the Flow
Since it is critical to get strategic planning into the daily flow, it is prudent for the strategist to take steps to ensure that happens. The first step would be to create visibility at the point where daily decisions are made. If the key decision-makers only see the strategists once a year at an annual planning meeting, then the strategists will only be a small, maningless distraction. If you want to impact the daily decisions, you have to be visible all the time—to be there when the regular decisions are being made.
Get on the calendar of as many of the decision making bodies as you can. Go to the meetings. Steer the discussions to consider the strategic implications of what they are considering. If they won’t let you into the meetings, get to the meeting members prior to the meeting. Make sure the strategic context is top of mind and part of the normal decisions within the flow.
The second step is to provide a link between the conceptual and the practical. Business Missions and Vision Statements can provide a great conceptual framework for where you want to take the company or brand. But that doesn’t mean that everyone can intuitively understand how it impacts their own day-to-day actions.
For example, let’s say that your strategy is to become a leader at providing some functional attribute, like service, or quality, or speed. That sounds nice, but how should a salesman do his or her daily task differently in order to expedite this strategy? How should someone on the shop floor act differently as a result of that mission statement? Where should R&D efforts be directed to make the strategy a reality? How should a secretary answer the phone as a result of this strategy?
Unless you can provide a link between the words on a paper and what the average person does on an average day, they may never make the link. Don’t assume people will figure this out on their own. Help them to make the connection. Help them to see that the everyday actions of everyday employees impact strategic success. Help them to find ways to act in support of the strategy rather than (unknowingly) against it.
Ask people to visualize how the daily flow should look when the strategy is fully operational. Then help them figure out how to change their processes in order to get in line with that visualization.
Finally, pay attention to metrics. Metrics are the way we measure the daily flow. If you want the daily flow to move in concert with the strategy, then use tools which measure how well the flow is moving with the strategy. Don’t expect the daily flow to support the strategy if the measurement tools and benefit packages reward a different type of performance. For example, if you want to win on quality, don’t focus on cost control metrics and rewards
Some people use a version of the Balanced Scorecard to accomplish this. However, it might just be as simple as making sure that once everybody sees the link between what they do and the strategy, to measure how well that link is getting done.
Strategic execution is most likely to be successful if the strategic planning process is integrated into the daily flow of how things get done in the business. Otherwise, you end up with strategic planning as being a minor disruption which gets ignored when the real work is resumed. To ensure that the strategy is integrated into the daily flow, consider the following actions:
a) Increasing the visibility of strategists and strategic thinking throughout the year at the places where routine decisions are being made.
b) Helping employees at all levels of the organization see the link between their everyday activities and the overall strategy.
c) Using metrics to measure and reward how well the daily flow is reinforcing the strategy.
There’s been a lot of talk over the years about how ineffective many Boards of Directors are. I think a lot of that has to do with the fact that they are often seen as a disruption rather than as part of the daily flow (as we saw in the story above). Unless you want your strategic planning
Thursday, October 20, 2011
Back when I lived in urban Minneapolis, I had a commute to work by car of about 14 miles. Although it wasn’t the greatest time of my day (I was in traffic tie-ups every day), I didn’t think a whole lot about it. It was just something I had to do every day.
By contrast, when I was living in Green Bay (a much smaller market), I was considering a job in Appleton. Appleton was one county away. The commute from my house to that new job would have been about the same distance as my commute in Minneapolis (around 15 miles). In fact, because of the nature of the traffic, the time of my commute from Green Bay to Appleton would have been shorter than the commute I had in Minneapolis. Yet, my desire (if I got that job) was to relocate from Green Bay to Appleton in order to shorten the commute.
Why did 14 miles of commuting seem okay in Minneapolis, but not between Green Bay and Appleton? I think it has to do with what I saw outside my car window during the commute. In Minneapolis, the entire drive was through a dense, urban environment. The view really didn’t change during that commute. All I saw was a built-up urban view. It was as if I didn’t go anywhere, because the view didn’t change.
By contrast, to get from Green Bay to Appleton, I would have left the urban view of Green Bay and driven into rural farm country (complete with barns and grazing dairy cows). Then I would have left the rural area to enter the urban area of Appleton. This contrast in views made me feel as if I was going on a very long distance because I was leaving one environment to go through two more visual environments. That made to commute seem so much longer and more dramatic.
Visually, the Minneapolis commute felt like I was staying in the same place. By contrast, the Green Bay to Appleton commute felt like I was leaving one world to go to another. As a result, I was willing to accept the commute in Minneapolis but not the commute in Green Bay, even though the distances were about equal and the travel time in Minneapolis was actually longer.
One of the main purposes of strategic planning is to help get a company from where it is today to a better tomorrow. That journey into the future is a lot like my commute to work.
If the view on that strategic journey stays the same (like my Minneapolis commute), then people are content to stay on that journey. They are content, because it doesn’t feel like much of an effort—everything seems the same.
However, if that strategic journey includes a dramatic change in view (like commuting from Green Bay to Appleton), then it feels like the journey is much longer and much more difficult. There is more resistance to taking the trip.
Yet the reality is that the future comes at the same pace, whether the view changes or not. The working time is the same, regardless of what work is being done. Even though a change in work may make the work seem harder and more time consuming, the reality is that it is merely another way to occupy the same length of time. And, as we shall soon see, it may actually be easier work.
Therefore, if your strategic vision requires significant change for your organization or its position, expect increased resistance due the perception that a change of view makes for a more lengthy and difficult trip. But remind people that this perception is not necessarily reality. Just because the view outside the window changes does not mean that the effort in driving the car is all that different. All you’ve done is just point that effort into a new direction—a better direction.
The principle here is that change is often not much more difficult than maintaining the status quo. It only seems that way because it is different. As strategic leaders, we need to help people see that beyond the false perception to the reality of the situation.
Here are three points to consider when persuading people to accept the journey of change.
1) Trying to Maintain Status Quo When It is Out of Sync is Very Difficult
Moving forward doing the status quo sounds easy. After all, it’s what we know and it is what gave us success in the past. But if the environment changes, then the status quo may not be as easy as it used to be. The effort to make the status quo still relevant in a changing environment can become a lot harder than expected.
Consider, for example, a conventional supermarket which suddenly has a big Wal-Mart supercenter built across the street. All of that status quo work which made the conventional supermarket successful in the past now has less of an impact. Doing the same old thing leads to lower sales and lower profits, because the Wal-Mart supercenter has taken away a large chunk of their business. The conventional supermarket has to work a lot harder just to try to lose only a little bit of past glory.
The supercenter has a natural superiority in price and selection. It takes a mammoth effort to try to overcome the resulting natural inferiority at the conventional supermarket. Unless the conventional supermarket changes its strategic approach, it can triple its effort on the status quo and still come up short. So sticking with the status quo may not be as easy as it first appears.
Change in the environment is inevitable. Eventually, the actions of the past will become out of sync with the marketplace. Their effectiveness will go down. Therefore, you will have to double or triple the effort in order to get the same impact as in the past. That doesn’t sound easier to me.
2) Getting in Sync With the Future May be Easier
I was hesitant to take the commute from Green Bay to Appleton because the scenery changed. What I didn’t take into account was the fact that because the commute would take me out of the city, I would be heading away from heavy traffic. The commute is easier in the country, because fewer cars are there. This would have been a much easier commute than the congested one I had in urban Minneapolis.
The same is true in strategy. If you change your strategy and head for a brand new position, you can end up moving in a direction which is far less competitive. There are far fewer cars on the road (competing entities) trying to reach that spot. As a result, this move into new territory is actually easier.
This is the principle behind the Blue Ocean strategy. By moving to uncontested new locations, success is actually easier to obtain.
In the example above, instead of working harder at the status quo, the conventional supermarket could have repositioned itself as the premier store for healthy, fresh, organic and wellness products. Using Whole Foods as an example, this type of concept can peacefully coexist against a Wal-Mart Supercenter and even provide the opportunity to successfully raise prices and margins.
Yes, that would require a change is activity. But it might provide a greater return for the effort than trying to make the status quo still work. And it would probably be even less effort in the long run to make that change than to continue the fight with the ever less effective conventional tools.
3) Changing Early Has its Advantages
There are many advantages to being an early mover when the environment changes. You get to own a position before it is contested (the easiest way to get a position). And it is easier to keep a position already owned than to take a position away from someone who already has it.
First movers get to define the category (and define it in a way most advantageous to themselves). First movers can lock up the supply chain to their advantage. First movers get customers in the habit of choosing them (and habits are hard to break).
All companies get the same amount of time. We all get only 24 hours in a day. If you spend most of your time driving in the status quo, you will be in the wrong location when your time is up. It is the one who redirects the car towards the new view early who gets there first (and gets the advantages of being first).
Trust me, if you wait until the end to realize that you drove in the wrong direction (towards status quo) and then try to catch up to those who took an early route to the future, you have a very difficult task in front of you. You will get to the future late and at a competitive disadvantage. That sounds like an awfully lot more work than just steering your company towards the future early on.
People tend to resist change because at first it appears to be harder and more time consuming. However, the reality is that early adoption of change can actually be easier and less time consuming than sticking with the status quo. The problem with the status quo is that eventually it will become out of sync with the changing environment. As a result, you have to work ever harder at it while getting ever less benefit. By contrast, early movement into uncontested areas of the future can be easier to attain and easier to defend. As a result, status quo is usually the harder and more time consuming approach.
I knew someone who moved from Chicago to Green Bay. He noticed that most of his co-workers had a home in Green Bay and a cottage further out in the country on a lake. So he did the same. Then he started thinking. He realized that the length of time it took to get from his cottage on the lake to his job in Green Bay was about the same length as the commute he used to have in Chicago. Therefore, he sold his house in Green Bay and lived full time at his cottage on the lake. This made him much happier, because the commute took him to a happier place. If you accept the idea that a changing view is okay, then you can become happier, too.
Sunday, October 16, 2011
Lately, we’ve been hearing a lot of stories about Steve Jobs. One of my favorites is an interview he had with journalists at the time the iPad was being first introduced.
One of the journalists asked Jobs what kinds of consumer and market research Apple had done to guide the development of this new and different product.
Jobs response? He said, “None. It isn’t the consumers’ job to know what they want.”
And based on the tremendous response of consumers, the Apple iPad has been a great success, even though the customers weren’t consulted on its development.
Steve Jobs didn’t believe in letting customers drive innovation. He didn’t see that as being their job. In fact, on another occasion, Jobs said, “You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new.”
No, Jobs felt it was HIS responsibility to get out IN FRONT of the customer and develop solutions customers were not clamoring for yet.
In a prior blog, I spoke at length on the pitfalls of seeking innovation via consumer research. This is not to say that consumer research is worthless. It’s a great way to get the consumer’s response to the here and now. It’s just not very insightful if you want to find great, out-of-the-box innovation for tomorrow.
Now some of you may be saying, “Okay, I get that. It is not the consumer’s job to innovate, but to consume what the professional innovators come up with. But that’s the business to consumer world. It does not apply to the business to business world. After all, those business customers are professionals at buying things. They’re paid to do what is best for their organizations. It really is their job to know what they want—for today and for tomorrow. Isn’t it?”
Well, based on some research we will soon talk about, it appears that Steve Jobs approach is just as relevant for the business world as it is for the consumer world. If you want breakthrough sales successes in the business world like Steve Jobs had in the consumer world, copy his approach.
The principle here is that B to B customers aren’t much better about knowing what they want/need than B to C customers. Therefore, a B to B strategy of giving the customer what they want can be inferior to a more aggressive approach like Steve Jobs—of giving the customer what they haven’t asked for yet.
Research by Dixon and Adamson
This can be seen in some recent research by Matthew Dixon and Brent Adamson. Dixon is Managing Director of the Corporate Executive Board's Sales and Service Practice and Adamson is Senior Director of the Sales Executive Council, a division of the Sales and Service Practice. Their research is based on interviews with over 6,000 B to B sales reps in nearly 100 companies. The full results of their research will be in their new book, The Challenger Sale: Taking Control of the Customer Conversation, to be issued November 10, 2011. But they let on to some of the key results in a recent HBR blog.
In essence, Dixon and Adamson found that all B to B sales reps fall into one of five categories.
1) Relationship Builders - They focus on developing strong personal and professional relationships and advocates across the customer organization. They are generous with their time, strive to meet customers' every need, and work hard to resolve tensions in the commercial relationship.
2) Hard Workers – They show up early, stay late, and always go the extra mile. They'll make more calls in an hour and conduct more visits in a week than just about anyone else on the team.
3) Lone Wolves – They are the deeply self-confident, the rule-breaking cowboys of the sales force who do things their way or not at all.
4) Reactive Problem Solvers - They are, from the customers' standpoint, highly reliable and detail-oriented. They focus on post-sales follow-up, ensuring that service issues related to implementation and execution are addressed quickly and thoroughly.
5) Challengers - They use their deep understanding of their customers' business to push their thinking and take control of the sales conversation. They're not afraid to share even potentially controversial views and are assertive — with both their customers and bosses.
Dixon and Adamson then looked as the sales success for of these five groups. What they discovered was that the Relationship Builders were the least successful sales people and the Challengers were the most successful B to B sellers.
At first, this seems counterintuitive. After all, most sales training organizations are set up to help reps become better relationship builders. Conventional wisdom in the B to B world is that if you build a strong relationship, find out what the customer wants and then give it to him, you will sell more. Apparently, conventional wisdom is wrong.
The problem is that B to B customers are a lot like B to C customers. They understand the difference between what a good and a bad version of the status quo is. However, they are not always good at envisioning the potential for something radically different. Therefore, if all you do is build relationships and give your customers what they want, you are not really differentiating much from the crowd. You’re just supplying the status quo, pretty much like everyone else. A closer business relationship, in that situation, doesn’t add that much value. So sales don’t go up much.
No, if you want great leaps forward in sales with business customers, you need to innovate in advance of what your customers even realize they might desire. Apple has sold a ton of iPods, iPads, and iPhones. Customers weren’t begging for them before they existed. The idea did not come up through talking to the customers. Steve Jobs was innovating in advance of his customers.
The same applies to the business world. The reason why the Challengers group in the study sold so much more than the other reps is because they acted more like Steve Jobs. They didn’t try to give the business customers what they were asking for. They didn’t try to get close by doing a lot of relationship building. Instead, they tended to be more confrontational. They challenged the businesses to think differently about their business. They offered solutions which the business customers weren’t asking for.
The Challengers would rethink the whole business of their customers and offer revolutionary answers unlike anything else on the market, like Steve Jobs. The offerings from the Challengers would be true innovation that gave the businesses a true competitive advantage. Naturally, once the business customers realized how much better these innovations were, they clamored to buy them even though they never asked for them (like consumers clamored for iPads). Sales would skyrocket (like the iPads).
So, rather than try to do a better job of what everyone else was doing, the Challengers did something entirely different. The differentiation was what made them stand out and outsell all the other groups.
If you want to be an exceptional seller to businesses, act like Steve Jobs did with consumers. Challenge the customer with great solutions they aren’t asking for.
Back when Steve Jobs returned to Apple, he wanted to rejuvenate Apple’s image. So Apple came up with a campaign with the slogan “Think Different.” Sales reps for business customers need to follow that advice. And B to B business strategies need to help the sales reps do this.
Friday, October 7, 2011
There’s a story from decades ago about the Sears department store company. The company was going through some difficult times. A team of executives was put together to try to rescue the company.
Eventually, one of the executives on the team supposedly said something like this: “If we were starting from scratch, would we try to build something like Sears? If not, then why are we working so hard to preserve it?”
Most strategic planning falls into one of two broad categories. Either one is trying to extend/exploit a winning business model or trying to repair a broken business model. As we can see in the story, Sears was working on the latter approach. Its business model, a middle of the road department store, was broken.
A natural reaction when one sees something broken is to try to fix it. But eventually one of the executives at Sears decided to question that assumption. His point was that the business model was broken for a reason—it was obsolete. The middle was not the right place to be anymore—success was at the extremes. Either become a low end discount store or a high end department or a specialty store. Even if you fixed the model to become the best middle of the road department store possible, it is still not the place you want to be. So why try to be there?
Often times, I think executives rush in to fix things before taking the time to ask the question “Is this worth fixing?” A lot of wasted strategic effort could be avoided if we spent more time asking ourselves if the broken business model is worth fixing in the first place.
The principle here is that not all strategic pursuits are worth pursuing. Before spending a lot of time and effort running down a strategic path, make sure it is a path worth running on. Although this advice seems obvious—especially when working on new ventures—it can be overlooked when working with core legacy ventures. We want to preserve the core so badly that we forget to ask ourselves if the core is worth preserving.
Example of Intel
Consider the story of Intel. Back in the 1980s, Intel was trying to fix its core legacy business of memory chips. Nobody at Intel wanted to give up on the business, even though the legacy business was not doing well. Emotionally, people wanted to hang on and try to fix it. Andy Grove, COO at the time, finally went in to see President Gordon Moore and said something like this,
“What would a new management would do if we were replaced? [which was a real possibility if they couldn’t fix things] The answer is clear: They would get out of the memory business. So we go through the revolving door, come back in as if we were the new management, and just do it ourselves.” You can read more about this story here.
Andy Grove stopped to ask the tough question: Is the legacy core worth fixing? As a result, he stopped trying to fix it and moved on to building on Intel’s new strength in processing. And instead of being fired, Andy Grove eventually was made CEO of Intel.
When meeting resistance to abandoning the core, keep these principles in mind:
1) All Strategic Initiatives Eventually Fail
Sometimes strategies fail due to mistakes in execution. Other times they fail because the marketplace has changed to the point where the core strategy is no longer valid. For example, the digital era has made the core photographic film business of Kodak obsolete, no matter how well it is executed.
When you have a problem with your core, start by asking what the source of the problem is. Is it from poor execution or from obsolescence? If obsolescence, then don’t waste a lot of time trying to fix it. If poor execution, determine if it is too far gone to be salvageable before trying to salvage it.
Remember, all strategic initiatives eventually fail, because a changing environment changes what is most appropriate. There is no shame in admitting that the old core is no longer in sync with the most recent changes. It is inevitable. The real test is whether simple modifications can get it back in sync or if its time has passed and it can no longer be brought back in sync. And that should be the focus.
2) Most of Your Other Stakeholders Don’t Care About the Past
Lenders, shareholders and customers are probably nowhere near as attached to your legacy as the people inside the company. Lenders and Shareholders get their returns from future cash flows, not past cash flows. If abandoning the core leads to better cash flows, then they are usually quite okay with that. If you stick too long with a legacy that is no longer producing cash flows, then they are typically quite okay with changing the management (as Andy Grove feared). If the new management would abandon the core anyway, why not do it yourself?
Customers are typically not enamored with the past, either. They want to purchase what is the best thing to purchase right now, not what was the best thing to purchase in days gone by. If an iPhone is available today, why purchase an old rotary dial desk phone? Providing what customers used to want is not a formula for success, even if they used to want it a lot. And if your customers no longer want your offering, there isn’t much reason to try to preserve that offering.
Therefore, resistance from the outside to abandoning your core may not be as large as you fear. In fact, the outside world may cheer you on for abandoning the core.
3) The earlier you ask these questions, the better you can resolve them.
If you wait until a core business is fully obsolete before changing, you are working from a severe disadvantage. By that time, the core has no value, you have no cash flow to use for a transformation, and your reputation may already be tarnished.
It is better to consider abandoning the core earlier, when it may still have value to sell off, or at least provide enough cash flow to fund the transition to a replacement business. Transitions are always easier when moving at a time of strength. Customers are more likely to follow. Your best employees are still around. There is more money to fund the shift.
Therefore, start asking the questions early, even when the present looks good, because the future may not be a repeat of the present. Negative change may be just around the corner.
Even though there may be a strong emotional attachment to the legacy core business, that does not mean that one should always try to preserve that business. The core may no longer be relevant today, or perhaps your execution of that strategy has drifted too far to be repairable. Therefore, before embarking on a massive program to fix a broken legacy business, ask yourself these questions: If I were starting over from scratch today, is this a business worth trying to be in? If not, why work so hard to be in it?
After Eddie Lampert’s investment company (ESL Investments) bought Sears, a lot of analysts were angry because Eddie Lampert was not pouring a lot of time, effort or money into preserving its core. They wanted him to fix the core business. However, Eddie Lampert was smart enough to ask the right questions. He knew the answer was not in fixing the core. He was merely using it as a foundation to become a major force in the on-line retail space. That was where he concentrated his efforts. This was where Eddie Lampert could see the possibility of a favorable return on investment. The analysts should have been happy that he wasn’t pouring money down the drain into the core.
Monday, October 3, 2011
There is a movie currently out in the theaters called, “I Don’t Know How She Does it,” starring Sarah Jessica Parker. The movie is about a woman, named Kate, who is trying to be a good mother, a good wife, and a good employee all the same time. The comedy in the movie comes from her difficulties (and occasional failures) in trying to simultaneously do all of these things well.
According to the movie reviews, not only does Kate have trouble doing things well, but so do the people making the movie. The reviews were so bad that I am not going to go see it.
There are many arguments used by businesses to downgrade the importance of strategic planning. One of those arguments goes something like this.
1) Most people know the difference between good and bad.
2) Most people would prefer to do good.
3) Therefore, if businesses would just eliminate the barriers on their employees, people would naturally do good things. This would create great success all on its own. Therefore, you do not need strategic planning.
The problem with that logic can be seen in the plot to the movie “I Don’t Know How She Does It.” Kate knew what a good wife, a good mother, and a good employee looks like. She was motivated to be good at all these tasks. Yet she was not performing these tasks very well.
Kate was drowning under the pressure of trying to do so many good things at the same time. She was learning that knowing good and desiring good does not necessarily lead to achieving good in all areas. Something was missing.
The same is true in business. Releasing the barriers on employee behavior may only lead to anarchy rather than success. Thousands of employees rushing around randomly trying to do good in too many areas, with too little coordination, can actually lead to bad performance—failure instead of success. Something is missing, and that something is strategic planning.
The principle here has to do with tradeoffs. Successful businesses are not usually the ones who try to be good at everything. Instead they are the ones who make good choices. They examine the tradeoffs between strategic options and choose a narrower area to focus on.
Here are three points to consider on this topic.
1. Better is Better
Successful companies realize that the goal is not to be good, but to be better. Customers aren’t usually looking for a good alternative. They want the best alternative. Your success depends on how your offering compares to alternatives. To win a customer’s business, performance must be viewed as superior relative to other options.
At a given point in time, consumer decisions tend to center around a key attribute. Perhaps lowest price is most important…or maybe quality…or maybe service. Then the choice is made based on that attribute. You’d better be better on that attribute if you want to be chosen.
Now, over a long period of time, a customer may desire many different attributes. However, decisions are made based on which attribute is important at a particular point in time.
For example, let’s look at grocery shopping. At the beginning of the month after just getting paid, one may want to stock up on the basics. Therefore, the key attribute may be assortment, so the customer chooses the large supercenter. Mid-week, this customer may need to pick up only a couple of items, like milk and bread. At that time, convenience is most important, so they go to a convenience store. When this person is having the boss over for dinner, quality may be most important, so the gourmet store is chosen. At the end of the month, money may be tight, so this person goes to a hard-discount store like Aldi, because it has the lowest absolute prices.
Yes, all the attributes are important at some point, but they are not all equally important at a particular point in time. As a result, the consumer did not do all their shopping in a single average store that was good at all the attributes (but better at none). No, the consumer chose the superior store for the attribute most relevant at that particular moment. Sometimes, it was the supercenter, sometimes the convenience store, sometimes the gourmet store, and sometimes the hard discount store. It was never the “fairly good at everything store.”
So, instead of aspiring to a lot of good, look for places where you can be better.
2. Better Options Come From Making Trade-offs
Usually, the only way to become the best in one area is to accept a lower performance in another area. For example, trying to offer the best price and the best quality and the fastest service at the same time fails, because it is nearly impossible to excel at all three at the same time.
It is expensive to offer superior quality and speed. These costs make it impossible to offer the lowest price. And if you want it cheapest and fastest, you will not get the best quality (think fast food). And if you want it cheaply with high quality, you usually will have to wait for it (think health care).
In other words, working to do better in one area (like low prices) can work against trying to do better in another (like quality). So if you have people randomly trying to do good in multiple areas, their activities will tend to cancel each other out. You end up better at nothing. And you don’t get chosen by the consumer.
The winners make trade-offs. They choose a place where they can be the best and focus their efforts in that direction. Yes, this may require backing away from other areas, but it is the only way to win in the area chosen.
Wal-Mart may have great prices and a large assortment, but to get there Wal-Mart had to back away from offering a speedy shopping process, or offering high service, or offering product customization. It was a reasonable tradeoff which has lead to success.
Apple offers a great product in a great way with great apps, but it is also one of the most expensive options. It is a reasonable tradeoff, which has lead to success.
Michael Porter talks a lot about this in his excellent article in the Harvard Business Review called “What is Strategy?” (December 1996). To quote Porter, “Trade-offs are essential to strategy. They create the need for choice and purposefully limit what a company offers.”
In other words, without trade-offs, all the competition starts to look the same, so there is no reason for a customer to choose you or prefer you. Businesses then have to resort to “bribes” to get business, by adding more “goodies” to the deal or by lowering the price. This leads to a downward spiral where eventually companies are making offerings they cannot afford. Failure is the ultimate outcome.
There is a reason why Southwest Airlines has been consistently profitable over the years while the other major US airlines have traditionally done poorly. Southwest Airlines chose a distinctive position (low cost point-to-point flying) and made a number of tradeoffs in order to profitably achieve superiority at that position (no seat assignment, no connections with other airlines, standardized fleet, no baggage transfers, etc.).
By contrast, the rest of the industry did not make trade-offs. They all tried to do everything reasonably well. Because they were all doing the same activities, they did not give customers a reason to prefer them (they all looked alike—nobody was distinctively better). Therefore, the rest of the industry ended up in price wars and point giveaways they could not afford. The result has not been pretty
3. Strategic Planning is Needed To Pull This Off
Therefore, in order to win, companies need to make choices. And the best choices are made if a qualified strategic planner is involved to help. Those choices are:
a) Where do I focus to win?
b) What tradeoffs do I need to make to win at this point of focus?
c) What business model optimizes these tradeoffs?
d) How do I get employees to understand the trade-offs, so that they do more in the areas related to the focus and less in the other areas?
Unless you answer these questions properly, you will be searching for good everywhere and have a comedy of errors on your hands, like the movie “I Don’t Know How She Does it.”
So don’t let people win the argument that strategists are unnecessary. The facts are in your favor.
Even if your people know what “good” looks like and are motivated to achieve it, that does not mean that you will be successful. The problem is that “good” does not win. Only superiority wins. And sustainable, affordable superiority can only occur if you choose a distinctive position and make the hard choices about the trade-offs necessary to win at that point of focus. You have to say “no” to a lot of good things in order to create a few “great” things. And without the help of strategic planning, the proper choices will probably not be made.
In the article “What is Strategy?”, Porter also says, “With so many forces at work against making choices and tradeoffs in organizations, a clear intellectual framework to guide strategy is a necessary counterweight.” Are you filling that necessary role?