THE STORY
One time, I was in Chicago on a business trip with some of
my co-workers. It was a nice day and we had some time on our hands, so we
decided to walk to the convention center, which was only a couple of miles
away.
We looked at a map and found a simple, direct street to walk
down. It looked easy. What the map didn’t show was the types of neighborhoods
we’d be walking through. As it turns out, that direct route took us through a
pretty dangerous section of Chicago. As we kept walking, the neighborhood kept
getting worse.
My co-workers were starting to fear for their lives. Having
grown up in the Detroit area, I was used to bad neighborhoods, but eventually
even I was getting fearful.
We saw a taxi drive by and quickly got it to stop for us.
Little did we know that we had almost completed our journey by then and the
taxi only took us a few blocks to get to our destination.
Had we been more aware of our environment, we would not have
chosen that route to walk. Yes, it may have been the most direct, the most efficient,
and the fastest route. But it was not the safest route. We needlessly put our
lives in danger. It would have been better off choosing a slower, more indirect
path that was far safer.
Strategic planning is also about choosing a path—a path into
the future. On first glance, it may appear that the best strategic path is the
direct route. After all, the shortest distance between two points is a straight
line, so the strategic path is drawn as a straight line between where we are
now and where we want to be. That type of thinking sounds practical, efficient,
and speedy.
Unfortunately, it can also be wrong. The most direct route
is not always the safest route. It may lead you into a mine field of
difficulties. The danger could be so
great that it destroys the ability for the strategy to succeed. It does no good to be faster and more
efficient if you end up dying before reaching the destination.
No, sometimes the best path is longer and less direct. These
paths can be safer and increase the likelihood of ultimate success.
Although we live in an era which emphasizes speed, we need
to remember that speed is not the ultimate goal. The real goal is success. And sometimes the
fastest path is not the best path for ensuring success. Therefore, when
choosing a strategic path, do not automatically choose the fastest, most direct
approach.
The Disadvantage
of Bold Moves
There are several reasons why the direct approach can be
less effective. First, it tends to loudly notify to the world (and to your
competitors) what your intentions are. That can cause those opposing your
strategy to wake up and fight you hard to prevent that path. Remember, almost
every winning strategy causes someone else to lose. If those who are about to
lose find out your intentions, they will try to keep you from winning.
However, if you act more slowly and less directly, the
opposition may not detect the threat as being as imminent or as devastating as
it is. Therefore, they may put up less of a fuss in trying to stop you. By the
time they figure it out, it may be too late for them to stop you.
Take, for example, Wal-Mart’s desire to be a significant
player in banking. Wal-Mart first tried a very direct and fast approach to this
strategic intent. Back in 1999, they applied for the right to buy a bank in
Oklahoma.
This bold action quickly awakened the status quo banking
industry to the threat posed by Wal-Mart. The banking industry immediately did
everything in its power to influence the government to stop Wal-Mart from
getting that bank. Congress was inundated by whatever forces the banking
industry could bring to bear to stop Wal-Mart from ever buying a bank. And it
worked. Wal-Mart could not buy a bank.
A few years later, in 2002, Wal-Mart tried again by attempting
to buy an ILC (Industrial Loan Company), which is a step lower than a full-fledged
bank. That also failed.
At this point, Wal-Mart tried a different tactic—the indirect
route. Slowly, Wal-Mart started forming alliances with companies performing
banking services. Since Wal-Mart did not own these businesses and since the
partners were already allowed to be in these businesses, they would be
difficult to stop. Also, because Wal-Mart added these pieces slowly in small chunks,
no single act was large enough to get the industry in an uproar.
For example, Wal-Mart did deals with Moneygram and Sun Trust
Bank for services like wire transfers, money orders and check cashing. It did a
deal with Green Dot to create the Walmart Money Card, a reloadable prepaid
card. And most recently, Wal-Mart worked with American Express to develop the
Bluebird Card, a more aggressive move into the prepaid card business.
Slowly, Wal-Mart is putting together a powerful financial
offering, branded together in the store as Walmart Financial Services. It is to
the point now where Walmart’s website has claimed them to be “a trusted name in
financial services.” The slower, indirect path is working far better for
Walmart than their earlier, more direct approach.
The Disadvantage
of Out-Pacing Your Stakeholders
Another problem with moving too quickly is that you can move
faster than your stakeholders are willing to go. No strategy works in
isolation. Success depends on getting alignment with all sorts of other
stakeholders, like your customers, your regulators, your suppliers, etc. If you
get to far ahead of your partners, the strategy can fail.
For example, when McDonald’s wants to enter a new geographic
area with restaurants, it does not just get some real estate and put up
restaurants. That could be too fast for its suppliers. McDonald’s wants to
guarantee that the burgers worldwide come from similar beef and the french
fries come from similar potatoes. Therefore, it takes the slower, more indirect
route of first working with farmers and distributors to make sure the right
kinds of cows and potatoes in the right quantity are in the pipeline so that
the stores have the right stuff to sell.
And in the Walmart example above, if Walmart had advanced
directly from nothing into full-service banking in one step, it might have been
too much for customers to accept. By moving slowly, Walmart has been able to
move consumer perceptions along to allow them to accept getting financial
services from a discount store.
One of the more interesting examples, however, is in the
online poker business. Online poker sites can be extremely profitable for the
companies who run them. However, the US government was banning the sites
because on-line gambling is illegal in the US. The on-line sites could have
directly tried to fight this, but they knew they would fail. So they took an
indirect route.
A few years back, I remember all of the sudden seeing poker
championship games being broadcast all over the place on cable TV in the US. Why
the sudden surge in broadcasting Poker Tournaments, I wondered.
Well, here’s the story. The online poker people wanted to
change the perception of poker from being a form of gambling to being a game of
skill. That is because on-line gambling is defined as being a game of luck,
which is illegal in the US. But games of skill are not considered
gambling.
What better way to convince people that Poker is a game of
skill than to broadcast it like a sporting event on sports cable networks? The
shows created poker winners who were becoming famous like athletes for their
skilled plays. They had announcers on the show talking about the skilled plays
being used by these skilled players.
Slowly, but surely, perceptions were being changed. Poker
was no longer just viewed as distasteful gambling hidden away in dark places. Now
it was a skilled sporting event out in the wide open lights. Over time, this
approach should be far more successful than the direct approach for the on-line
poker companies.
A key part of strategic planning is developing the proper
path to get from where a company is today to where it wants to be. Due to the
desire to move quickly, many firms try to build direct paths to the desired
future. However, direct paths can be fraught with dangers large enough to prevent
success. As a result, it is often the slower, less direct approach which has
the greater likelihood of success.
If you go online to choose a path to drive your car to your
destination, the software often asks you which type of path you want: the most
direct, the fastest, the one using the most highway, the one using the least
highway, etc. In other words, the
software recognizes that the fastest path is not always the path you desire. If
software can recognize that, then so should strategists. Check out other
options which may lead increasing your chance of success.
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