THE STORY
One time I was doing some work for a client which I found
very frustrating. I kept trying to give them the insight I thought they needed
for their decision, but it seemed like my efforts were always a little bit off
from what they were looking for.
It wasn’t until much later (after the project was over) that
I found out what the problem was. My client had deceived me about what their
true intentions were. They wanted to keep their true intent a secret, so they
gave me instructions under false pretenses.
No wonder my insights were a bit off the mark. They were
designed to meet the false pretense rather than the real objective.
THE ANALOGY
My client was not the only one who likes to keep secrets. Secrets
can be found all over the business world. This secretive approach often finds
its way into the world of strategy.
There seems to be this idea out there that if a strategy
“gets out” and is made public, it ceases to be an effective strategy. Somehow,
mere knowledge of the strategy takes away its competitive advantage.
The problem is that the true value of a strategy is in its
execution. And if those executing the strategy are kept in the dark, they
cannot execute it well. As we saw in the story, I could not effectively do my
job when I was kept in the dark.
The principle here is that strategies are most effective
when they are well communicated, both inside and outside the organization. A
secretive approach to strategy diminishes its effectiveness.
The Problems With
Secrecy
There are quite a few reasons why keeping a strategy a
secret is detrimental to its effectiveness.
- If your employees do not
fully comprehend the strategy, they will not be able to fully execute the
strategy. Thousands of decisions are made all over the organization every
day. Depending on how those decisions are made, they can move a company
either closer to or further away from your desired strategic direction. If
the strategic direction is not known all the way down the organization, it
will only be random luck if their decisions move the company in the right
direction. Remember that your REAL strategy is not what you put on a piece
of paper, but what you actually do. So to get what you do to match what
you put on the paper, you’d better make sure the doers know what is on
that piece of paper.
- When your employees know
what the strategy is, then they can use their insights and initiatives to
make the execution even better. By contrast, if just the top executives know
the strategy, then the only way to get the strategy executed is by having
the top executives order people to do specific actions designed to support
the strategy while keeping the strategy behind the actions a secret. This
only makes sense if you believe that:
- All the great ideas are
found only at the top of an organization; and
- A top-down only control
of the business like the old communist economies is the best way to go.
The bankruptcy of the old communist
system should be proof enough that a top-down only secretive approach has many
flaws. The alternative is to let the people at the bottom in on the secret and
allow them to make contributions to the effort. Strategies are made much
stronger when input comes from the collective intelligence of the entire
organization working on a common known goal.
- Strategies usually include
a reason why certain consumers should prefer patronizing your brand over
the alternatives. Why should these consumers flock to your brand if you
keep your reason for preference a secret? You should be shouting your
strategic benefit from the rooftops, so that there is no mistake as to why
you should be preferred. And to make the claim believable, it helps to
show why your strategic approach makes the claim a true differential advantage.
Take the insurance business, for
example. If your strategy is based on low price and you get there by going
direct and eliminating the independent insurance agent to save money, let the
customer know. Conversely, if your strategy is based on best service, play up
your strategic approach of having the best local independents working for you
(something the price-oriented insurers eliminated).
Positioning is about owning a spot
in the mind of the customer. You won’t own that position if you keep it a
secret.
- The stronger you cement
your position and strategy with your customers and your employees, the
harder it will be for the competition to take it away from you. In fact,
if you make it clear to your competition what your strategy is and how
strongly you will defend it, you can cause your competition to no longer
want to fight in that space and instead take a differentiating strategy. For
example, Walmart has made it clear they will fight to the death to defend
their low price position, so most competitors stop trying to win price
wars against Walmart and instead go a different route, which strengthens
Walmart as the everyday low price leader.
The Faulty Logic
Behind Secrecy
Some believe that if you let the competition know what your
strategy is, then they can quickly copy it and take it away. That is why they
want to keep it a secret. But this thinking is flawed, because there is a big
difference between knowing what a strategy is and knowing how to best deliver
it.
Great strategies are built upon great business models. And
great business models are often very complex and very difficult to imitate.
For example, Southwest Airlines has done very well with its
low price strategy. But if a competing airline merely copied Southwest
Airline’s low prices, they would not be as successful as Southwest. Southwest’s
strategy works because they have a unique and complex approach to their
business model, including choice of airplanes, choice of airports,
point-to-point routes, corporate culture, and so on. You need the full business
model to make the strategy work. This is nearly impossible for an established
competitor to convert to.
In another example, Wells Fargo has created success with a
superbly executed plan to win via cross-selling. Now it’s one thing to say “we will win via
cross-selling.” It’s another thing to
have a sophisticated business plan designed specifically to optimize
cross-selling. As Wells Fargo CEO John
Stumpf put it recently, “We could leave our strategic plan on an airplane and
it wouldn’t matter. It’s all about
execution.” In other words, there is no reason to hide the “what” of Wells
Fargo’s strategy from competition, because it would take them years and years
to figure out the “how” behind the strategy, and by then you’d have made even
further advances, so they never could catch up.
Here’s a little secret for you. If a competitor can
immediately copy your strategy upon hearing it, then you really don’t have much
of a strategy. A good strategy is based upon making a number of deliberate
choices about how you operate. Trade-offs are made in certain areas so that you
can better excel in other areas. These choices and trade-offs attempt to
optimize against your unique strengths and weaknesses. The net result is a
complex business model which is not easily copied due to its complexity and its
unique suitability to your own situation.
We live in an era of transparency and openness. If secrecy
is your only defense, then you are in trouble.
Remember, great strategies try to find a place where YOU can
win, not where anyone can win. If anyone can supposedly win there, then nobody
will win there, because nobody will have an advantage.
When it comes to strategy, secrecy is a disadvantage.
Strategic secrecy keeps your employees from doing their best, it hurts your
ability to own your position with the consumer, and it weakens your ability to
scare off a competitor from going head-to-head against you. Great strategies
are built upon great business models, which are extremely difficult to imitate.
As a result, even if competition knows your strategy, it doesn’t mean they know
how to take it away from you. So don’t keep your strategy a secret.
If your strategy is nothing more than a hollow platitude,
like “We will be the Best” or “We will be the Most Profitable” then I might
consider keeping it a secret, because I would be too embarrassed to let others
know how silly my so-called strategy is.
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