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.
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.