THE STORY
To help alleviate pollution, congestion and speed up traffic, some urban areas have put HOV lanes on their highways. HOV stands for High Occupancy Vehicles and is typically defined as a car having at least two people in it. The HOV lanes usually only allow high occupancy cars and other efficient vehicles, like buses.
Because about 75 to 85% of workers commute by driving alone
in their car, most commuters cannot legally take advantage of the HOV lanes. As
a result, the HOV lanes are less congested and move along faster. Seeing the
HOV cars moving faster makes some of those driving alone try to find ways to
cheat in order to get into the HOV lanes.
One way used to cheat is to put a mannequin or a life-size
blow-up doll in the passenger seat. For example, in 2010, a 61 year old woman
put a mannequin in the passenger seat so she could ride in the HOV lane in New
York. Unfortunately for the woman it was a cloudy day, and the hat and
sunglasses on the mannequin looked out of place to a highway officer. The woman
ended up having to pay a $135 fine and had two points taken off her license.
We live in a business environment which has been described
as faster than any time in history and getting even faster. Businesses feel the
pressure to move ever faster or die. To a large extent, speed has become the
default universal strategy.
One way businesses try to increase speed is by unburdening
themselves of as much as possible. Management is eliminated, rules are
eliminated, and strategic planning is eliminated—all in the cause for speed.
The elimination of strategic planning is justified with reasons
like “We don’t have time to waste on that” or “Things move too fast to plan
anything long-term” or “All we have to do is release the next version of our
product before the competition—you don’t need strategic planning for that.”
The problem is that the business world is more like those
HOV lanes than these people realize. All this unburdening is making businesses look
more like those single person cars—going it alone. And since nearly everyone is
taking this same approach, they are all crammed into the slower lanes.
Ironically, the faster HOV lane is the one where cars are “burdened”
with extra passengers. And, as we will see in this blog, if companies load up
their “car” with extra passengers like strategic planning, they will have
access to the faster lane and get to their destination more quickly.
The principle here is that the proper use of strategic
planning does not slow a company down, but actually puts a company on a faster
path. So instead of dropping strategic planning in the name of speed, we should
be adding it to our “car”. Described below are three reasons why adding
strategic planning gets you into the HOV lane of business.
1) Strategic
Planning Improves Speed Via Focus
A focused company can move faster than an unfocused company,
and strategy improves focus. Lack of focus leads to anarchy and confusion. You
can yell at an unfocused company to “Move Faster!” all you want, and all you
get is faster anarchy and faster confusion. Everyone is moving in random
directions rather than making forward progress. Faster randomness is not improved
progress.
Strategic Planning, when used properly, is a way to provide
a business with focus. Not only can it tell a business what are the right
things to work on; more importantly, it can tell a company what are the wrong
things to work on. Strategic planning simplifies the agenda by taking a lot of options
off the table (the things that are off-strategy). All the time-wasting rabbit
trails are eliminated before they begin.
With a strong, focused strategy, you don’t have to waste
time in endless meetings continually asking yourselves “should we be doing this
or something else?” Instead, you can speed things up by focusing on how to improve
on the things everyone already knows are important to the strategy.
Look at Apple. Under Jobs, Apple did not go in all
directions trying to do everything as quickly as possible. Jobs had a specific
strategy in mind as to what Apple would focus on. It had to do with designs
that emphasized quality, elegance, coolness, and user-friendliness, made
possible by focusing on building closed end-to-end systems. It became obvious
what was appropriate for Apple to be doing and what was not.
The “not” list for Apple under Jobs was large. They did not
work on low price products, or products not tied to the larger closed system.
They did not even work on manufacturing. This allowed Apple to become very
focused and quickly build a whole new digital future.
2) Strategic Planning
Improves Speed By Overcoming the Leapfrog Trap
When speed alone becomes the substitute for strategy, a
company is no longer building unique competitive advantages or competencies
(except maybe the competency of speed). All they are doing is racing everyone
else to be the first to release the next new improvement to the status quo.
This is very common in areas like consumer electronics & digital media, and
becoming more common elsewhere.
This process leads to what I call the leapfrog trap. Any
small success gained by getting to the next improvement first is lost when a competitor
leapfrogs you and gets to the improvement which follows before you. Gains are
short and fleeting, since others are racing to leapfrog your most recent
advancement as soon as they can.
Here is the crux of the problem. Because everyone is
focusing on the same thing (speed), nobody is creating a competitive advantage.
All the companies look about the same, with the same types of engineers in the
same types of culture working on the same types of issues. You cannot create a
lasting advantage in this scenario because you bring no real competitive advantage
to the marketplace. Others can copy you almost immediately because they have a
similar business approach with similar tools at their disposal.
By contrast, a true strategy builds differential advantages
which allow a business to do certain things better than others. Rather than
playing the same game of leapfrog with everyone else, you go your own way and
build a different game where you have an edge and are not so easily copied.
This leads to the third point below.
3) Strategic Planning
Improves Speed Through Business Model Superiority
Great strategies understand the importance of making
trade-offs. They don’t try to do everything well. They understand that:
a)
There are not enough resources to do everything well;
and
b)
Even if there were enough resources, it is still not
possible to win on all fronts because of conflicting agendas. For example, it
is nearly impossible to win at lowest price AND highest quality AND most
innovation at the same time, because what it takes to win in one of these areas
makes it harder to win in the others.
Therefore, great strategies choose what to specialize in and
make all the proper tradeoffs to win there, even if it means giving up abilities
in places outside their specialty. Take, for example, Southwest Airlines in the
US. For decades, they have had both consistently lower prices than their
competitors as well as consistently higher profits. Why? Southwest Airlines
built a business model to specialize in lowering costs. This caused many
trade-offs, where Southwest didn’t do things everyone else did if it got in the
way of the low cost strategy.
When other airlines tried to copy Southwest’s pricing, they
did not achieve Southwest’s higher profits, but made their profits even worse.
Why? Because their business models were not laser-focused on making enough tradeoffs
to pay for the lower prices.
When all you look at is speed, you take your eyes off
building the right trade-offs in your business model to allow real differential
advantage. If the business model does not provide an edge, then you cannot quickly
build a place where you can win. You are stuck in the leapfrog trap.
Ironically, the singular drive for speed does not usually
end up putting a business on the fastest track to lasting success. Instead, the
faster track also needs to include a drive for great strategy. The addition of
strategy improves speed by:
a)
Adding Focus (on what to do and what NOT to do);
b)
Adding Differentiation (to avoid leapfrog trap); and
c)
Adding a Trade-off Based Business Model Design (which
makes it harder for others to copy you).
These additions allow you to take a superior path that
speed-only businesses cannot get on.
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