Monday, January 13, 2014

Strategic Planning Analogy #518: Deadly Serious

I recently saw the movie “Inside Llewyn Davis.” It’s the fictional story of a folk singer back in the early 1960s. I also recently pulled out and listened to some old vinyl records of folk singer Bob Dylan from the early 1960s.

A common element about much of the folk music scene in the early 1960s was a sense of utter seriousness about the music. I could feel it in both the movie and the Bob Dylan records.

Many of the songs spoke about big, serious issues, like Peace & War, Love & Hate, Life & Death, and Social Injustice. The audiences at performances were quiet and serious. They focused on the words as if they were oracles from God. The mood was a bit like going to a (godless) church. And the backs of the albums were full of long liner notes from reputable reporters and serious music critics. They wrote about the music as if they were critiquing the works of the greatest masters of art and literature. Many of the folk artists were willing to almost starve to get the message out.

That’s quite a bit different from the music scene of today. Today’s popular music has been downgraded to little more than a background beat—a soundtrack to a video where someone wearing little clothing prances about. The suggestive video gets the emphasis and the background music feels like an afterthought. The audience is loud and rowdy—more like a party than a church. Nobody takes the “artists” like Miley Cyrus or Justin Bieber seriously. And you can tell they are in it for the money, not the message.

Things have certainly changed.

I think a similar change has taken place in strategic planning. If you go back in time—to perhaps roughly around the 1980s—strategic planning was taken very seriously. Like the folk music of the early 1960s, the strategy topics covered in the past were large and deep—of life and death importance to the company or brand. Positioning, competencies, structure, differentiation—a search for a sort of “eternal purpose”, a reason for a brand to exist, a reason to keep the company from dying.

People with the word “strategy” in their title back then were treated with respect. The most respected consulting firms, who hired the best and the brightest, specialized in strategy. People listened attentively when they spoke on the subject, like hearing a sermon in church.

And like the long liner notes on the back of the folk records, there were lots of people writing serious books on the topic of strategy.

Now, it seems that strategic planning has, like today’s music, fallen out of seriousness. Strategic planners today are often relegated to merely creating the background beat—the monthly rhythm of KPI (Key Performance Indicator) reports, plan vs. actuals reports, and other such monthly scorecard updates. The real focus has moved elsewhere. Strategy work is seen as merely a temporary stopping point for high potential employees or those seeking to become something else, like a CFO—it is not a serious career destination. Even the big consulting firms rarely do strategy work anymore.

There aren’t many forums left where the big “life and death” issues of the corporation get serious discussion. Some of the newer social media firms take strategy work about as seriously as one would a Miley Cyrus video.

Things have certainly changed.

The principal here is that long-term success requires making the right choices on some major, serious topics. Make the right decisions on these major topics and your company lives. If you ignore them, or guess wrongly, your company will die. They are, quite literally, life and death decisions.

When strategic planning is relegated to being just the rhythm section (only producing the monthly reports), companies lose an important focal point for dealing with these larger, serious issues. And that makes survival a lot riskier.

I will bundle these serious issues into two categories—“Reason To Live” questions and “Reason Not to Die” questions.

1. Reason to Live
If you want your company or offering to live, then you need a reason for why customers would want it to live. Otherwise, your company will die.

There is too much competition; too many alternatives. With all of those choices, a consumer is not forced into choosing your offering. They can choose something else, and unless you give them a reason to prefer your offering, they will choose something else. That is why I have said many times that the most important question in strategy is: What is it about your strategy which will cause customers to prefer you over the alternatives?

Preference is caused by offering a differential advantage over the alternatives. There are many ways to create this edge: by being faster, lower cost, higher quality, better service, more features, more specialization, higher convenience, and so on.

The important point here is that differential advantages rarely come about by accident. If all you do is the same thing everyone else is doing in your space, you end up just like everyone else in your space. There is no difference. There is no advantage. There is no real preference. At best, you gain customers randomly.

No, if you want to be preferred you have to be different; you have to choose a different strategic path than your competition. You have to choose where to build an inherent advantage. And then you have to design and build a different business model in order to profitably deliver your different results.

All of that requires serious discussions. The answers won’t turn up in a monthly update report. You need serious time devoted to the issue.

It bothers me that so many people just look to where the hot business space is and then rush in to fill the demand—just like thousands of other companies. Yes, there can be big winners like Apple, Google and Facebook. But the vast majority of the ones jumping into hot spaces fail.

They are lured into the hot space just like people are lured by the hot singer prancing about in the music videos. It looks so inviting. But because there is no substance built behind the scenes, it fades away.

Before jumping into the hot space, ask yourself some serious questions. What would give me an inherent edge over everyone else jumping into this space? What would I need to do differently in order to create that edge? How do I build a business model that excels in delivering that edge? Where do I get the competencies and capacities to pull it off? How do I build a superior advantage over others who may want to create the same advantage?

Without these serious discussions, you are not designing a reason for living. You are merely playing the lottery and hoping to get lucky. And we all know that nearly everyone who plays the lottery loses.

2. Reason to Not Die
Just because a company is successful today does not mean that it will continue to succeed. Many one-time great and successful companies have died or nearly died. Just think of Kodak, Lehman Brothers, Tribune Co., Global Crossing, Woolworth’s (US), and Sears.

The problem is that the environment changes. What succeeds in one environment may fail when that environment changes. Past success is no guarantee that success will continue into that changing world. Instead, one needs to be examining the environment and asking the tough, serious questions about whether your business is falling out of favor with change and on a path to death. And, if the current path is death, what big changes need to be made to avoid death.

The companies above either ignored the changes or made bad choices about how to deal with the change. Kodak bungled the transition from analog film to digital imaging. Tribune Co. bungled the transition from newspapers to digital media. Lehman Brothers misread the future of mortgages. Global Crossing misread the evolution of communications. Woolworth’s and Sears stayed in the middle while retail bifurcated into high-end and discount.

If all you do is measure success over the past month, you will miss the bigger picture. Not only can it make you blind to the larger changes, it can actually make the transition even harder. For example, sometimes the path from the old strategic vision to the new requires taking a temporary dip in earnings, as investments are shifted from the old to the new. The only way to preserve the near-term results may be to delay or ignore investments into the new. As a result, you miss the transition to the new and you die like the examples.

Take time to stand back and seriously assess the bigger, longer term picture. That way, you can get in front of the change and successfully transition into the new environment. If you don’t, you will probably die.

Companies fail all the time. Usually, they fail because they did not properly address the big, serious issues of life and death. Companies live/thrive if they provide a differential advantage by choosing the right way to be different. Companies avoid death if they adapt to the changing environment. Unless you devote significant time to seriously discuss these issues, you will not ultimately survive. That is why I am in favor of strong strategic planning disciplines which tackle these tough issues.

Just because serious strategic planning may appear to be out of fashion does not mean that many of its critical functions are no longer necessary.

1 comment:

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