Monday, January 27, 2014

Strategic Planning Analogy #520: Whiteout!

I’ve been suffering through this winter like most everyone else here in the United States. A couple of days ago, it was snowing and blowing so bad that we had “whiteout” conditions.

A whiteout occurs when there is so much snow blowing in so many directions that you cannot see anything but a wall of “white.” It’s like being locked in a totally dark room where you can see absolutely nothing—except instead of total blackness, you have total whiteness.

I’ve been caught in whiteouts when driving on expressways. It is extremely dangerous because not only can’t you see the road, you cannot see what the other drivers on the road are doing. You may as well be driving blind.

Businesses can also experience a form of whiteout. Except instead of being blinded by snow, they are blinded by an excessive flurry of data. With unending streams of data flying from all directions with no end in sight, it is easy to get lost.

There are those who say “the more data, the better.” But like snow, too much data can be a dangerous thing. It can overcome businesses and make it impossible to find the way forward. One can become so bogged down in looking down at data that looking up to make forward progress comes to a halt.

The principle here is that obtaining data should not be the goal. The real goal is to discover and reach your vision. Data is only useful in this endeavor if two things occur:

1.     It is converted into knowledge:
a.      Insight to help discover the vision;
b.     Insight to deliver the promises of the vision; and
c.      Monitoring knowledge to make sure you are on track.
2.     It does not bog down forward progress towards your strategic destination (paralysis of analysis).

In other words, if all you have is a big pile of data, you have nothing. In fact, it is worse than nothing because of all the wasted time and effort to gather it and stare at it. Instead, what you want is a smaller pile of knowledge.

Knowledge is like a small map you can take in your car telling you where to go. The knowledge map is useful because it distills the vast outdoors into just what you need to motor along. By contrast, data is like all that snow that is still blowing around outside. Instead of giving knowledge of where to go, it prevents you from knowing where to go.

We can learn three things about how people deal with snow to help us understand how to deal with data for strategic purposes.

1. Look at Radar, Not Individual Flakes
If you really want to understand how to deal with snow, you need knowledge. And what knowledge is that? As I’ve stated in previous blogs, strategic knowledge of the environment usually boils down to three things: Magnitude, Direction & Speed. If you know this about a trend, then you typically know what strategic action to take.

For example, household car ownership in the US peaked in 2007. The current direction in the percentage of households owning cars is moving down. If we add to this the best knowledge on the anticipated magnitude of this trend (how low will car ownership go) and the speed (how fast will ownership drop), then we can build an intelligent strategy to deal with this trend.

The same is true of snow. If you know Magnitude (size of the storm), Direction (where it is coming from and where it is going) and Speed (how fast the storm is moving), then you will know how to deal with that snow storm. This is what the TV weathercasters talk about—magnitude, direction and speed—because they know this is the knowledge you need to make the right decisions.

They don’t get this knowledge by looking at individual snowflakes. In fact, they don’t have to really look at any snow at all. Instead, the weathercasters get this knowledge from understanding the big picture. And the big picture comes from looking at radar images rather than snowflakes. Radar captures the entire storm at once and lets you measure magnitude, direction and speed.

Strategists need to do the same. They need to stop obsessing with individual data factoids and look at strategic radar which lets one see the big picture—big enough to show direction, magnitude and speed.

You won’t get the big picture on car ownership by staring at everyone’s driveway one at a time. You need to get broader—and look at something other than cars and driveways. For example, what are the key “driving” forces behind choosing not to own cars. Is it:

1.     Population migration to dense urban centers?
2.     A different attitude towards car ownership among younger adults?
3.     A growing concern for the environment?
4.     A poor economy?
5.     Advances in car sharing options (like Zipcar)?
6.     Less need to travel due to being able to get tasks done at home via the internet?
7.     A combination of the above?

Get the big picture on this (via strategic radar), and you can start to make educated projections on the direction, speed and magnitude of car ownership. Now you have knowledge instead of data.

2. Plow Away the Unneccessary
Snow on the roads is considered a bad thing. Therefore the plows are brought out to clear away the snow on the road. The drivers of the snowplows do not stop to examine every snowflake on the road to determine which ones are good and which are bad. No, the drivers previously determined that if it is on the road, it is bad and needs to be plowed away. No further examination needed.

The same is true in business. A lot of data is strategically worthless. Its speed, direction and magnitude have no relevancy to advancing my strategy. Therefore, rather than spend time examining it, I should just plow it away so that I can move forward.

For example, Walmart’s strategy centers around owning the low cost, low price position. Therefore, Walmart can focus their attention on only dealing with finding knowledge of issues impacting Walmart’s ability to own the low price position.

When Walmart determined that:
a)     Warehouse clubs and supercenters had the potential to offer lower prices than Walmart discount stores; and
b)     Consumers were starting to prefer these formats (direction, speed and magnitude moving their way),
Walmart changed its strategy and diversified into warehouse clubs and supercenters.

Recently, they made the same determination about internet shopping and are quickly and aggressively moving in that direction.

Everything else was plowed away so that they could focus on what really mattered—owning low price. By knowing where to focus, they could ignore and just get rid of all the debris that does not impact that focus. This allows Walmart to efficiently and effectively own its position over many decades.

That is why focus is so important to strategy. Focus lets you know what to look at and what you can ignore. As I mentioned in a prior blog, it is often more important to know what your strategy isn’t than what it is, because there is a lot more data which is worthless than is worthwhile. Defining what is outside your strategy lets you know what is worthless and can just be plowed away.

3. Fly Above the Clouds
No matter how bad the snowstorm, airplanes can usually avoid the turmoil by flying above the clouds. It’s always sunny and snow-free above the clouds. And that leads to quick and easy travel to the destination.

A similar situation exists in the business world. Current business fads and daily crises can cause all sorts of turmoil. Bouncing from fad to fad or crisis to crises is like bouncing around in a jet going through a storm. It slows you down and keeps you from your intended destination.

Strategists need to get companies to rise above these current temptations which suck up a company’s time, just like jets rise above the clouds to escape turmoil. Once you get above the clouds, you can see clearly. The same is true in business. If you stop getting bogged down in the petty distractions of the moment, you can see more clearly what is truly important.

Rather than follow the current fad, follow the larger game plan. After all, one rarely wins a strategic position when following others to get to the same location as they are. Winning comes from differentiation, not imitation. Rise above the fray to clear the path to your intended destination—the place where you can win.

Although some data can be useful for strategy, most is just a wasteful distraction. And even the useful data only becomes useful if it is converted into knowledge. Therefore, instead of wasting time trying to absorb as much data as you can, follow the tricks used to deal with snow:

  1. Focus on the Big Picture by looking at “Strategic Radar” (showing direction, magnitude and speed) rather than looking at every snowflake (piece of data).
  2. Just plow away all the data not relevant to your task of moving forward towards your winning point of differentiation.
  3. Fly above the clouds of current fads and distractions so that you can easily see the final destination.

Remember, the winner is not the one who captures the most data, but who gets to the right destination first with the right offering. Don’t let competitors in snow plows pass you by while you stop to look at every snowflake.

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