Wednesday, November 30, 2016

Strategic Planning Analogy #571: Creators Vs. Craftsmen

Back in the early 1970s, pianist and composer Claude Bolling had the original idea of recording an album that was a mixture of classical and jazz music. It was to feature Bolling on piano accompanied by someone on flute (with drums in the background).

Bolling was fortunate to get Jean-Pierre Rampal to play the flute part. Rampal was considered to be one of the very best (if not THE very best) classical flute players of his generation.

Bolling showed Rampal the basic music and asked Rampal to do some jazz improvisation around it, like bending the notes or modifying the rhythm. It was reported that Rampal was a gasp at the suggestion and replied something like this:

“I am the world’s greatest flautist and will play your music to perfection. But I do not improvise. If you want me to play in such a manner, you will have to write it into the music.”

So Bolling meticulously incorporated “improvisation” into the musical score. Rampal played it as written and it sounded like improvisation, even though it was anything but.

The album was released in 1976, called “Suite for Flute and Jazz Piano Trio.” It topped the charts for about two years and stayed on the Billboard sales list for 530 weeks (nearly 10 years). It became one of the largest selling albums ever released on a classical music label. Little did most people know that the great jazz parts on flute were not improvisations, but just excellent technical reproductions of a musical score.

You’d think that all great musicians would be great creative artists. After all, what is more creative than music? Well nothing could be further from the truth. Jean-Pierre Rampal was not creative with his flute. He could only play what was put in front of him.

Yes, Rampal was the best at playing the classical flute, but that does not make him creative. It just meant he was a great craftsman. He mastered the craft of playing the flute. That was an excellent skill..but it was not creativity.

Compare Rampal to Ian Anderson, the flute player in the band Jethro Tull. Anderson may not have had the same level of technical craftsman skills as Rampal, but he had extreme levels of creativity. Anderson can get creative sounds out of a flute that virtually no one had done before him. Anderson also wrote all the original music he performed. Anderson was a true creator.

I’ve known many musicians over the years. Many of them are great at their craft, but only a few are what I would consider to be musically creative.

The same is true in cooking. There are people who are excellent at the craft of cooking and can prepare great meals. However, all they can do is follow a recipe. Yes, they follow it to perfection, but they have no aptitude for creativity in the kitchen. Others, can go into the kitchen without a recipe, look at the ingredients in front of them and invent a marvelous new dish from their creative mind. This second type of cook is harder to find.

The point here is that we should never assume that just because someone can do a job at high levels of perfection that they are naturally creative. He or she might just be a great craftsman. Creativity is something very different and the most creative ones may not have the best skills at performance.
This is especially true in the world of business. Top performers in their fields—like operations, sales, accounting, and personnel—may have excellent skills in their particular craft, but in all likelihood, they are not the most creative ones in their organizations.  

Part of the strategic planning process requires creativity. If you load up the strategic planning team with your top performers, you may only end up with a bunch of craftsmen…great people, but not the ones that can invent a truly creative strategy. They could all be like Jean-Pierre Rampal, ready to execute with perfection, but waiting for a creative Claude Bolling to put the notes in front of them. 

Make sure you look beyond excellence at a craft and enlist some of the more creative ones in your organization to help with strategy.

The principle here is that the complete strategic planning process requires a variety of skills. Therefore, you need to seek out a variety of people to work on the process. Otherwise, you may not get all the skills you need.

One of those skills is creativity. Your most creative ones are not necessarily your best performers. They may just be great craftsmen.

Instead, the truly creative ones may be hidden in your organization. They may not even look like your best performers. Rather than wearing formal apparel like the craftsman Rampal did when performing, they may wear shabbier clothing like the creative Ian Anderson did when performing.

The most creative ones may be among your youngest employees, without much experience. After all, your most seasoned employees may be so wrapped up in the status quo that they cannot see anything new or different. Instead, it may be the fresh face that is most likely to question the status quo and see a different way to approach the business.

Indeed, the employees at the top with the most experience are probably the ones with the most to lose if the status quo (which they have perfected as a craft) is replaced by something new (and requires new skills to execute). Therefore, if you load up your strategic process with only older, experienced people, you may end up with the opposite of creativity—resistance to change and barriers to new ideas.

No, it is the younger group that has more of a vested interest in the future and may be closer to understanding what the next generation of customers want.

As Gary Hamel says in his book, “Leading the Revolution”, if you want a revolutionary new strategy, you have to have revolutionaries on the team. Or, in Hamel’s words:

“Most companies are not led by visionaries; they’re led by administrators. No offense, but your CEO is probably more ruling-class than revolutionary. So don’t sit there staring at the corporate tower hoping to be blinded by a flash of entrepreneurial brilliance. Administrators possess an exaggerated confidence in great execution, believing this is all you need to succeed in a discontinuous world. They are accountants, not seers.”

If your corporate tower is full of craftsman administrators, you may need to look outside the tower to find your creative revolutionaries. They may be out there in some remote outpost far from corporate headquarters. They may not even be employees. Wherever they are, find them and put them on the team. The level of creativity in your strategy depends upon it.

This is not to say that unconventional creative young people are all you need to do strategy. No, you need both the Claude Bollings and the Jean-Pierre Rampals to create success.

My point is that you need a variety of skillsets to pull off a great strategy, and the skillset of revolutionary creativity may be the hardest to find. They are probably not the person in the office next door. They may not even have an office or cubicle at headquarters. In all likelihood, you probably don’t even know their names.

Therefore, if you do not take pro-active effort to seek them out, they will not be found. And that will be to your great loss.

Don’t think you can avoid the hard work of finding the creatives by hiring one of the big strategic consulting firms. My experience in working with them is that the big consulting firms probably have even fewer creative types than you do. These big consulting firms may be the most skilled craftsmen at running the process, but I wouldn’t rely on them for the big, new idea. That’s your responsibility.

Take your responsibility seriously and seek out the right mix for your strategic team.

It is a mistake to load up your strategy team with only your top performers. Top performers may only be great at their particular craft. They may be lousy at out-of-the-box creativity. The truly creative revolutionaries are probably hidden in your organization. If you do not take the time to seek them out, you will miss out on their insights. That will probably result in a poor strategy. And no matter how good your top performers are at executing their craft, great execution of a poor strategy rarely leads to success.

I received an autographed copy of Leading the Revolution directly from Gary Hamel. To reciprocate, I gave him a copy of my book Fast Forward. Hamel just threw my book into a pile of old boxes, presumably to be tossed out. I guess he was not seeking to hear new voices to help with the revolution. So much for practicing what he preaches. Don’t do the same. Please put the ideas of this blog into practice.

Saturday, November 12, 2016

Why Most Strategies Fail: Reason #3


I recently saw a blog by the Cascade strategy software company entitled “The 5 Reasons Why 70% of Strategies Fail.” You can read it here.

Since I disagree with their conclusions, I decided to write my own blogs on why strategies fail. I came up with three major reasons. The first reason why most strategies fail is because they are too internally focused at the expense of an external orientation. I covered that topic in the first blog.

The second major reason why strategies fail is because they focus too much on “doing” rather than “being.” That was covered in the second blog on this topic.

The third reason I feel most strategies fail is because they fall victim to the “Tyranny of the Immediate.”

I feel so strongly about the evils in the tyranny of the immediate that on my blog site you can see links to 15 other blog entries I have done on the topic. In fact, I wrote an entire book on the topic which you can download for free here.

What is the Tyranny of the Immediate
So what is the tyranny of the immediate? Think of it as the daily fires at your business which demand your immediate attention.  It could be something like an angry customer, or a production line mistake, or a disgruntled employee, or a bad report in the media. Not a single one of these types of minor crises will permanently cripple your business. So why see them as a major source of strategic failure?

The reason is because there are so many of them. Executives typically encounter at least one of them a day. If the executive is not disciplined, he or she will find themselves totally consumed with putting out the fire of the day.  And therein lies the tyranny. We become captive to their demands on our time every single day. If getting the immediate crisis resolved captures too much of our time, then there is no time left for long term strategy.

In a sense, any strategy is worthless and bound to fail if people in the organization are such a prisoner to the tyranny of the immediate that nobody has enough time to adequately put the strategy into practice.

Successful Strategies Take Time
In the classic strategy book “Competing for the Future,” Prahalad and Hamel say:

“As a benchmark, our experience suggests that to develop a prescient and distinctive point of view about the future, a senior management team must be willing to spend about 20 to 50% of its time, over a period of several months. It must then be willing to continually revisit that point of view, elaborating and adjusting it as the future unfolds.”

Unfortunately, Hamel and Prahalad’s research found that most executives spend less than 3% of their time to building that corporate perspective of the future. It is no wonder that strategies fail when so little time is devoted to them. And in my opinion, the tyranny of the immediate is the biggest culprit causing so little time to be devoted to this core act of strategy.

Tripped Up By Distractions
That is why I wrote the book “Tripped Up by Distractions.” I wanted people to see all the subtle ways in which time and effort are stolen away from doing the work of strategy. They may only look like minor distractions, but when you add them up they can rob us of the time needed to do strategy properly. Until we tackle the distractions, we cannot build successful strategies.

In the book, I identify five major sources of distractions:
  1. Having our head down looking at individual numbers so much that we lose sight of the big picture; 
  2. Sending so much time trying to produce perfect documents or in trying to check off the items on the documents that we don’t have time to anticipate and adjust to realities surrounding us.
  3. Putting the wrong people in the wrong places doing the wrong things.
  4. Getting so focused on accumulating money today that there is no time left to strategize about how to build an enduring money-making enterprise.
  5. Spending so much time reacting to change that there is no time to anticipate change and build a strategy to take advantage of change.

Some of these look at first like innocent activities. But when you add these issues to the normal crises of the day, you can see why companies have a tendency to spend insufficient time on building and executing a good strategy.

The book then has three major recommendations of better ways to spend one’s time:
  1. Spend more time asking questions. If you ask the right questions, you can more efficiently get to the root of what is strategically important.
  2. Spend more time on broad issues rather than narrow crises. If you get the big issues right, a lot of the daily crises disappear.
  3. Change your actions. Not all activity is equally productive in tackling strategy effectively. If you keep doing what you did before (falling victim to the tyranny of the immediate), don’t expects your outcomes to get any better.

Warning Signs that Your Strategy is on a Path to Failure
So, what are the warning signs that one is falling victim to the tyranny of the immediate?
First, do a time study of what your executives do. Is core strategy work closer to Hamel and Prahalad’s ideal of 20 to 50% or is it closer to their findings of less than 3%? The lower the number, the harder it is to build and execute a successful strategy.

Second, look at what your company chooses to put as top priority regarding where time is spent. What do people get most in trouble for if they don’t spend time on it? What are the consequences if someone spends too little time on strategy? People will spend the time on that which they perceive management wants them to spend time on. Send the right message. Reward good strategic behavior. 
Punish those who fall victim to the tyranny of the immediate.

Third, is strategy work treated like a real job or more like a hobby you do on the side in your spare time? If there is never enough time in the day to do your day job, how can you expect much from tasks relegated to doing in your spare time? If you truly believe that designing and executing the right strategy is the difference between long-term success and failure, then intentionally carve out time for it. Have people on staff for whom this is their full-time responsibility Make at least some of the strategic work the day job of people.

Finally, how well do your executives delegate the little crises so that time is freed up for the work of strategy? If delegation is not occurring, then strategic work is not occurring either.


Depending on which study you look at, somewhere between 60% and 90% of strategies fail. If we don’t address the deep-seated reasons why strategies fail, we will not be able to raise the percentage of strategic successes. I believe that there are three major reasons why strategies fail and my reasons do not always agree with conventional wisdom. The third reason I believe most strategies fail is because not enough time is being spent on the subject. Real success occurs when a company takes the time to get strategy right and keep it relevant. Without a proactive commitment to spend the time it takes to get strategy right, the tyranny of the immediate and a whole host of other distractions will get in the way. If your strategy is a half-hearted effort barely worked on to accomplish, you will get what you deserve: failure.


Thomas Jefferson said, “All tyranny needs to gain a foothold is for people of good conscience to remain silent.” As a strategist, it is your responsibility to be noisy and fight so that the crisis of the day and other such distractions do not become tyranny to your organization.

Friday, November 11, 2016

Why Most Strategies Fail: Reason #2

I recently saw a blog by the Cascade strategy software company entitled “The 5 Reasons Why 70% of Strategies Fail.” You can read it here.

Since I disagree with their conclusions, I decided to write my own blogs on why strategies fail. I came up with three major reasons. The first reason why most strategies fail is because they are too internally focused at the expense of an external orientation. I covered that topic in the first blog.

The second major reason why strategies fail is because they focus too much on “doing” rather than “being.” That is the topic of this blog.

In an earlier blog I started by looking at children. Children don’t talk about what they want to “do” when they grow up. No, they talk about what they want to “be” when they grow up. Strategists need to imitate children by asking what their companies want to be in the future rather than what they want to do in the future.

“Being” Keeps You Relevant
Why is a focus on “being” so important? One reason is because the world is full of change. Technology changes, competition changes, social norms change, and so the list goes on in so many areas. The cumulative impact of all of this change causes behaviors and actions which used to be right and normal to appear quaint and obsolete.

Just think of all the change resulting from the internet or the smart phone. They have turned many conventional behaviors on their head. The right behaviors before the internet and the cell phone now look so add and out of place. This is one reason why many millennials cannot tolerate watching old movies and TV shows. The activities in these old shows seem so wrong or odd from the millennials’ modern perspective that they cannot relate to them.

This is why a strategic focus on “doing” can lead to failure. If you do the “right thing” for a long enough period of time, the changing world will eventually make it the “wrong thing.” Your strategy becomes obsolete and you fail.

Just look at Kodak. It didn’t matter that Kodak perfected the way to do analog film. Digital imaging made that type of doing obsolete. A strategy that finds the best way to do something is worthless when customers no longer want you to do it.

That is why focusing on “being” is so much better than a focus on “doing.” “Being” transcends a changing environment. For example, if instead of focusing on “doing” film, Kodak had focused on “being” the best solution for capturing memories, it could still be a thriving company today.

There is always a need to capture memories. The best solution may vary over time, but a solution will always be needed. If you focus on the big picture of what you want to stand for in the marketplace (your choice of what to be), you will remain relevant. By contrast, if you focus on what you want to do, you will become irrelevant.

Example: Wal-Mart
Over the decades, Wal-Mart had had a relentless focus on what it wanted to be. It’s founder, Sam Walton, wanted the company to be the best at offering retail value, starting first in rural communities.  Back in the 1950s the best way to “do” that was with variety stores. So Sam Walton operated Walton’s variety stores.

By the late 1950’s Walton could see that discount stores were becoming a superior solution for being the best at offering retail value, so he abandoned doing variety stores and began to do Wal-Mart discount stores.

In the early 1980’s it looked like warehouse clubs could be an even better way to be the best value provider, so in 1983 the first Sam’s Club was opened. By the late 1980’s Walton could see that supercenters had the potential to be a better value than either discount stores or warehouse clubs, so he stopped doing discount stores and started doing supercenters.

Now, shopping by smart phone appears to consumers as the best value, so Wal-Mart is pushing very hard to become a major player in that space.

Through it all, Wal-Mart has changed many of the ways they have done things. But it has stayed true to what it wanted to be: the best value in retail. By focusing on the being rather than the doing, it has survived around seven decades, whereas most of its competitors (who focused on doing) during that time have disappeared.

“Being” Increases Preference
Nearly every wildly successful brand creates a meaning and purpose which transcends the current product offering. It is this added purpose which causes customers to want to identify with the brand. 

As we talked about in the prior blog, successful strategies create natural preference without resorting to bribes. When your company becomes something grander that customers want to be identified with, they will prefer your brand and pay a premium to do so.

Think of Nike. It does not make shoes. Others own the factories and do the work.  Nike focused instead on being the embodiment of what is aspirational in athleticism. Anyone wanting to identify with that aspiration became attracted to Nike and was loyal to them.  That strategy allowed Nike to successfully expand into many athletic areas beyond shoes while charging premium prices.

BMW’s success is not due so much to “doing” automobiles as to “being” the purveyor of “the ultimate driving machine.” Everything BMW does is focused on this higher level of being. Those desiring to be associated with that type of being flock to BMW and pay a premium for the privilege.

Apple’s success has far more to do with the being it represents than the products it offers. It became the essence of coolness and hipness. Those who also wanted to be seen as cool and hip flocked to Apple.

This is not just a consumer products thing. Back in the days of the big mainframe computers, IBM won the day. It was not just because IBM was good at doing mainframe computers. It was that they created this aura of professionalism and service which transcended the product. It impacted everything all the way down to the professional-looking dress code of the service technicians who came to the customer’s building for repairs.

IBM executed becoming this sense of being professional and reliable so well that there was a saying back in those days that “nobody ever lost their job recommending IBM” for their company. It was the brand IT professionals wanted to be identified with.

Being Needs to Influence Everything
As IBM and other successful brand show, strategy focused on being is a lot more than just a clever slogan or public relations. It has to become a consistent way of life for the entire organization. The corporate culture has to have a similar sense of being. Every facet of the business has to reflect that sense of being, from product design to customer service to how the brand interacts with society.

Steve Jobs made sure everything in every area of what Apple did lived up to what the brand wanted to be. Similarly, there is no tolerance at BMW anywhere for something that is not driven towards being the ultimate driving machine.

These companies show that success comes not from a completing a list of tasks but from an integrated approach aimed at becoming something with a much higher purpose that permeates the essence how a company sees itself. This goes well beyond just a check list of tasks. It is an exercise in identity management.

Dire Consequences When Strategy is more about Doing than Being
When doing dominates strategy, activities are drawn towards performance metrics rather than how a company is perceived. As long as you do what it takes to meet the performance metric, you are rewarded. Unfortunately “what it takes” can destroy who you are.

For example, Wells Fargo got so focused on the task of doing more multiple account activities that it lost sight of its role to be a financial institution preferred by its customers. The result was that Walls Fargo angered its customers by opening many accounts in the customers’ names without their approval. Now they have a big mess to clean up.

Similarly, Volkswagen got so hung up on doing whatever it took to get good diesel mileage ratings that it resorted to lying and cheating. This severely damaged Volkswagen’s ability to be the type of company customers want to identify with. And now they are paying a steep price (in both money and image).  

Warning Signs that Your Strategy is on a Path to Failure
So, what are the warning signs that one is more focused too much on doing rather than being?
First, how seriously do you take your business mission? Do you even know what you want to be? Does your mission explain a higher reason for being that customers will want to identify with or is it just some clever phrase? Does the company try to live out the mission or is it just meaningless rhetoric?

After the collapse of Enron, I talked to many former employees looking for a job. They all said that Enron had a business mission paper explaining the essence of what Enron wanted to be. It was called RICE and it stood for Respect, Integrity, Communications and Excellence. However, they also said that Enron totally ignored this paper.

Instead, Enron became one thing: a place for doing whatever it takes to increase short-term stock price. The incentives all hinged on doing that one thing. So that is what people did. At the extreme, it became illegal stock manipulation.

This leads to the second warning sign: what do you measure? Wells Fargo, Volkwagen and Enron were measuring an activity (adding cross accounts, increasing fuel economy, raising stock price) rather than measuring how their being was perceived in the marketplace. This destroyed their strategy.

That is why I see KPIs as a necessary evil rather than a salvation for strategy. KPI’s tend to focus on doing, because doing is easier to measure and attribute to an individual. Too many and too much focus on these doing-related KPIs lead to the problems at Enron, Wells Fargo and Volkswagen.
Instead, we need more measurement tools that look at how we are managing our image and sense of being that we want customers to identify with.

The third warning sign is how a company reacts to the changing environment. Does it change with the environment so that its being remains relevant (like Wal-Mart) or does it stick with improving the old process and become obsolete (like Kodak)?

A fourth warning sign is a strategic process where corporate culture is not integral. As the saying goes, “culture eats strategy.” Ignore culture at your own peril.

Depending on which study you look at, somewhere between 60% and 90% of strategies fail. If we don’t address the deep-seated reasons why strategies fail, we will not be able to raise the percentage of strategic successes. I believe that there are three major reasons why strategies fail and my reasons do not always agree with conventional wisdom. The second reason I believe most strategies fail is because the strategic effort is too focused on doing rather than being. Real success occurs when everything about a company reflects the reason why customers would want to identify their sense of self-worth with the identity of your brand. This requires a strategy that is rooted in knowing what your represent (your sense of being) and what type of culture is needed to personify it. Otherwise, employees will do the activities that boost personal gain and destroy the brand and the strategy behind it.

If you don’t look in the mirror, you won’t know how attractive you are. A key role in strategy is to be the mirror, so that the company can see how attractive it is becoming to its customers

Thursday, November 10, 2016

Why Most Strategies Fail: Reason #1

This week, I saw a blog by the Cascade strategy software company entitled “The 5 Reasons Why 70% of Strategies Fail.” You can read it here.

The title lured me in. However, after reading the article, I was completely dissatisfied. I so fundamentally disagreed with almost everything said in the blog that I wanted to write back as to why I felt the blog totally missed the point.

However, because we approach strategy in such fundamentally different ways, I couldn’t find any common ground from which to start. It was as if we were from different planets speaking a different language.

Therefore, I will just write my own set of blogs on why I think most strategies fail. It boils down to three things. I will devote a separate blog to each reason.

For a strategy to succeed, it must succeed in the external marketplace. It is out in the world, where the customers and the competition are, that you have to win acceptance. If the consumers vote for your competition, you lose—no matter what internal goals you have achieved. Too much internal strategic focus at the expense of external focus misses the point and often leads to failure.

The Most Important Question
Therefore, strategy needs to start in the external world by asking this question: Do you have a reason why customers should naturally prefer you over the competition? In prior blogs (here and here) and in a book, I referred to this as The Most Important Question.

There are three key concepts in this question. The first is the idea of “preference.” A good strategy provides a reason to be preferred by a meaningful segment of the population. This means that you perceived as providing a superior solution to an important problem faced by the customer—a solution worth choosing over other alternatives. Does the foundation of your strategy start with a compelling reason for being preferred by the external marketplace? Do you even know what problem your offering is even trying to solve and what others are doing to solve that same problem?

The second key concept in this question is “natural.” A natural preference is a preference rooted in the attributes of the value proposition. It is not artificially added on top. It is naturally embedded in who you are and what you offer. If you do not have a natural reason to be preferred, then you will be perceived as offering a commodity—no better than anyone else; no reason to be chosen over the others.

In the world of commodities, you cannot create preference naturally. Instead, you have to add incentives—or what I like to call bribes—in order to create artificial preference. These bribes can be lower prices, free add-ons, or other gimmicks to create the excitement that your commodity offering cannot do on its own. The problem with these bribes is that they suck the profitability out of your offering. And since competition can usually copy these external bribes, you end up in a downward spiral to bankruptcy.

So, if you have to resort to bribes to create preference, you strategy is a failure from the very beginning.

The cell phone networks in the US are a perfect example of this. The top firms (Sprint, AT&T, and Verizon) have not done a very good job of creating a natural preference for their network over the alternatives. To many, they are pretty much the same commodity, offering similar phones, similar coverage and similar services. The fact that there is so much switching between the firms indicates a lack of reason for preference.

Since there is little natural preference, these mobile network firms use a lot of bribery tactics to win customers, such as with price incentives and free features. These bribes often have only a temporary impact on preference, since the others copy the incentives. The only long-term impact is a reduction to profitability potential. Without the profits, long term success is threatened.

This is why AT&T is trying to buy up all the content companies. It is an attempt to create a natural preference rather than a preference via bribes.

One way to know if you have created naturel preference is to ask the market if your offering would be missed if removed from the marketplace. If alternatives work so well that you are not missed, then you have built a strategy that has no reason to succeed, no matter how well it is executed. I dare say that most companies fail because they never created a strategy that gave the market a reason to want you to succeed.

The third key concept in the most important question is “consumers.” It doesn’t matter whether or not I like my product. It doesn’t matter if independent testing says my product is superior. What matters is the consumer perception of my product. Theirs is the only opinion that matters. Strategies succeed or fail in the mind of the customer. How much of your strategic plan is focused on the mind of the consumer?

The Rise of the CMO
In my opinion, the beginning of the demise in the prominence of strategy was when businesses created the position of Chief Marketing Officer (CMO). The CMO was given responsibility for the external marketplace factors. It was snatched away from strategists. This created a number of disastrous outcomes.
  1. It forced strategists to only work in the realm of internals—things like financial outcomes, project management and maintenance of the metrics of performance measurement. These are all a waste of time if your strategy is not rightly rooted in building natural preference in the marketplace. So the strategists could no longer control the key to strategic success.
  2. CMOs really only have significant influence over bribes, like pricing and advertising and consumer gimmicks. They really don’t have much influence over how the company fundamentally functions in order to create a natural preference. Therefore, instead of focusing on natural preference, CMOs turned the company’s focus towards bribery. This ruins the essence of strategic success.
  3. Although CMOs have lofty job descriptions with long-term goals, if you look at what most of them spend the majority of their time on, it is short-term advertising. Short-term advertising so consumes their schedule that they never get around to giving the long term marketplace the attention it needs. Because traditional strategists were almost exclusively long-term oriented, they were able to do a better job of making sure the long-term strategy could overcome short-term concerns (more on this when we get to the blog on reason #3 for why strategies fail).

Warning Signs that Your Strategy is on a Path to Failure
So, one of the first places I would check to see if your strategy is likely to fail is the balance in the strategy between internal and external orientation. If your strategy (and the process behind it) has too much of an internal focus, your strategy will probably fail. By contrast, winning strategies tend to be far more externally focused on the marketplace.

Here are some clues that your strategy is too internal:

First, are most of your strategic goals focused on “What’s in it for me?” or are they focused on “What’s in it for my targeted consumer group?” “What’s in it for me” goals are things like:

1.      Profitability Goals
2.      Growth Goals
3.      Shareholder Return Goals

These all may be nice things, but they are outcomes, not strategies. They do not tell you how to achieve them. There are lots of ways to increase profits or growth in the short term that will destroy a company in the long-term. In fact, often the fastest way to achieve internal goals in the near term is to screw your customers and give them no reason to prefer you over the long term.

As a general rule, if you get the external marketplace issues right, the internals tend to take care of themselves. However, if you only look at the internals, there is no guarantee that the externals will survive. A lack of external orientation in your goals often leads to failure.

A second warning sign is how you are measuring success: Are you mostly measuring what is going on inside your buildings or are you measuring what is going on in the minds of your customer?   Keep in mind that the perfect internal execution of a strategy which is seen as irrelevant in the mind of the customer is a waste of time and a certain path to failure. So measure what really matters.

Look at your KPIs (Key Performance Indicators). Are they mostly measuring internal achievements or external marketplace achievements?  Unless your strategy is making an impact on the marketplace, your strategy is worthless. Therefore, load up on KPIs that measure what’s happening out in the market where results really matter the most.

A third warning sign is to look at what your strategists focus on. Are they mostly focused on internal issues like financials or project management or KPI management? Again, these are nice things, but they are not the essence of what makes a strategy successful. Successful strategies put a company in a position where they can win in the marketplace.  If that is not job #1 for your strategists, then why should you expect to ever win in the marketplace?

I could say more on KPIs, but I will save that for the next blog, which will focus on the second reason why most strategies fail.

Depending on which study you look at, somewhere between 60% and 90% of strategies fail. If we don’t address the deep-seated reasons why strategies fail, we will not be able to raise the percentage of strategic successes. I believe that there are three major reasons why strategies fail and my reasons do not always agree with conventional wisdom. The first reason I believe most strategies fail is because the strategic effort is too focused on internal issues. Real success occurs when a company is properly positioned to win in the external marketplace. This requires a strategy that is perceived by the customer as providing a superior solution to one of their problems in a natural way. If these external concerns are not met, then all the internal manipulations are a waste of time. So, if you want to have a successful strategy, put the emphasis on the issues which have the largest bearing on success. These start with getting the externals right.

I am not trying to imply that the internals do not matter at all. They do matter…just not as much as the externals. We will be addressing the internal issues more in failure reasons #2 and #3 (the next two blogs).

Tuesday, November 1, 2016

Strategic Planning Analogy #570: The Magic Word

There is a magical word in the English language. That word is “Normal.” Normal represents that which is to be expected: the routine, the average to which everything else is compared. If something is better than normal, we rate it with a positive number. If something is worse than normal we rate is with a negative number. And normal remains the eternal midpoint of 0.

What makes “normal” a magical word? It’s magical because it can change your entire perspective on life. For example, let’s say your life falls into a terrible routine—you’re locked in a prison camp, or you’re living every day in poverty with little to eat, or some such situation. It looks bad. You’d think you’d rate it a low negative number.


If your situation stays like that long enough, it becomes your expected routine. It becomes your normal to which you compare everything else. It is your new reference point of 0. Now it is no longer the definition of bad. Bad is that which is worse than that new normal, no matter how bad the starting point of your new normal is.

That is why people who have lived their entire life in poor impoverished nations often seem so happy. This situation is their normal. It is pretty much all they know. It is their stating point of zero. Since it rarely gets worse, they don’t rate much in negative numbers. And since it sometimes gets better, they have many positive moments.

So, if you find your life taking a bad turn, just pull out that magic word of “normal.” Classify your current state as the new normal. Suddenly, it moves from being a big negative to being your new zero. And zero feels a whole lot better than a big negative number.

Many companies have learned the magic in the word “normal.” When times get bad for a business, they explain it away as being “the new normal.”

“We can’t do anything about this situation,” they say. “It’s just the way things are. It’s the normal way the marketplace will work from now on. We just have to accept it and live in this reality.”

They make it sound so logical. They claim these aren’t really bad times. These are now normal times. This is all that can be expected in times like these. Instead of the situation being rated a negative number, things are now recalibrated to zero.  

And in recalibrating to zero, the business accepts the new status quo. They settle for the new point zero. They stop aspiring for anything much better. It’s okay now to be this way well into the future because it is normal.

And this is where the strategic problem arises. Once you accept a bad situation as normal, you are trapped into thinking that this current situation is the baseline for strategy. It is the norm from which you try to eke out minor improvements. The parameters of your assumptions are bound by the mistaken belief that the events causing your situation to be bad are normal, and therefore nearly impossible to change.

As a result, the expectations in one’s strategy tend to drop. After all, it is difficult to pull off abnormal results when the forces of nature are pulling you back to normal, right?  This causes weak, ineffective strategies which perpetuate a bad situation. Significant improvement doesn’t happen, because you no longer expect it or plan for it. You’ve let the magic of normal lull you into complacency.

I first learned about this principle in a college political science class. Although my college professor didn’t quite say it in these words, he believed that most social unrest and political revolts were a result of changes in the perception of normal.

His logic went something like this. As long as the citizens of a nation saw their situation as normal, they were relatively content. You can’t change normal, so you may as well accept it. So even nations with horrible conditions were relatively stable. This is all the people knew and it was all the people expected, because it was their vision of normal. There was no reason to change, because they did not see anything to change to.

But then, in the middle of the 20th century, mass media started penetrating the far corners of the earth. People in the poor, repressive nations started to see how life was lived in other places. They saw how other places had a totally different type of normal life. The normal in these other nations looked MUCH BETTER than what they were experiencing. Suddenly, these nations decided that the superior normal in these other places should be their normal, too.

By accepting this new and better definition of normal, the people in the poor, repressive nations changed their perspective. Now, their current circumstances were no longer rated as zero. By comparison to the new idea of what should be normal, the current situation was a huge negative number.

Nobody wants to live in a highly negative situation, so the people in these nations started to revolt. They were willing to make great sacrifices in order to achieve their much higher expectations of what normal should be. So, according to my professor, mass media and its impact on people’s expectations is what ended colonialism and put the world on a better path.

Application to Strategic Planning  
So how does this principle apply to strategic planning? Businesses can be like those repressive nations before the mass media. Everyone pretty much accepts the current situation. It is all they know and they think it is all that can be achieved. It is the normal we have to live with.

The nations did not revolt and work to improve the situation until they could imagine a potential new normal that was worth fighting for. Without first creating the ability to conceive of a new reality, there was no reason for the people to rock the boat and take radical action.

From this, one of the most important principles of strategic planning can be seen: Before you can convince a company to take on the difficult task of radical change, you must first convince the people that there is a new and much better version of normal that can be attained from that change effort.

Therefore, one of the chief roles of the strategist is this: to help the people within the business redefine their perception of what normal can be. The strategist has to paint a picture of a future which is not only much better than today’s norms, but also something which they can envision as becoming their new norm if they are willing to work for it.

Making Insiders Into Outsiders
This is one of the reasons why most revolutions in an industry are started by outsiders. Because outsiders have not lived inside the industry, they aren’t brainwashed into thinking that the norms of the industry are the way things need to be. Outsiders have an advantage in dreaming up and going after a new definition of normal, because:

·         The minds of outsiders are not clouded by years of living under the old normal. They don’t have to unlearn the old conception to form a new one, because they never lived under the old conception.
·         Outsiders have no vested interest in the current normal. It is not theirs. By contrast, insiders have to change their thinking about their identity, which is tied to the current normal.
·         Outsiders have nothing to lose if the normal of the status quo is upset. By contrast, insiders worry the change will make their situation worse. Kodak didn’t aggressively move from film-based to digital-based imaging because that new normal looked less profitable. What they missed is the fact that bankruptcy from not adapting to the new normal is even less profitable.

Therefore another key role for the strategist is this: to help insiders think more like outsiders. This means helping people look at the industry with new eyes that are not clouded by the past. This helps people to conceive of a better normal.

One of the enemies of strategic planning is complacency. If people feel the status quo is all that can be achieved, they will resist any effort to change. Therefore, one of the key roles of strategic planning is to help people to do two things: 1) Envision a new and better normal; and 2) Help them believe that the new normal is achievable.  Sometimes, it helps if you can get people to see their industry more like an outsider than an insider.

The inability to envision a better normal is not an excuse to view the status quo as being acceptable. Bad is still bad, even if you cannot see a way to make it better. In these cases, perhaps the best move is to sell out to someone who is willing to accept that poor reality…preferably before an outsider finds a way to make that view of normal obsolete.

Friday, October 14, 2016

Strategic Planning Analogy #569: Strategic Multivitamins

My most recent blood test showed I was low in vitamin D, so I went to a healthy food store to look for vitamin D supplements. The man at the store said that to get the maximum benefits of vitamin D, you need a supplement that also includes vitamin K. Others say that vitamin D needs to be paired with calcium, because calcium is absorbed better when paired with vitamin D.

There are lots of other pairings in vitamins and supplements. Folate needs to be taken with B12 if you want it to work properly. Potassium needs to be paired with sodium to keep things in balance in your body. The list of pairings go on and on.

As a result, I did not leave the store with a vitamin D supplement. Instead, I got a multivitamin supplement.

Many of the tools used in strategic planning, like KPIs and tactical outcome targets, are a lot like vitamins. They help make a business stronger and healthier. Regular emphasis on them keeps a business from feasting on the bad “junk food” which leads to poor performance.

The problem with that these strategic vitamins is that we tend to focus on only one or two at a time. When that happens, a company can get out of balance. Just as some vitamins need to be paired with other vitamins to work most effectively, most KPIs and targets work most effectively when paired with other KPIs/targets. The singular focus can get a company out of balance and turn a good tool into a business health nightmare.

Therefore, companies need to apply strategic multivitamins, so that everything stays in balance.  

Yes, it’s true that one of the key benefits of strategic planning is the advantage of getting a company more focused.  However, there are dangers in getting TOO focused.  Vitamin A is important for health, but if all you take is vitamin A, you will suffer in two ways:      
  •  You will starve yourself of other vital vitamins;
  •   You will get vitamin A poisoning.
Similarly, if you narrowly focus a company on achieving just one thing, you can starve it of other essentials and turn that one good thing into a poison for your company. KPIs and targets need to be balanced and paired.

Although Warren Buffett did not use the vitamin analogy, he said something very similar at the latest annual meeting for Berkshire Hathaway. Buffet said that profits need to be paired with growth. If you only focus on profits, Buffet says that you will take too much money out of the company today and starve it of future opportunities. For a healthy business, you need to pair the two (profits and growth). That way, a company is healthy both today and tomorrow.

Pairing Efficiencies With Investments
A similar pairing would be efficiency and investment. A focus on efficiency is a good thing. It helps root out waste. It makes your efforts more productive.

However, if too much effort is placed on efficiency—at the expense of everything else—then problems occur. It moves beyond rooting out waste and starts eliminating or delaying every expense possible in the organization. Maintenance is postponed and investments are eliminated. This can result in increased injuries and product failures. The Samsung smartphone disaster may have been caused by eliminating too many costs associated with testing in the mistaken guise of getting to market more efficiently.

The irony is that by eliminating virtually all expenses today, we just create problems later which cost even more in the future...or even cause business failure. That would be efficiency poisoning.

That’s why efficiency needs to be paired with investments. We can’t simply cut our way to prosperity. We also need to invest in our strategic future. We need to invest in maintenance, equipment, safety, new lines of business, advertising/promotions, etc. A healthy future requires balanced nutrition from both efficiency and investments.

Pairing Internal With Extermal
Another important strategic pairing would be a combined focus on both internal and external factors. It is easy to fall into the trap of getting too focused only on the internal. After all, the internal is far more under our own control. It’s easier to achieve our targets in places where we have more control. And don’t our executives want achievable goals?

As a result, we can put on blinders and only worry about perfecting our internal business model. But what’s wrong with perfecting our business model you may ask? Well, if you do this while ignoring external factors, you can miss shifts in the customers or in what competition is doing. Customers may no longer want what your model offers or competitors may have come up with a superior business model.

Consequently, an internal-only focus can lead to perfecting an obsolete business model. No matter how grandly you’ve perfected the obsolete, it is still obsolete and worthless.

Just look at Blockbuster. It was trying to perfect the traditional movie rental business model. Unfortunately customers were moving to better business models offered by new competitors (Netflix and Redbox). Now Blockbuster as we knew it is gone.

And what about the current disaster at Wells Fargo? Wells Fargo has been so internally preoccupied with a focus on its culture of pushing its model of multiple accounts to the extreme that it lead to corruption and a public relations disaster. Had they balanced this internal focus with an external focus, they would have understood better how the internal tendencies were hurting their external relationships with their customers. That would have led to a stronger long-term strategy.

Balanced Scorecard
This is where tools like the Balanced Scorecard come in. Although I have never been the biggest fan of the particulars surrounding the balanced scorecard, I do appreciate its intended goal.

The goal of the balanced scorecard is to create a more balance blend of KPIs/targets. It takes into account a lot of pairings, like internal and external, efficiencies and investment, profits and growth. It forces a company to stay away from being too narrow in its focus. You can look at the balanced scorecard as being a company’s multivitamin.

Just as there are many types of multivitamins, there are many ways to achieve balance in the KPIs and targets you focus on. The important thing is to get on the multivitamin approach.

One of the benefits of strategic planning is getting a company focused on where it needs to be. And that’s a good thing. However, if we get too focused on the tactics we use to get there, we may never reach our intended destination.

Life is complex. To make it work properly, we need a balance of nutrients. In a similar fashion, the business world is complex. To make our business work properly, we need a balance of KPIs/targets. If we get these out of balance for too long, disaster is almost inevitable.

Examples of balance would be pairings like profits and growth, efficiency and investment, & internal and external.

When I bought my multivitamins, the label said I should consult my physician before taking the pills. Similarly, I believe companies should consult a strategist before taking a strategic multivitamin.

Thursday, September 22, 2016

Strategic Planning Analogy #568: SWOT it Away

I was born with a larger than normal nasal cavity, which means that I have a better than average sense of smell. I haven’t decided yet if that is a good thing or a bad thing.

On the good side, most of the flavor of our food comes through the nose, so good food tastes really, really good to me—more so than for the average person. The bad news is that it causes me to overeat and have a weight problem.

On the good side, I can more easily detect problems, such as a gas leak or if food is starting to spoil, or if a baby needs a diaper change. The bad news is that these types of bad smells cause me to react more negatively than others and get more nauseous than others.

So is having a more acute sense of smell a good thing or a bad thing?

One of the tools often used in strategy is the SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). The basic assumption behind the SWOT analysis is this: things can be easily categorized into one of these four categories. Once you put things into their proper category, then a strategy will emerge to emphasize the strengths/opportunities and mitigate the weaknesses/threats.

The problem is that I see the world as being a lot more like my nose than like a list of categories. My acute sense of smell has both strengths and weaknesses. It provides me with both opportunities and threats. So does just about everything in business. Just as my nose won’t easily fit into these categories, neither does most of the business world.

As a result, it can be dangerous if a strategist just dumps a particular attribute into one of these four categories, since this will ignore the weakness inherent in any strength (and vice versa).

The principle here is that the SWOT analysis, as it is typically used, is an improper approach to strategy. The reason is because the fundamental assumption behind SWOT is flawed—things do not have a singular characteristic of being either good or bad. And if you only see a singular attribute, you become blinded to the more complex nature of the situation you are dealing with.

With SWOT, things labeled “bad” will be ignored or gotten rid of and things labeled “good” will get all the attention. As a result, you will miss out on the good things inherent in the “bad” and be overcome by the bad things inherent in the “good.”

Example: Retail
For example, let’s compare ecommerce vs. brick & mortar retail in the US. If you do the SWOT analysis, you might say that ecommerce is an opportunity and that brick and mortar is a weakness. 

After all, by comparison, ecommerce is:
  1.   Less capital intensive;
  2.   More Convenient;
  3.   More Flexible;
  4.   Faster Growing.

Such a simplistic approach might cause a retailer to abandon its stores (weakness) and put everything behind ecommerce (strength). However, this conclusion misses some nuances.

  • Omnichannel (both ecommerce AND brick & mortar) is even more valuable to customers. This is one reason why about 6 of the top ten US commerce sites are owned by companies that also operate brick and mortar stores (it varies depending on who is doing the research). It also helps to explain why many so-called pure ecommerce sites are starting to open up brick and mortar stores.
  • About 88% of commerce in the US still flows through brick and mortar stores.
  • Amazon so dominates the “pure” ecommerce space in the US that success in the pure ecommerce space is not a guaranteed successful strategic option for non-Amazon firms.

Therefore, dumping stores and putting all money behind ecommerce could be a huge mistake.
Just like my acute sense of smell, both forms of retail have strengths and weakness. You can’t just slot them into a single category. SWOT is too simplistic to account for all the nuances.

Alternative to SWOT
An alternative to the SWOT approach is something I call the MacGyver Approach. In the TV show “MacGyver”, Angus MacGyver gets into a lot of problematic situations. To get out of these predicaments, MacGyver looks around to see what is at his disposal. Usually it is just a bunch of everyday stuff—not inherently good or bad—just stuff. He then figures out how to combine what is at his disposal to create a way out of his dilemma. He can make bombs out of household chemicals. He can use chewing gum and paper clips to find a way of escape. 

The value of the items is not in each individual item, but in the ways MacGyver combines them for the desired effect.

The same can be true for your business. Your business has a lot of things at its disposal, including money, customers, patents, distribution channels, business partners, image, employees, and so on. Rather than trying to slot each one into a singular category of good or bad, weak or strong, just look at it as a bunch of stuff at your disposal (no preconceived value judgements).

Then, like MacGyver, look for ways to combine it all to create a way out of your dilemma. It’s a lot easier to find creative solutions when you don’t poison your mind with preconceived notions about how various parts are only good or only bad. Having an open mind opens up more possibilities.

You’d be surprised at what kind of strategy you can come up with if you abandon the SWOT approach and use more of a MacGyver approach. So my suggestion is to take SWOT out of your strategic toolbox and replace it with the MacGyver tool.

I’ve covered this concept in a variety of posts in the past. To learn more about this idea, go here and here.

Strategies have a starting point—where we are today. Our current situation comes with all sorts of baggage. To sort through all that baggage, a common strategic approach is to quickly sort everything into different piles depending on whether the baggage is “good” or “bad.” This is called the SWOT analysis. Unfortunately, by initially putting value labels on things we miss out on the fact that there is both good and bad in everything. SWOT closes our minds prematurely to all the potential strategic options available to us. A better approach is to eliminate the labels and see it all as a just pile of raw materials (no value labels) from which we must build a strategy. Then, like MacGyver, we look for creative ways to combine it all so that the sum of the parts gives us the edge we need to escape trouble and achieve success.

You don't need a nose like mine to smell the benefits of MacGyver over SWOT.

Remember, the best strategy for your company is not some generic approach applicable to everyone. After all, if everyone can do it, where is your advantage? Instead, your advantage comes from making the most from what is uniquely you. Look at everything you have and figure out how to combine it for maximum impact.

Thursday, August 25, 2016

Strategic Planning Analogy #567: Water Between the Marbles

When I was in Junior High School, we did an interesting science experiment. The teacher took a beaker and filled it full of marbles. He asked the class if we thought the beaker was full. We all said "Yes."

Then the teacher poured water into the beaker over top the marbles. He poured quite a bit of water into the beaker before the water reached the top. Then he poured the water surrounding the marbles out into another beaker. The second beaker was about half full of water.

So the teacher then pointed to that original beaker with marbles up to the top and re-asked his first question: “Is this beaker full?”

This time we answered “No.”

Things can appear full even when they are not. It doesn’t matter what the container is or what you put into it. You can fill the container to the top and it still will not be full.

The problem is that little spaces form between the objects you put in the container. Each individual space may appear tiny, but when you add them up, all those spaces take up a lot of room. That’s why so much water could be put into a beaker that was supposedly “full” of marbles.

The same is true in business. A market may appear to be full, with large competitors appearing to take up all the available space. It looks like there is no room for anyone else.

However, if you stop looking at all the marbles (the big competitors) and start looking at the spaces, you will see that there is still a lot of room in that market. If you think strategically, you may still find a successful way to fill those open spaces.

The principle here is that even in highly mature markets there always seems to be room for niche products or niche companies. The reason is because large companies tend to be best at doing the large things (serving large customer segments, large product runs, large marketing programs, etc.). They are not well designed to go after those small spaces.

These large, mass companies are like those marbles. They take up all the space that marbles are capable of taking, but they leave gaps they cannot fill.

Because water can go into smaller spaces, they can fill in the places the marbles cannot get to. Smaller niche markets and niche companies are like that water, able to penetrate spaces difficult for the large companies to effectively reach.

McKinsey Article
I saw an example of this principle in an article put out this month by McKinsey and Co. The article was looking at the consumer packaged goods (CPG) industry. This is a very mature business. Consolidation has occurred and there are only a few large companies left trying to fill the CPG space.

To get an idea of how full the CPG space is, the article states that growth for these large CPG companies over the past four years averaged only about 0.3% per year. It looks like there is no more room for these large CPG companies to stuff any more marbles into the CPG market. They’ve already tapped pretty much all they can get, right?

So does that mean every other company should walk away? Not necessarily. In the story, we saw that even when the marbles “filled” the beaker to the top, there was still room for about a half a beaker full of water in that beaker. Similarly, the McKinsey article says that even though the big CPG companies have “filled” the CPG market, about half the CPG space is filled by niches not held by the big companies.

And here’s the more exciting news. While the big companies were averaging only 0.3% growth, the article says that midsize companies were growing at 3.8% and small CPG companies were growing at an astonishing 10.2%!  So even in so-called slow growing mature markets, you can grow and prosper if you know how to get into those small spaces.

So how do you take advantage of those small spaces? Well, simply put, you have to become less like a marble and more like water. Marbles are large and rigid. Water is fluid and flexible, able to seep into small places.

There are three ways to become more like water. They are discussed below:

1) Make your Company Successful At Being Small
Large companies tend to find it hard to do small things because their very bigness tends to get in the way. They have large overhead, lots of bureaucracy, rigid rules, and an infrastructure built to exploit big opportunities.

Smaller, more nimble companies, however, are less burdened with all this rigid structure and high cost. They can be built in such a way that they can make money on small opportunities outside the reach of the big ones.

Don’t try to gain success by imitating the big guys. Gain success by structuring your business model to do things they cannot do. Stop trying to be a rigid marble. Stay fluid and flexible.

2) Target Small Opportunities
Don’t look for the big opportunities. Big opportunities attract big competitors. The big competitors will crush you there. Instead, look for the small niches which fall below the big company’s radar.

Small niches can still be pretty profitable if you know what you’re doing and are designed to optimize in a niche environment. So don’t look at where the big marbles already exist. Look at the spaces between them. Find a small space rightly sized for you, but too small for the big guys.

3) Make Big Companies Better at Doing Small Things
If you are already a big company, the challenge is in finding a way to become better at doing small things. Technology can be helpful here. You can use technology to:
  • ·       Make small production runs more feasible;
  • ·       Make it easier to find and target smaller consumer segments;

You may also need to segregate your approaches to business depending on whether it is large or a niche. For example, large opportunities may get one level of service and support while niche opportunities get a different level of service and support. In other words, you may have both “marble” divisions and “water” divisions, which are run differently.

Fullness is a relative term. When you try to fill a space with large objects, there will still be lots of spaces where the large objects cannot penetrate. In the business world, you can have a successful strategy by targeting those niche spaces between the large firms. The trick is to design your business to succeed at niches (small, fluid, nimble) and to choose the niches which fall below the radar of the large companies. Large companies can also do a better job of going after some of these niches if they segregate these niche opportunities within their company and treat them differently.

There is no such thing a single right strategy which makes all the other strategies wrong. The right strategy for a marble is different than the right strategy for water. Both can work. The secret is finding the strategy where you have an advantage. The question for you should not be “What is the right strategy?” but rather “What is the right strategy for me?”