Strategic Planning Analogy #358: Another New Strategy

THE STORY
Here’s a headline you probably will never see: Company Hires New Head of Marketing Who Doesn’t Change Anything.

Instead, we’ve seen the opposite happen hundreds of times. A new marketing head is hired and suddenly there is a new advertising agency with a new advertising slogan to match a new marketing strategy. And given that heads of marketing seem to only last about two to three years before being replaced, that’s a lot of new advertising slogans and marketing strategies.

That is why I was impressed by an article in Mediaweek last September about Tim Mahoney, Chief Marketing Officer at Subaru. In the six years prior to his return to Subaru in 2006 (after having been away for 9 years), Subaru had gone through five different ad slogans and marketing strategies (with two different agencies). In just the one prior year to Mahoney’s return, Subaru had used five different print ad layouts.

When Mahoney got back to Subaru, one might have expected him to change everything yet again. Instead, he kept the most recent slogan (from his predecessor), picked a singular ad layout, and started working on perfecting its execution. He told the ad agency to not even try to change them.

They have now had the same slogan and marketing approach for four years. The consistency is strengthening the brand. And as a result, Subaru has been doing very well and is picking up market share.

THE ANALOGY
Marketing is not the only place where this type of problem happens. Executive turnover is high all over the spectrum. And it is very common for the executives in all areas to reject what the former executive did and go in a new direction. As a result, not only do marketing strategies wobble all over the place—all strategies seem to be in flux.

Not only is the tenure for marketing executives short; CEOs don’t seem to last very long, either. This just accelerates the changing of the strategy. How do you build a long-term strategy with enduring impact on the marketplace when the strategy itself does not endure?

In the case of Subaru, sticking with an ad strategy for multiple years has had a positive payback. The same is true for corporate strategies.

THE PRINCLPLE
The principle here is that you will never complete a long-term journey if you keep changing where you want to go. If you want long-term success, you need continuity on the objectives and the follow-through.

Sure, sometimes things change so much that it is time for a wholly new strategic approach. Most of the time, however, all we need are a few tweaks to a long-standing game plan. The temptation to keep changing the strategy needs to be resisted. We can see the consequences of falling victim to the temptation to change in the example below.

The Consequences of Ever-Revolving Strategies
I know of a retail brand that, for more than a decade, changed presidents about every two years. Each new president wanted to make a good impression—prove they were worthy of taking over the helm. As a result, each new president would reject major portions of the strategy of their predecessor and create a new strategy for the company.

The logic was a follows. If the former president had been doing a good job, he would not have been let go after only two years. Something apparently was wrong with what the former president did. Therefore, the new president feels compelled to do something different. And, as part of doing something different, each new President did something new to the strategy.

Unfortunately, all these changes to the strategy had consequences:

1) Employees at headquarters became confused as to what they should be doing, because the priorities and the expectations changed so often. This made it very difficult for them to excel at their jobs. Rather than getting better at what they were doing, they always seemed to be doing “transition” work—undoing the old and starting the new.

2) Many employees out in the field started ignoring headquarters and their various strategic changes and began to do whatever they felt best. After all, it’s hard to hold the people in the field accountable when the leaders and the expectations change so often. The employees in the field knew they would outlast the leader and whatever his “strategy of the day” was. Therefore, they tended to ignore it, figuring “this too shall pass.”

3) When leaders know that their time may be short, their strategic emphasis often shifts to changes with quick returns. Long-term investments with longer paybacks are not a strategic priority. When long-term investments are delayed for over a decade, the basic infrastructure needed to run the business becomes tired, outdated, broken, obsolete, or terribly inefficient. It is difficult to compete against newcomers with the latest and greatest stores and management tools when yours are old and tired.

4) Consumers became totally confused as to what the store stood for. Various swings between standing for quality or price, upscale or downscale, left consumers unsure about what the stores were trying to be. It’s hard enough to get customers to love you when you solidly stand for something. It is almost impossible to get customers to love you when they have no idea of what you stand for. As a result, store traffic dwindled, year after year after year, as customers defected to stores with a stronger position in the marketplace.

As a result of all of these consequences, this retail chain is no longer in existence.

What do I Change?
Here’s the dilemma. Often times a company can be underperforming, creating a perception that change is necessary. However, if you keep changing the strategy, you can make things worse rather than better, as we saw in this retail example. So then, what should one do?

In general, we need to do more like what Tim Mahoney did. Rather than change the direction, he changed the execution. In other words, often times a strategy fails not because it is a bad strategy, but because either it was executed poorly or abandoned too soon. Therefore, rather than change the strategy, keep the strategy and change the execution.

Assuming the strategy is essentially sound, think about what could be holding back strategic success. Perhaps the company is missing some key components such as expertise, capacity, infrastructure, connections, technology, or whatever. If so, then instead of abandoning the strategy, focus tactics on obtaining what is missing. You wouldn’t send a soldier out to battle with a gun, but no bullets. Similarly, don’t try to execute a strategy which is missing key components.

Then, once the tools are in place, the emphasis should shift to improving the execution. Just as athletes get better with practice, so do employees. Keep at it, so that execution gets better. Keep pounding at the key essence of the strategy so that EVERYONE gets it—employees, customers, potential customers, supply chain partners, etc. Keep pounding at the essence of the strategy so that everyone instinctively knows what the right thing is to do. It’s better to have people know instinctively what to do than to either:

a) Have to stop the world and begin long debates every time something comes up;

b) Have to write down hundreds of pages of rules to follow that will never keep up to date with what’s going on; or

c) Have employees go off and do things somewhat randomly and contradictory, because they have no sense about what the company is trying to accomplish.

If you think change is in order, I think these suggestions are often a better place to start rather than automatically throwing the current strategy away.

SUMMARY
When times get tough, or when a new executive is put in place, there is a temptation to quickly reject the old strategy and start afresh. Although this may occasionally be a good thing to do, usually frequent strategic change causes more problems than benefits. If you feel a need to change, consider instead changing the tools or the execution.

FINAL THOUGHTS
For your legacy, would you rather be known as the person who changed the objectives or the person who changed the results?

Strategic Planning Analogy #261: How Does It Feel?

THE STORY
Back when I was a teenager (in the 1970s), muscle cars were all the rage (especially if you were a teenager). These were gigantic hunks of metal with massive engines. They shouted of power. They had names like GTO, Barracuda, Javelin and so on.

One of the distinctive features of these muscle cars was their paint job. No dull and boring colors need apply. They were bright yellows, bright oranges, bright purples and bright reds. They looked like shiny plastic toy cars…only a lot bigger.

Of course, nowadays, cars truly are made of plastic and other non-metal parts. However, you could not tell by looking at the paint job. Most of the cars of today seemed to be painted in metallic colors, like gray and silver and copper. Even when other colors are used, they often have metallic flakes in the paint to give it more of a metallic look.

So why is it that when the cars were made of metal, we made them look like plastic, but when the cars are made of plastic, we make them look like metal?

THE ANALOGY
The automobile industry understands the importance of appearance. Just being a good car is not enough. You also have to look the part. Fast muscle cars are like “toys for older boys.” The plastic colors helped reinforce that image. It makes them feel more “fun.” By contrast, today’s cars are all about quality and durability. The illusion of metal helps reinforce that image.

Image is not just important to automobiles. Every strategy should have an image component. And every image is reinforced by visual cues, even if the visual cues have little to do with actual performance.

Is a plastic car any stronger because is has a metallic paint job? That depends on whether you ask the automotive engineer or the customer. The engineer would say no, but the customer seems to feel more secure in the strength when the appearance is metallic.

Are you adding the right visual cue to your offering to evoke the image most relevant to your strategy?

THE PRINCIPLE
The principle here is that reality lies in the mind of the consumer. If bright, plastic colors make muscle cars seem more fun in the mind of the customer, then one should use bright plastic colors. If metallic colors make a plastic car feel more durable in the mind of the customer, then metallic colors should be used.

It doesn’t matter what rational measurements say. What matters is how customers feel. Strategic positions are not just held by rational measurements, but also by whether the position “feels right” in the customer’s mind.

Principle in Action
If you are a bank, you probably want a strategic position which includes being strong, stable and secure. That’s why banks tend to be located in brick buildings, rather than ones with cheap plastic siding. The physical reality of bank security may have nothing to do with bricks versus plastic siding. But in the mind, bricks make a bank seem much more secure.

When I was younger, I was hanging out at a shopping center that had a bank in it. It was a nice, sturdy brick building (or so I thought). I accidentally kicked the building and a piece of the thin brick façade fell off, exposing chicken wire and a little plaster. It was all a fake. Suddenly, my opinion of the security of that bank went down. It was all emotional, based on the illusion of fake bricks. When the visual cue broke down, so did my opinion. It didn’t matter that the reality of what was happening inside the bank had not changed. The opinion in my mind changed, and that is all that matters.

A similar principle applies to lawyers. A lawyer may not be any smarter if they are sitting in a plush, ornate office, but it sure feels like it.

To reinforce the strategy, everything should have an appearance which reinforces the image behind the strategy. For example, Apple owns the position of cool. They do it by making sure EVERYTHING is cool. Sure, the technology is cool, but so is the user interface, the esthetic design, the advertising, the software/apps, and even the store you buy it in. Everything helps to reinforce the coolness of everything Apple. As a result, it makes the people who use Apple products feel more cool.

Many of Apple’s competitors stop at just trying to make the technology cool. That’s not enough when all of the other visual cues are telling customers that Apple is cooler.

The cues don’t have to be rational…just effective at the mental level. For example, I worked with a grocer whose strategy was based on having an image of low prices. Through research, they determined that having employees bag the groceries lowered costs, because it sped up the checkout line, requiring fewer cashiers. Lower costs would help create lower prices, right? So what did the company do?

Rather than using baggers, the store used the less efficient process of having the customers bag their own groceries. Why? Because the visual cue of bagging groceries yourself created a greater mental perception of “low price” than would arise if the efficiency of baggers was applied to actual prices. Baggers do not “feel” like low price, even if they are.

What to Do
So what is a strategist to do? First, come up with a compelling strategic position. Second, determine which attributes reinforce that position. Third, make sure there are enough practical attributes imbued in the product to deliver on the promises inherent in the position. Fourth, surround the offering in visual cues so that every experience reinforces the mental perception of delivery on the promise.

When I say everything, I mean everything. If a customer has to call your customer service line, will that experience reinforce what you stand for? Do you ever consider the customer service line when designing the strategy?

Even if it doesn’t make sense from a rational perspective, if it helps with mental persuasion, do it. If needed, make the plastic car look like sturdy metal or the metal muscle car look like fun, colorful plastic.

And remember, although the smoke and mirrors are important, the product still has to deliver. A cool environment will not save an electronic gadget whose internal technology sucks.

Spend some time trying to experience the entirety of your offering, just like a real customer. Don’t just have someone in your firm take a product off the assembly line and dump it in your lap. Take time to try to purchase it just like a customer would. Try to set it up and use it without having one of your tech people or engineers in the room. Call to complain and hear what the response is. Experience all the image cues.

SUMMARY
Strategies are won or lost in the minds of the customer. These minds are influenced by all sorts of visual cues. The better you are at incorporating the management of all of these cues into your strategy, the greater the likelihood of success.

FINAL THOUGHTS
When you are in a strategy meeting debating tactics and actions, continually ask yourself this question, “How does that make me feel?” If it doesn’t feel right or feels inconsistent, then it probably shouldn’t be done, no matter how rational it first appears.

Analogy #226: Dealing With Roadblocks

THE STORY
This morning, driving to work, I came to a place where traffic was stopped...a place where traffic is not normally stopped. I could see a police car up ahead flashing its lights. Therefore, I concluded that there must be a big accident up ahead.

I had three options. First, I could sit and wait until the police were done stopping traffic. Second, I could turn left and drive a few blocks along a path parallel to my normal path, except one block further east. Then I could return to my normal path once past the police car. The third and final option would be to turn around and take an entirely different path to work.

Well, it looked like traffic wouldn’t be moving for awhile, so I decided not to do option #1 (stay and wait). Then I figured that an entirely new path to work would take me so far out of my way that I would probably lose more time, so I opted against option #3 (entirely new path). As a result, I went with option #2 (modified original path). It worked out just fine and I lost very little time.

THE ANALOGY
As mentioned in our last blog, strategic planning is about finding paths to our destination. In today’s story, I had a great path for getting to work, but I was temporarily blocked by an unusual occurrence. The same can happen to businesses. They may have developed a great strategic path which normally works, until an unusual event occurs.

For example, the severity of the current economic crisis can cause many formerly good strategies to suddenly stop working, just like that police car stopped my ability to get to work. So then the question arises: what do I do to my strategic path when there is a temporary blockage, like a recession?

Similar to my commute, you have three options. First, you can keep your strategy in tact, change nothing, and wait it out. Second, you can pretty much maintain your core strategic path, but make a small temporary adjustment. Third, you can look for an entirely new strategy which is specifically designed for the new temporary conditions.

As we will see below, typically the best response is option #2—small modifications to the path.

THE PRINCIPLE
The principle here is that strategic success finds the proper balance between consistency and adaptability. Strategic consistency is very important. If you keep changing your position regarding what you stand for, you will end up standing for nothing in the mind of the consumer. By contrast, consistency reinforces your position over time, making it stronger.

Unfortunately, temporary events, like a recession, may cause your position to become far less relevant for the times. You may be shouting a consistent strategy of “quality” or “prestige” at a time when your customers are mostly focused on “low price.” Therefore, one may need to become adaptable to the changing times.

The question is how to adapt to the short-term while not destroying the long-term strength of your brand consistency. As we will see in a moment, this balance between consistency and adaptability is done via “context.”

But before we get there, let’s look at a real, live example in the marketplace—apparel retailing to teens. In the current economic recession, apparel sales to teens have dropped considerably. The old paths aren’t working like they used to. If I were an apparel retailer, what should I do?

Well, Abercrombie & Fitch opted for option #1 (stay and wait). They have not lowered prices or gone into any sort of panic promotions. They are acting as if nothing has changed. They are remaining consistent to their prestige “cool” image.

There is some logic to this approach. If they start shouting “price” and promote like crazy, they can potentially destroy the strategic foundation of the entire company. To quote CEO Michael Jeffries, “Promotions are a short-term solution with dreadful long-term effects.”

Unfortunately, this consistency places Abercrombie & Fitch in a position of being temporarily out of touch with its customers, causing them to leave and start shopping the competition. In November, sales for stores open at least a year at Abercrombie & Fitch were down about 28% from the prior year. A more promotional competitor, like Aeropostale, was down only 5% and more price-oriented The Buckle had an increase of 15%. At least for now, Abercrombie is losing market share and there is no guarantee that it will come back when the recession is over.

So, is option #3 (total strategic change to a price orientation) a better option? Not especially. To achieve those lower prices, these other firms had to significantly lower their gross margins, which tends to wipe out any of the profitability that the short-term sales boost provides. If you have built your reputation on prestige rather than price, you probably don’t have an infrastructure to support those lower margins. Therefore, you may not be much further ahead near-term in profits. In addition you may have destroyed your ability to return to your prestige pricing once the recession is over, so the long term is also destroyed.

So the trick is to find that balance in the middle, where you show enough adaptability to still be relevant to your customer, without changing so much that the long-term strategy is destroyed. To do that requires context.

For example, rather than looking at it as a dichotomy between two opposites (prestige versus promotional), look at how to make prestige more desirable in tough economic times. In other words, look for ways to increase the value while retaining the prestige context.

Beauty companies have done this for years. Rather than destroy their pricing image through heavy discounts, they go the other direction. They retain the same basic price point for the item, but add large gift boxes full of other beauty products for “free” with the purchase. This type of promotion retains the prestige pricing context, yet makes the value stronger in times of recession. As an added bonus, it can expose a customer to more of the company’s beauty products, which can lead to more future sales for the products that were originally received for free.

There can be lots of ways to increase value without losing context. Perhaps the prices stay high, but financing options are improved. Perhaps a purchase can gain the customer access to other relevant products/services/events that they could not otherwise have access to. In other words, make the prestige or exclusivity even greater for the same price.

Hence, the best option when you hit a temporary roadblock is most likely option #2. You essentially stay on the same basic path (the context), but make a small adjustment to make that context more relevant. This way, you help keep customers from defecting during the rough patch without destroying the long-term strength which comes through consistency.

SUMMARY
When times get tough, there is the temptation to abandon one’s strategy and do whatever it takes to get sales in the door. Unfortunately, when you are looking for sales in the worst way, you often end up using the worst way to get sales. Remaining consistent to the context of your long-term strategy is usually the best approach, both for near-term and especially long-term profits. However, within that context, look for ways to make it more relevant to the current times through minor adaptations.

FINAL THOUGHTS
Standing one’s ground, like Abercrombie & Fitch, can sound very noble, like the sentries at Buckingham Palace. However, that makes one like a motionless statue, rather than a living being. And we all know what birds do to statues…and it is not pretty. Better to move a little bit and wave one’s arms to keep the ill effects of the birds away, provided one does not abandon one’s post.

Analogy #214: Maid or Maiden

THE STORY
Once upon a time, a young man saw a bottle wash up on the shore. The young man opened the bottle and out popped a Genie.

The Genie said, “Thank you for letting me get out of that bottle. Out of gratitude, I will grant you a wish. Behold, I place two women before you…one a maid and the other a maiden. You must choose only one of them and she will be yours.”

The young man thought, “Boy, it would be great to have a maid to take care of all the things I do not want to deal with. The maid would do all the work while I have all the fun. But it’s not much fun being alone.

“On the other hand, it would be a lot more fun having a great time together with the young maiden. However, without the maid, I would be so busy with chores that I wouldn’t have much spare time to enjoy being with the maiden. I’d really like both.”

Feeling perplexed, the young man asked the Genie, “Wouldn’t be possible have a woman who is both a maid and a maiden?”

“Oh, no,” the Genie replied. “If you made the maiden work hard at maid chores, she would lose her beauty and charm. If you had the maid try to act the maiden, she would be in a world beyond her upbringing and not know how to act. No, you must pick one or the other.”

So the young man made his choice. Immediately afterward he scoured the beach looking for another genie in the bottle, so that he could request the other option and have both a maid and a maiden.

THE ANALOGY
Successful strategies require choosing a position in the marketplace. Although there often are many positioning options to choose from, they tend to fall into one of two basic types. Either the position is like a maid or it is like a maiden.

A “maid” position is a one where you offer the solution of eliminating or reducing the effort in some task a person does not want to do. The idea is that if you hand over your problems to the maid, they will take care of the mess for you, so that you can spend more time on the things you enjoy.

A “maiden” position tends to be the opposite approach. Here one is offering an even better experience in something which you desire to do. The idea is that your enjoyable times will be even more enjoyable when accompanied by the maiden.

If you can own the position of the superior maid or maiden in your industry, then you have a great shot at success. People will choose you.

However, as we saw in the story, it is difficult to try to become known as both the maid and the maiden. For example, it would be difficult to believe that someone is the most qualified maid if they act like a maiden. You would believe that Maiden-like people wouldn’t want to get their hands dirty enough to clean properly. Their dignity would supposedly not let them act like a common laborer.

Similarly, a maiden loses some of her allure if she’s also known to be a maid. If she is such a good maiden, then why does she have to stoop to do common labor? It’s never a good idea to date the household help.

THE PRINCIPLE
The principle here is focus and consistency. Focus on either being the maid or the maiden and then consistently act in a way which reinforces that focus.

For example, let us look at the world of computing. The Microsoft PC success has traditionally been based on being the best maid. It is designed to efficiently do all of that boring stuff at work for you, like spreadsheets and charts. You don’t need to know much about computing. The machine does most of the work for you, and it could work in just about any business environment. Not very glamorous or sexy, but it gets all that boring stuff done for you. The perfect maid.

By contrast, Apple is positioned as that sexy and glamorous maiden. It is known for helping you be more creative and have more fun with the things you like to spend time on, like listening to music or making movies. The machines look sexier, and the interface is more glamorous and alluring. The perfect maiden.

The problem came when the Microsoft Maid wanted to become more of a maiden. Out came Vista. Vista was a disaster on many levels. First, it didn’t seem to work as well as Windows XP. In other words, it was a less efficient maid—slower and more cumbersome. Second, although it was a bit more glamorous, Vista was an inferior maiden to Apple. You can put a fancy dress on the maid, but it is still the maid. By losing its focus and being inconsistent, Microsoft has suffered.

By contrast, Apple has been consistent in its focus by taking key technology elements to become the best maiden in music and mobile devices. Even the Apple retail stores are more maiden in their approach. The consistency has reinforced the Apple brand, giving each new brand extension a built-in maiden allure.

Speaking of retail, let’s turn our attention to Best Buy. Best Buy is essentially a maiden. It is positioned to help people use technology to make their lives more enjoyable. It’s all about maximizing pleasure. One of their old slogans was “Turn on the Fun.” There was logic to adding the Magnolia higher end Home Theater departments to Best Buy. After all, Magnolia was just a higher class maiden, helping create a more glamorous home enjoyment entertainment solution.

But then there is the major appliance section at Best Buy. You know, those stoves, refrigerators and washing machines off to the side of the Best Buy store in the area that doesn’t have any customer traffic. People tend to be more in more of a “maid” mindset when looking for major appliances. As a result, when Home Depot and Lowes started selling major appliances, they quickly overtook Best Buy in market share (and then some).

Home Depot and Lowes are positioned more like “maids.” They are efficient places to help you get all those nasty projects done. As a result, it was a more consistent fit to put maid-like appliances in these maid stores than in the Best Buy maiden stores. Of course, now that the manufacturers are trying to make the appliances sexer, perhaps Best Buy has a chance to fight back (although I’m not sure what the demand is for sexy washing machines).

Many articles have been written about the problems of being positioned in the messy middle. It is better to be seen more on the extreme—an extreme solver of problems (the maid) or an extreme provider of pleasure (the maiden).

SUMMARY
In the competitive world of today, one needs to stand for something in order to survive. One way to look at positioning options is with respect to how you help a consumer improve their lives. Are you helping them by being the best at eliminating the drudgery (like a maid) or are you helping them by being the best at improving the pleasure (like a maiden)? Either option can succeed. However, once the choice is made, be consistent to that position and build upon it. And avoid trying to merge the two. There is a dis-synergy to adding the maid and maiden together.

FINAL THOUGHTS
Since most industries can support both a maid and a maiden approach, one has the opportunity to avoid direct competition by choosing the one not chosen by the competition. Direct competition usually leads to price wars and lower profitability for both of you. But if one of you chooses to be the maid and the other the maiden, then you can more successfully co-exist.

Analogy #192: Pick a Pew

THE STORY
Back when I was a young boy, my family took a summer vacation to New England. One of the places we visited was a church which claimed to be one of the oldest churches in the US still in operation.

One of the things that I found interesting was the fact that the many of the church pews had names engraved on them. The tour guide said that the in the old days, the wealthy people would donate large sums of money to the church. In return, the church would put your name on a pew. That spot became your spot in the church, and was where you were expected to sit during the church service.

The more money you gave, the more prominent your location. It sort of reminds me of the luxury suites at the sports stadiums, where wealthy corporations can buy the best seats at the stadium.

I figure there were some disadvantages to everyone knowing where you sat at church. First, everyone would know if you didn’t show up. Second, it would be hard to just sneak into the church late.

THE ANALOGY
In many ways, having engraved assigned seating at church also created some advantages. First, you didn’t have any trouble finding a spot, since one was reserved for you. And everyone knew where everyone was, so it was easy to locate each other. There was also a sense of orderliness and predictability.

Good times in business also tend to follow this same pattern. Everyone knows who you are and where you belong. You have a special position in the marketplace which belongs to you. None of your competition can take your seat. The more you invest, the more prominent your position. There is stability and order.

THE PRINCIPLE
Sometimes, I am asked to explain good strategy in as few words as possible. On those occasions, my response is this: “Pick a pew and then sit down.”

By “pick a pew,” I mean that strategy is first about making good choices about where to locate yourself in the marketplace. Just as there are lots of pews in a church, there are lots of positioning options in the marketplace. And just as some pews are better located than others, so some business positions are better than others.

It’s virtually impossible to stand for everything in the marketplace. Typically the best approach is to find a more narrow set of attributes where one can excel, rather than being mediocre at everything. You have to make some tradeoffs and choose to narrow your sights on specific location where you can win. We talked about this in detail in the blog “Strategy is Like Barbeque Sauce.”

Les Wexner of The Limited uses the term “best at.” What are you best at? If the marketplace cannot quickly and uniformly mention what you are best at, then you have done a poor job of picking your pew. Your position should be so easily identifiable that it is as if your company’s name is permanently engraved on that pew for all to see.

If you haven’t picked out and staked a claim to a pew, then you are stuck with whatever is left. Rarely is that a prime location. The same is true in business. So step one is to make that choice: finding the best unclaimed pew for which you have sufficient resources to secure. In other words, “pick a pew.”

The second step is to “sit down.” By this I mean that businesses need to settle into that position. As an old consultant once told me, “Great positions are hard to find. Once you get one, ride it for all it’s worth.” If a company keeps moving around, it will confuse the marketplace and the employees. Nobody will really give you strong credit for your position, because it changes too often.

If you move around and try to sit everywhere, you will end up sitting nowhere in the minds of the marketplace. However, if you stick it out for the long haul in the same location, everyone will instantly associate you with that location. That strength of image can then be used to extract additional value out of the marketplace.

Apple picked the pew of elegant innovation. Whatever Apple introduces is a great, highly functional innovation encased in sleek design. People who desire this give Apple so much credit that they are willing to pay a premium for the privilege of owning an Apple product. New products are accepted quickly because of the reputation consistently built over time.

If Apple walked away from its pew and started to litter its portfolio with “me, too” products in ugly packaging, it would ruin that image. Customers would stop trusting what Apple stands for. New “innovations” would be met with more skepticism. Profits would drop.

When you sit down in your pew, you are firmly and clearly staking claim to that spot. Nobody can take that spot away from you unless you stand up and walk away from it. The more clearly you can communicate where you have chosen to sit the better (see “Clarity”).

Sitting down does not mean that you have to do the same thing forever without change. Apple has transformed its business in many different directions over time. The secret is that every transformation is consistent with the chosen pew—elegant innovation, be it in computing, music, cell phones or retailing.

Wal-Mart picked the pew of low price and has sat there for more than 45 years. The way it delivers that low price has changed from discount stores to supercenters. In addition, Wal-Mart has created many new supply chain innovations to improve its ability to deliver low prices. Even its recent efforts in environmentalism are rooted in eliminating the environmental waste which drives up costs.

Because of the strength gained from sitting in one place for so long, when the economy recently weakened, customers who became more interested in low prices instantly knew where to go. They went to Wal-Mart in droves.

So the principle here is not to continually change your position at every whim. Sit down in one spot and work on improving your ability to deliver that position. Intensification beats meandering every time.

SUMMARY
Good strategy can be defined as simply as “Pick a pew and then sit down.” In other words, choose a position and then stick with it, always trying to intensify on one’s ability to deliver on that position.

FINAL THOUGHTS
I’ve seen people fret so much about picking the right pew that they never truly make a choice. The fear of making the wrong choice paralyses action. In reality, there are usually many viable positions in the marketplace. Just pick one and stop second-guessing yourself.

Strategic Planning Analogy #138: Stay the Course

THE STORY
I know of a retail company where the founder and CEO was planning on leaving in a few years. Therefore, the company brought in a person to act as the temporary #2 executive and eventually become the replacement CEO.

Although the company had a number of retail stores, the CEO’s favorite store was the first store. It had one of the highest sales and profitability levels in the chain.

The new #2 wanted to make his mark on the company and prove that he was worthy to take over leadership. Therefore, he set a personal goal to get the second store to have higher sales and profits than the first store.

This #2 executive spent a lot of time tinkering with the second store. He was always modifying the store layout and the merchandise mix. Every little modification was designed to help improve sales and profits.

The result? Instead of gaining on the first store, the #2 store fell further behind. Although the new executive thought the continual changes should have pleased the customers, the customers saw it differently. What the consumers saw was a store that always seemed to be messy due to the changes going on and a store where they could never find what they were looking for because the products kept being put in new locations in the store.

Eventually, the executive gave up on this project. He left the store alone and the store performed well again.

THE ANALOGY
It’s not uncommon for people to want to make improvements. Change is often viewed as a good thing—an opportunity to change for the better. However, from the customer’s point of view, change can have negative consequences. It can upset the normal flow of business and confuse the customer.

This is what happened in the story of this retail executive. He wanted to change things for the better, but his changes made things worse.

The same thing can happen in strategy formulation. In an attempt to improve the company performance, there can be a desire to constantly tinker with the overall strategy. This can be especially true in companies which have extensive annual planning processes and/or elaborate annual off-site planning meetings. If you are going to that much effort, there is some pressure to come up with something new in order to justify the activity. It looks a little silly to go through all that work just to end up saying that nothing is changing and we will “stay the course.”

If you have someone new managing the planning process, there is even more of an incentive to change things. Like the new executive in the story, there is a desire to prove your worthiness. It is hard to prove your worthiness if you do nothing different.

However, it is usually the case that keeping a strategy essentially unchanged for a period of time is actually more effective than continual tinkering. As in the story above, when the second store was left unchanged for awhile, its performance improved. Customers had time to get used to what the store was trying to accomplish and understand how to shop it.

THE PRINCIPLE
The principle here is “consistency.” It is extremely difficult in today’s society to get a consumer’s attention. They are continually bombarded by messages. The everyday stresses and hectic lifestyles make it difficult for customers to think beyond the “crisis of the moment.” In addition, with all of the multi-tasking going on, it is difficult for consumers to think deeply about any one issue.

As a result, constant tinkering with a corporate strategy can get lost in the mental shuffle. It’s hard enough making a strong impression in the mind about any particular strategic positioning and getting it to stick. If you keep modifying the position, you can easily lose that impression and end up standing for nothing. Consistency of strategy deepens the impression in the mind. Modifications weaken the impression.

An old advertising executive I used to work with called it the “shaving man” theory. His point was that the average executive is consumed with thinking about his company. When he gets up in the morning, one of his first thoughts is about the company. When he goes to bed at night, one of his last thoughts is about the company. Every time he shaves, he is thinking about the company.

By contrast, when the average person is shaving, he is not thinking about that company. It is nowhere even remotely on his mental radar. Instead, he is probably thinking about things like:

1) The presentation he is making to his boss that day.

2) The fact that he doesn’t like the new group of boys his son is hanging out with and that he believes they are a bad influence on his son.

3) He sees his body in the mirror and is concerned that he is getting fat and out of shape.

4) His car is getting old and starting to need lots of repairs. Should he continue to put more money into repairing the car, or buy a replacement?

5) He doesn’t like the boy that’s dating his daughter and he’s trying to figure out how to get that boy out of his daughter’s life.

6) Tonight his favorite football team is playing on TV and he’s thinking about what it will take to win the game.

It’s hard for your company to compete with all of that mental clutter. If you’re lucky, he will think of your company when it comes time to purchase whatever it is you are selling. Anything beyond that is very rare.

In the mean time, the executive who is always thinking about his company, even when shaving, quickly becomes bored with the company strategy and thinks its time for a change. However, for the customer who rarely thinks about the company, he may only just be starting to grasp what the company is trying to stand for. The customer is not bored with your strategy.

If you change your strategy at this time, you may temporarily make the top executives in the company happy (less bored), but you will have confused the customer who has no time to comprehend all the nuances to your tinkering. After the tinkering, the consumer may have no idea what your strategy is and abandon you for something they better understand. In the long run, that will make the top executives unhappy.

I was recently reading a story about the new President of Eddie Bauer. Years ago, Eddie Bauer was a strong brand. It was positioned as a high quality rugged outdoor clothing company for men. They invented the down-filled coat. The strategy was to be the brand of choice when men wanted to have the best functioning rugged outdoor wear, yet still be a bit stylish.

After the Eddie Bauer brand was purchased by Spiegel, they started tinkering with the strategy. They added a lot of indoor home furnishings to the mix. The apparel mix went from being predominantly for men to being predominantly for women. Although stylish was still a concern, ruggedness was being deemphasized.

Now I’m sure that if someone had time to go to all of the executive meetings and read all of the internal company documents, they could have found some of the logic behind why Spiegel did all of this tinkering to the strategy. However, to the average person, this must have seemed like bizarre behavior on the part of Eddie Bauer.

Women, who were not trained to think much about the brand for themselves, would be too busy mentally to comprehend that they should add the brand to their list of choices. Men, who had one type of impression about the strategy would see that the brand had left that strategy, so the men who used to have a favorable impression left the brand. The Eddie Bauer brand essentially died in the marketplace.

All the while this was going on, firms like L.L. Bean stayed consistent with the rugged outdoor strategy and thrived. Sure, they improved the executional tactics along the way, but L. L. Bean stayed true to the core strategy and deepened the impression in the minds of its customers. The consistency at L.L. Bean won out over all the tinkering at Eddie Bauer.

SUMMARY
Even though it makes sense to have strategic reviews on an annual basis, this does not justify a need to change your strategy on an annual basis. Too much tinkering will confuse the consumer and weaken your bond with them. Consistency deepens the bond and increases the power of your brands.

FINAL THOUGHTS
Annual strategic reviews serve many purposes. They can help determine if you are drifting off-track from your strategy. They can help you find ways to improve the execution of your strategy. They can help find ways to improve the strength of your strategy. They can even help you know when one of those infrequent times come up when the environment has changed so much that it is time to change the strategy. However, it is not the time for an annual reinvention of the company. If you feel a need to reinvent your company every year, then it is time to get a different set of inventors.

Strategic Planning Analogy #133: Don't Abandon the Maps

THE STORY
There’s a reason why Las Vegas is one of markets hardest hit by the recent housing crunch. For the longest time, it used to be one of the hottest housing markets. I guess what goes up, must come down.

I have a friend whose job was to find real estate for a retail company. He was looking for retail sites in Las Vegas at the height of its house construction boom. New sub-divisions were spouting up all over Las Vegas at a rapid rate.

When my friend would get to Las Vegas, he would buy the most up-to-date road map he could find. However, even the most recent maps could not keep up with the growth of the area. A large number of streets would be completely missing from the map.

Since he wanted to build stores in the areas of growth, he would always be driving around these new areas of Las Vegas that were not on his map. As a result, he would often get hopelessly lost. The maps were of no use to him.

THE ANALOGY
Strategic plans are often like maps. They help companies find their way to the desired future. As we saw in the story above, when the environment is rapidly changing, maps can quickly become out-of-date. At that point, they have lost much of their usefulness.

In much of the business world, the environment appears to be changing at a rapid rate. Using the analogy of maps, many would say that the strategic planning maps can no longer keep up with the fast pace of change. They become out-of-date too quickly. New strategic alternatives, like the new sub-divisions of Las Vegas, aren’t even on the map. Therefore, these people suggest that the idea of strategic planning is no longer very useful and should be abandoned.

I heartily disagree with this conclusion. I believe that in rapidly changing, turbulent times, strategic planning becomes more valuable, not less. In this blog I will try to explain why.

THE PRINCIPLE
There are several reasons why strategic planning is even more valuable in times of rapid change:

1) It reduces distractions
2) It helps speed decision-making
3) It helps strengthen one’s position
4) It provides a competitive advantage

These are briefly discussed below.

1) Strategic Planning Reduces Distractions
When things are changing rapidly, it is easy to get distracted by all of the activity going on. One can get so immersed in the details of the change that you can lose sight of the big picture.

Each little change can lure you in. You can fall victim to the latest fads, which provide no lasting value or competitive advantage. You can end up like a pinball, bouncing all over the place from fad to fad without making any forward progress.

In times of rapid change, one cannot afford to waste time bouncing around from distraction to distraction. To continue the analogy, sure there may be some new streets in Las Vegas, but don’t let them distract you. Your goal is to get from Salt Lake City to Los Angeles. All you need to do is get through Las Vegas on the way to Los Angeles. You need a “big picture” map of the entire trip. With the big picture strategic map, you can continue the quest to Los Angeles without getting bogged down in all of the change in Las Vegas.

2) Strategic Planning Speeds Decision-Making
Strategic planning helps you focus in on the ultimate destination for where you want to take your business. When you have a firm focus on the end point, it is easier to understand how to react when confronted with rapid change.

Using our example, if you know that your strategic destination is Los Angeles, it is easier to deal with the changes in Las Vegas. There may be many new roads, construction on old roads, and numerous detours confronting you when you get to Las Vegas. If you have no idea where you are going, all of that change can become very confusing and slow you down.

However, if you know that the end goal is to get to Los Angeles, the process is easier and faster. All you have to do is ask a local which it the best way to get through Las Vegas in the direction that leads to Los Vegas.

This is also true with strategy. If you know your goal of what strategic position you want to own or strengthen, then you can quickly deal with rapid change. As each change confronts you, all you need to do is ask yourself how that change impacts your goal and choose the answer which exploits the change in a way which gets you the closest to your goal.

There is no need to reinvent your strategy for every little change. Just stay the course. However, if you have abandoned strategic planning and thrown away your map, then you have no guide to help you navigate the change. Every little change can slow you down, because you have no reference point.

With no ultimate destination in mind, every little change can open up all kinds of possibilities and you can become paralyzed by not having any idea which possibility to pursue. When you don’t know where you are going, every road can become a temptation. Change creates more strategic roads to bog you down in decision-making, unless you can quickly assess them in reference to a larger strategic goal.

3) Strategic Planning Helps Strengthen Ones Position
When large organizations are confronted with change and there is no unified ultimate strategic goal, you can have factions of the company each choosing a different path. This would be like having everyone in your company choosing a different road in Las Vegas.

Your efforts are now diluted into many directions. Portions of your organization will be moving in opposite directions, canceling out the benefits of each other’s effort. Worse yet, your consumers will become confused. They will not understand what you stand for in the marketplace. Without a strong position and a unified effort to excel in that position, your firm will lose the battle.

Even if all of your people move in the same direction, if change causes the direction to appear random, it does not help strengthen your position either. Strong positions come from getting everyone to move in a direction which reinforces that position. If strategic planning is abandoned, there is no focus on where to win, so your efforts will be less fruitful. Instead of getting closer to the goal of Los Angeles, you will end up wandering aimlessly through the Nevada desert.

4) Strategic Planning Provides a Competitive Advantage
If your competition has abandoned strategic planning, then they will fall victim to the problems mentioned in points 1 through 3. They will become distracted, have their decision-making slowed down, and weaken their position. By contrast, if you continue to employ strategic planning, then you will avoid these pitfalls. Relatively speaking, you will become stronger in the marketplace while they become weaker.

Sure, it may be a little more difficult to do strategic planning in a world of constant change than in a static environment. However, if you take the extra effort to do so when your competition does not, then you are that much further ahead.

SUMMARY
Many people have justified abandoning the process of strategic planning because they do not see its relevancy in times of rapid change. In my opinion, strategic planning is even more important in times of change, because it improves your focus, so that change does not distract you and throw you off course.

FINAL THOUGHTS
Certainly, over longer periods of time, if there is enough change in the marketplace one may need to reassess one’s strategic goals. Eventually all strategies become obsolete, and rapid change accelerates this phenomenon. But this is no reason to abandon strategic planning. Instead, one needs the process in order to periodically reassess one’s goals, to determine when it is the right time to make modifications.