Strategic Planning Analogy #569: Strategic Multivitamins

THE STORY

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.

THE ANALOGY
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.  

  

THE PRINCIPLE
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.

SUMMARY
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.

FINAL THOUGHTS
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.

Strategic Planning Analogy #554: Organizing the Closet

THE STORY
Jessica and Amanda both owned a huge amount of clothes—so many that it became hard to find the right thing to wear. Therefore, Jessica and Amanda decided to get more scientific about how they organized their walk-in clothes closets.

Because having a color-coordinated outfit was so important, Jessica organized her closet by colors. All the reds were put together, all the blues were put together, and so on. Jessica was proud of her decision. “Now, putting together a coordinated outfit should be a snap,” said Jessica.

Amanda took a different approach. First, she separated her clothes by season. Then within each season, she separated dressy clothes from casual clothes. “This should make it easy to find an appropriate outfit for the season and occasion,” thought Amanda.

So who do you think had the easier time finding an outfit?

As it turns out, Jessica had the more difficult time. Sure, all the reds were together, but there were so many of them to wade through. There were summer wear in reds, winter wear in reds, dressy clothes in reds, casual clothes in reds and so on, all mixed up together. Most of what she had to sort through in reds was inappropriate at any particular time or occasion. It was difficult to find the appropriate red items at any particular point in time.

By contrast, Amanda’s approach to sorting made finding an outfit much easier. She knew what season and occasion she needed an outfit for before entering the closet. Then, she went to the appropriate area where those types of clothes were located. It was easy to make the right choice.

THE ANALOGY

Just because you organize your closet does not mean that it will help make your life simpler and more organized. Some organizational methodologies are just more helpful than others. Amanda, who organized by end use, had a superior system of clothes segregation than Jessica’s, which sorted by color.

The same is true in business. Businesses are told that things will be better if they segregate and specialize. However, not all segregation approaches are equally effective. Some are far more efficient than others. If a business chooses the wrong segmentation approach, it may deceive itself into thinking it is better off, merely because it went through the act of segmenting.

However, it may find itself in a situation like Jessica, with a segmentation scheme that provides no benefit, because it organized around the wrong factor (like color).

Therefore, before running your business through a complicated segregation and specialization program, make sure you are segregating and specializing on the most effective factors.

THE PRINCIPLE
The principle here is that a segmentation system based on end use and occasion (like Amanda) is almost always better than a segmentation system based on people/customers. At first, this may sound like heresy. After all, the majority of publications on targeted business segmentation will focus on how to target particular customer segments. But, as we will see below, that is not the best system for these times.

Push Vs. Pull

The targeted customer approach was developed a long time ago, before the advent of social media and consumer empowerment. The idea was that you would choose a particular customer segment and then pitch your product to that segment. It assumed that the business controlled the conversation, both in terms of who was involved and what the message was. It was called “push” marketing, because the manufacturer was pushing the conversation to its intended target. It was a controlled, one-way discourse. In such a controlled environment, segmenting by customer made sense.

However, that world has pretty much disappeared. Customers now want a dialogue, which includes not only a two-way conversation with the manufacturer, but also adding in other voices, like blogs, independent reviews, consumer ratings, and the opinions of their friends. The manufacturer no longer controls the conversation. It is merely one voice among many.

Now, we are in a “pull” environment, where the customers decide whether they want to get involved or not. If they decide to opt-in, then they pull the product towards them. If the customers don’t want to opt-in, the manufacturer is left out. Because the company has pretty much lost the ability to control who wants to be in the conversation, it seems a little silly to think they can control the segmentation of customers.    

Customers Have Multiple Occasions

But even if you could still segregate customers, it’s not the best choice. This is because people do not act the same in all situations. Take food, for example. Your choice for the most appropriate place to get food can change based on the situation/occasion:

• At the beginning of the month, when flushed with cash: A stock-up store.
• When out of a couple of perishable items, like bread or milk: A convenience store.
• When trying to impress a date or a boss: Higher-quality, more expensive food.
• When trying to stretch your money at the end of the month: a hard-discount cheap store.
• When needing a quick snack at work during a break: a vending machine.
• When in a hurry: a fast food restaurant.

As you can see, the person stayed the same, but the best option did not. The best option for the same individual varied by occasion. So if you target a particular consumer segment, what are you supposed to offer, since it varies by occasion? Am I to be a combination large stock-up, small convenience, high price, low price store inside of a vending machine that is also a restaurant? There really is no way to capture a consumer segment, because the consumer segment is not consistent across occasions. It really isn’t a meaningful segment.

Occasion Segmentation

This is why occasion-based segmentation is a much better choice. It was a better choice for Amanda’s closet and will be a better choice for your business. There are three reasons for this.

First, it allows a company to specialize and become “best at” offering the solution to a particular occasion. Rather than trying to be that combination food mess mentioned earlier, you can focus on just one of those occasions and truly become the best. That way, when someone is looking for a solution to the problem associated with that solution, you will stand out as the best option and get the business.

And this leads directly into the second reason to segregate and specialize based on a solution. In a pull environment, the customer is the one making the choices, and they make their choice at the time of the occasion. They will go out into the social media space to figure out what is the best option for that occasion and then pull in the best option. The only way they will choose you is if you have specialized in such a way as to be the best at that particular time and occasion. So to win in the new environment, you need to own the occasion.

The beauty is that you are now open to all modern customers, not just a segment. Whenever anyone falls into the occasion you are specializing in, they can be yours. And given the modern digital tools, they will find you. Isn’t that better than proactively telling people you don’t want their business because they are not in your “customer segment”?

Take the Kia Soul. It was originally targeted to a young “first car” consumer segment. However, one of the largest segments buying the car is retirees. As it turns out, retirees drive less, need to save money (on fixed incomes), and don’t haul around a lot of stuff or people. The Kia Soul is a great solution to the majority of the occasions retirees fall into. Why write off retirees and all of their business because of a push marketing segmentation directed to youth?

Finally, a specialization based on occasion typically leads to operational efficiencies. By not trying to be all things to a consumer segment, you can save all the expenses associated with that. Hence, the occasion-based focus can be a more profitable approach.

SUMMARY
In general, specialization and focus are good things. However, the benefits of specialization and focus vary depending on what you choose to focus on. In most cases, focusing on owning an occasion segment is more powerful than trying to own a consumer segment. Occasion-based segmentation is more in tune with pull marketing and the way consumers behave today. In addition, consumers vary their choices based on the occasion at hand, which implies that there really is no single way to please a consumer segment. Therefore, instead of focusing your business based on consumer demographics, focus on solutions for particular situation.

FINAL THOUGHTS
Every time you pick out your clothes to wear, remember that your choice is made based on the occasion for which you are wearing them. That way, you will never forget to run your business the same way—designed to be the best at providing a solution to a particular occasion.

Strategic Planning Analogy #520: Whiteout!

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

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

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

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

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

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

1.     It is converted into knowledge:

a.      Insight to help discover the vision;

b.     Insight to deliver the promises of the vision; and

c.      Monitoring knowledge to make sure you are on track.

2.     It does not bog down forward progress towards your strategic destination (paralysis of analysis).

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

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

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

1. Look at Radar, Not Individual Flakes

If you really want to understand how to deal with snow, you need knowledge. And what knowledge is that? As I’ve stated in previous blogs, strategic knowledge of the environment usually boils down to three things: Magnitude, Direction & Speed. If you know this about a trend, then you typically know what strategic action to take.

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

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

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

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

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

1.     Population migration to dense urban centers?

2.     A different attitude towards car ownership among younger adults?

3.     A growing concern for the environment?

4.     A poor economy?

5.     Advances in car sharing options (like Zipcar)?

6.     Less need to travel due to being able to get tasks done at home via the internet?

7.     A combination of the above?

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

2. Plow Away the Unneccessary

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

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

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

When Walmart determined that:

a)     Warehouse clubs and supercenters had the potential to offer lower prices than Walmart discount stores; and

b)     Consumers were starting to prefer these formats (direction, speed and magnitude moving their way),

Walmart changed its strategy and diversified into warehouse clubs and supercenters.

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

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

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

3. Fly Above the Clouds

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

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

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

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

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

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

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

It's All About the Beans

THE STORY
Back in the first half of the 20^th Century, A.J. Bush decided to start a business. His first choice was to manufacture hosiery. However, a nearby canning company was trying to get rid of its old canning equipment at a price too good to pass up. So A.J. Bush went into the canning business.

A.J. Bush wasn’t very particular about what he canned. He canned just about every kind of vegetable produced by the farmers of Eastern Tennessee. The following generation kept up the tradition of canning whatever came along. They even experimented with more exotic items, like sauerkraut, dog food and spaghetti. If it could be eaten and it could be put in a can, then the Bush family probably canned it (or at least thought about canning it).

This strategy wasn’t working out too well for the Bush business. By the 1970 and 1980s, the company was getting into serious financial troubles.

As a result, in 1990 the Bush business began a serious and highly involved strategic planning process. After a few years of analysis and thinking, they came to make a number of difficult choices. One of those choices was to focus exclusively on canning beans.

These decisions turned the company around. Instead of remaining a troubled also-ran in the vegetable canning business, they are now a profitable market leader in beans.

In the first picture above, you can see me next to a cardboard cut-out of Jay Bush and his dog Duke, who promote Bush beans in television commercials, another part of their success.

THE PRINCIPLES
So what can we learn from this story? Several things…

1) Strategic Planning is Important

When I am asked what the value is of strategic planning, I often say that it can be the difference between having a thriving company and a bankrupt company. That was certainly the case for the Bush family business. Had they not embarked on a serious strategic planning process back in the 1990s, I doubt the company would be around today. As a result of that planning, they not only survived, but thrived.

What kind of value can you place on the difference between success and failure? It is so large, it is too big to calculate. People would pay almost any price to improve the likelihood of success. This is why it baffles me why so many today are claiming that strategic planning is of little, if any value.

Wouldn’t you rather be a successful winner than a bankrupt loser? How much is that worth to you? If strategic planning can improve the likelihood of preventing bankruptcy and ensuring success, shouldn’t you do it?

Part of the problem is that a lot of what is done today in the name of strategy is not tackling those tough issues which can make the difference between success and failure. During that thorough strategic planning process at Bush during the 1990s, they tackled a number of tough issues, like:

a)     Leadership: The Bush family knew they needed to up the game in leadership, so they changed the board structure to bring in seasoned outsiders to the board of directors for the first time. This was a tough decision for the family members who had to give up some control in order to improve the leadership.

b)     Management: To get the quality of management necessary to win, Bush made the hard choice to move management operations from the little town of Chestnut Hill, Tennessee to the larger city of Knoxville, Tennessee. The larger city made it easier to draw in higher quality managers. But it was tough for the family who liked it back in Chestnut Hill.

c)     Product Mix: Not only did the focus shift from canning any food to canning beans, it also shifted from canning food as ingredients to canning beans that were ready to serve from the can due already having the special sauce. This was very radical and at the time perhaps seen as very risky to put all the future into one type of product.

d)     Sales/Marketing: Once the product mix was established, a professional sales force and marketing program was put in place. This was a significant change from the status quo which they knew.

Compare this to what a lot of companies do today and call strategy:

a)     Set numerical goals (with no details on how to achieve them)

b)     Use metrics and systems to try to do the status quo faster and cheaper.

c)     Have a week-long golf outing surrounded by a few meetings so it can be written off on their taxes.

Great strategies tackle the tough issues. They seek the right trade-offs between options. They challenge the status quo. They move companies into uncomfortable new areas. THEY MAKE A DIFFERENCE. And that difference can mean success rather than failure.

2) Focus is Important

The second lesson from the Bush story is the value of focus. The move from an unfocused “can anything” to the focused “experts in beans” made all the difference to the fate of Bush.  Focus is important, because it allows a company to specialize. And specialization is what it takes to win in a crowded marketplace.

Les Wexner, the genius behind the Limited retail empire (which over the years included such stellar brands as The Limited, Victoria’s Secret, Abercrombie & Fitch, among others), would refer to this as “Best At.” He always wanted to know what his brands were “best at” and then would make sure that the brands were doing everything they could to excel at the area focused on to be best.

The consultants at McMillan Doolittle refer to it as the “EST” strategy. Where have you focused to become superlative? Is it to be the big-est, the cheap-est, the hot-est, the easy-est, the quick-est, and so on.

The idea is that once you determine your focus, you know where to place your bets. You know which trade-offs to make. You know which direction to push your business. You know where to win. And over time, your specialized trade-offs will give you the expertise to excel at your point of focus, and you will win.

Bush was never going to win as an also-ran in canning all sorts of food. But by focusing on beans, it found a place where it could excel through focus, outdo the marketplace and win.

3) Positioning is Important

Focus is not only important to making a difference internally. It is also important to your customers. An internal focus allows you to create an externally winning position in the minds of your customers. By having an internal focus on beans at Bush, the company now had a compelling position to tell the consumers: Bush = The Best in Beans. Consumers were willing to seek out the Bush brand and pay a brand premium because they knew that they were getting the best in beans.

We’ve talked so many times in this blog about the value of positioning. Great positions lead to great success. But if you have not built an internal strategy focused on delivering something special, you have nothing solid to build a position around.

If you cannot deliver superiority on the key point of your position, then your position is nothing but a lie. And consumers will eventually figure out if your position is real or a lie.

That is why the integrated planning process is needed. The internal business model and the external marketing message need to be in sync. And this only comes through serious, company-wide planning. Positioning does not just belong to the CMO. It needs to belong to everyone.

SUMMARY
Good strategic planning is not just some numbers game played in the fall to give an excuse for an off-site business vacation. Good strategic planning tackles the tough topics of focus, positioning and the implications of these topics on the status quo. If done properly, it can be the difference between success and failure. Therefore, if you prefer success over failure, put a high value on doing serious strategic planning.

FINAL THOUGHTS
When a company is operating smoothly, it is difficult to see the need for strategy. It is easy to forget that it was earlier tough strategic decisions which created today’s smooth operations. And if you want smooth operations in the future, you need to make more tough strategic decisions today.

Strategic Planning Analogy #509: High Occupancy Vehicles

THE STORY

To help alleviate pollution, congestion and speed up traffic, some urban areas have put HOV lanes on their highways. HOV stands for High Occupancy Vehicles and is typically defined as a car having at least two people in it.  The HOV lanes usually only allow high occupancy cars and other efficient vehicles, like buses.

Because about 75 to 85% of workers commute by driving alone in their car, most commuters cannot legally take advantage of the HOV lanes. As a result, the HOV lanes are less congested and move along faster. Seeing the HOV cars moving faster makes some of those driving alone try to find ways to cheat in order to get into the HOV lanes.

One way used to cheat is to put a mannequin or a life-size blow-up doll in the passenger seat. For example, in 2010, a 61 year old woman put a mannequin in the passenger seat so she could ride in the HOV lane in New York. Unfortunately for the woman it was a cloudy day, and the hat and sunglasses on the mannequin looked out of place to a highway officer. The woman ended up having to pay a $135 fine and had two points taken off her license.

THE ANALOGY

We live in a business environment which has been described as faster than any time in history and getting even faster. Businesses feel the pressure to move ever faster or die. To a large extent, speed has become the default universal strategy.

One way businesses try to increase speed is by unburdening themselves of as much as possible. Management is eliminated, rules are eliminated, and strategic planning is eliminated—all in the cause for speed.

The elimination of strategic planning is justified with reasons like “We don’t have time to waste on that” or “Things move too fast to plan anything long-term” or “All we have to do is release the next version of our product before the competition—you don’t need strategic planning for that.”

The problem is that the business world is more like those HOV lanes than these people realize. All this unburdening is making businesses look more like those single person cars—going it alone. And since nearly everyone is taking this same approach, they are all crammed into the slower lanes.

Ironically, the faster HOV lane is the one where cars are “burdened” with extra passengers. And, as we will see in this blog, if companies load up their “car” with extra passengers like strategic planning, they will have access to the faster lane and get to their destination more quickly.

THE PRINCIPLE

The principle here is that the proper use of strategic planning does not slow a company down, but actually puts a company on a faster path. So instead of dropping strategic planning in the name of speed, we should be adding it to our “car”. Described below are three reasons why adding strategic planning gets you into the HOV lane of business.

1) Strategic Planning Improves Speed Via Focus

A focused company can move faster than an unfocused company, and strategy improves focus. Lack of focus leads to anarchy and confusion. You can yell at an unfocused company to “Move Faster!” all you want, and all you get is faster anarchy and faster confusion. Everyone is moving in random directions rather than making forward progress. Faster randomness is not improved progress.

Strategic Planning, when used properly, is a way to provide a business with focus. Not only can it tell a business what are the right things to work on; more importantly, it can tell a company what are the wrong things to work on. Strategic planning simplifies the agenda by taking a lot of options off the table (the things that are off-strategy). All the time-wasting rabbit trails are eliminated before they begin.

With a strong, focused strategy, you don’t have to waste time in endless meetings continually asking yourselves “should we be doing this or something else?” Instead, you can speed things up by focusing on how to improve on the things everyone already knows are important to the strategy.

Look at Apple. Under Jobs, Apple did not go in all directions trying to do everything as quickly as possible. Jobs had a specific strategy in mind as to what Apple would focus on. It had to do with designs that emphasized quality, elegance, coolness, and user-friendliness, made possible by focusing on building closed end-to-end systems. It became obvious what was appropriate for Apple to be doing and what was not.

The “not” list for Apple under Jobs was large. They did not work on low price products, or products not tied to the larger closed system. They did not even work on manufacturing. This allowed Apple to become very focused and quickly build a whole new digital future.

2) Strategic Planning Improves Speed By Overcoming the Leapfrog Trap

When speed alone becomes the substitute for strategy, a company is no longer building unique competitive advantages or competencies (except maybe the competency of speed). All they are doing is racing everyone else to be the first to release the next new improvement to the status quo. This is very common in areas like consumer electronics & digital media, and becoming more common elsewhere.

This process leads to what I call the leapfrog trap. Any small success gained by getting to the next improvement first is lost when a competitor leapfrogs you and gets to the improvement which follows before you. Gains are short and fleeting, since others are racing to leapfrog your most recent advancement as soon as they can.

Here is the crux of the problem. Because everyone is focusing on the same thing (speed), nobody is creating a competitive advantage. All the companies look about the same, with the same types of engineers in the same types of culture working on the same types of issues. You cannot create a lasting advantage in this scenario because you bring no real competitive advantage to the marketplace. Others can copy you almost immediately because they have a similar business approach with similar tools at their disposal.

By contrast, a true strategy builds differential advantages which allow a business to do certain things better than others. Rather than playing the same game of leapfrog with everyone else, you go your own way and build a different game where you have an edge and are not so easily copied. This leads to the third point below.

3) Strategic Planning Improves Speed Through Business Model Superiority

Great strategies understand the importance of making trade-offs. They don’t try to do everything well. They understand that:

a)     There are not enough resources to do everything well; and

b)     Even if there were enough resources, it is still not possible to win on all fronts because of conflicting agendas. For example, it is nearly impossible to win at lowest price AND highest quality AND most innovation at the same time, because what it takes to win in one of these areas makes it harder to win in the others.

Therefore, great strategies choose what to specialize in and make all the proper tradeoffs to win there, even if it means giving up abilities in places outside their specialty. Take, for example, Southwest Airlines in the US. For decades, they have had both consistently lower prices than their competitors as well as consistently higher profits. Why? Southwest Airlines built a business model to specialize in lowering costs. This caused many trade-offs, where Southwest didn’t do things everyone else did if it got in the way of the low cost strategy.

When other airlines tried to copy Southwest’s pricing, they did not achieve Southwest’s higher profits, but made their profits even worse. Why? Because their business models were not laser-focused on making enough tradeoffs to pay for the lower prices.

When all you look at is speed, you take your eyes off building the right trade-offs in your business model to allow real differential advantage. If the business model does not provide an edge, then you cannot quickly build a place where you can win. You are stuck in the leapfrog trap.

SUMMARY

Ironically, the singular drive for speed does not usually end up putting a business on the fastest track to lasting success. Instead, the faster track also needs to include a drive for great strategy. The addition of strategy improves speed by:

a)     Adding Focus (on what to do and what NOT to do);

b)     Adding Differentiation (to avoid leapfrog trap); and

c)     Adding a Trade-off Based Business Model Design (which makes it harder for others to copy you).

These additions allow you to take a superior path that speed-only businesses cannot get on.

FINAL THOUGHTS

There’s a reason why mannequins are referred to as “dummies.” And if you think you can sneak onto the fast lane without real strategy in the passenger seat, then that mannequin may not be the only dummy in your car.

Strategic Planning Analogy #498: Snapshots vs. Paintings

THE STORY

I recently got back from a combination trip to see my new grandson and a vacation.

I wanted a good picture of my grandson. To get it, I took a lot of pictures of him. Some of the pictures were pretty awful, but eventually, that process lead to getting a good photo of him (see photo above).

Afterwards, I went vacationing and toured some old houses. There were old oil portraits of people on the walls.  They may have looked fancy—even a bit regal—but I’d rather have the simple snapshots of my grandchild than any of those old paintings.

THE ANALOGY

In the business world, we have the option of building two types of planning processes—either one like the process used to create fancy oil paintings (like the ones I saw in the old houses) or like the process used to create digital snapshots (like the ones I took of my grandson). 

The painting process may create something worthy to display on a wall for generations, but it is usually time consuming, costly and inflexible. Those don’t sound like good qualities for a strategic plan. 

Conversely, taking digital snapshots is quick, inexpensive, and flexible. It may produce a few duds, but eventually you get some good photos in a very efficient way. Those qualities also sound good for strategic planning.

THE PRINCIPLE

The principle here is that the goal of strategic planning is not to create perfect documents and statements to proudly display on walls and bookshelves. The goal is to figure out how to move a company forward in an efficient and timely manner. To do so, we can learn more from the process I used to get a photo of my grandson than from the artists who made those old paintings on the walls of those old houses.

The Problems With Paintings

Oil paintings can look great on the wall and last for generations. The artist of great paintings can achieve great fame. And that can sound appealing. There is a certain appeal for planners to want to create plans great enough to “hang on the wall” for generations and give the planner fame and glory. But great plans should not be the desired endpoint; instead, the desired endpoint should be great companies. The plans are just a means to that greater end.

The important thing to remember is that you don’t need “perfect oil portrait” plans in order to effectively and efficiently move a company forward.  In fact, the desire for this perfection can actually be counterproductive. 

One of the problems with oil paintings is that they take a long time to create. Time is a precious resource in our fast-moving world. Time lost in perfecting a plan can become advantage lost to faster competitors. A “good enough” plan received in a timely manner is more valuable than “perfection” which comes too late to be of any use. Is your planning process geared more towards timely completion or excessiveness and grandeur?

Another problem with oil portraits are that they are posed. The people being painted have to remain in a stiff, usually unnatural position in an artificially positive environment.  And if the posing still doesn’t look good, the artist will alter reality to make the painting more flattering than reality.  The end result may be great art, but not an accurate accounting of reality.

Bad planning can fall into the same trap. The plan may try to place the company in the best light rather than show the harsh reality of the truth of what’s happening out in the marketplace. The most positive assumptions can be used. The plan may try to please the egos of the leadership rather than tell the truth they do not want to hear. Wrong strategic decisions are made, because judgment is clouded by unnatural flattery in the “posed” strategic plan.

Sometimes the flattering distortions are the result of trying to hit unrealistically high profit numbers with the plan. The only way to fit these numbers into the plan is by surrounding them with unrealistically optimistic scenarios, since you cannot get there just by incrementally tweaking the harsh reality.

The result is that the plan becomes a failure and the numbers are never achieved, because the plan was never achievable once reality overcame the false optimism posed in the assumptions.  It would have been better to paint the real picture and show that the desired profit numbers were not achievable. Then, you would be aware that radical change was necessary and you could take steps in advance to avoid the inevitable failure of the flattery approach.

Finally, oil paintings have to problem of being hard to modify once the paint has dried. We live in a dynamic world.  Adjustments are inevitable.  Is your planning process hard to modify once the ink has dried?  If the world changes shortly after the plan is put into play, do you have to wait a year until the next planning cycle to make adjustments?

The Benefits of Snapshots

Digital snapshots avoid a lot of the problems we saw with the painting approach.  They are fast and easy to create.  They capture reality rather than an artist’s distorted vision of flattery. They provide rapid feedback of what is happening. And it is easy to keep taking snapshots so that your latest picture is accurately telling you what is happening NOW.

What does a snapshot oriented planning process look like?  First, it gets out of the portrait studio inside the corporate offices and goes out into the marketplace to capture reality where money is changing hands. And it doesn’t care what camera the snapshots come from. It gathers impressions from social media, customers, competitors and a variety of other sources, so that the information is not a one-sided bias of “corporate-think.”

Second, snapshot planning is very experimental. When I was taking snapshots of my grandson, I tried all sorts of approaches to getting his picture.  Some of these experiments did not work.  But some picture-taking experiments were great.  The planning analogy is to do a lot of small experiments. Test hypotheses to see how well they fly out in the marketplace. The results of a test can often provide far better guidance for strategic decisions than having internal executives guess about what will happen in the real world.

Try things on a small scale. The disaster at JCPenney was not that CEO Ron Johnson tried something different. The disaster was that he did a full rollout before testing it.  There was little downside risk to my taking a bad snapshot of my grandson, so I could afford to try a lot of things before finding what worked.  Set up your tests in a similar manner, so that you do not risk much and can pull the plug early if it doesn’t work. That approach would have saved JCPenney a fortune.

Being flexible and experimental does not mean that your planning becomes random. This is not a process of just clicking a camera continually in random directions until you get a good shot. No, there still must be a focus to where you point the camera.

Winning strategies need to position your company in a place where is can bring a competitive advantage. There may be very few places where you can create that kind of advantage. Random acts are not the best way to find these places. First you need to understand the marketplace, what you bring to bear on the marketplace, and what others can do. This preparatory work helps you to know the general space where you are most likely positioned to succeed. Then you get flexible and experiment within that space.

The emotional connection between me and my snapshots was the fact that I wanted a record of my grandchild. Random photos of anything, or of other babies, would not have worked.  I needed to point my camera in the general direction of my grandson in order to get a satisfactory photo. In the same way, your plan needs to know the focal point. This provides guidance for the experimentation.

SUMMARY

Plans are not the endpoint, but a means to a greater end—the long-term improvement of the business. Therefore, rather than wasting time perfecting the plan, focus your effort on building a tool which quickly and effectively points to where success is most likely, so that you can win the race to finding the fortune that such a place offers.

FINAL THOUGHTS

You rarely see oil portraits of the young and unaccomplished. Instead, most portraits are of older people after they have made their great accomplishments.  They look backward at past successes rather than towards where future success will come. Planning processes which are too focused on the successes of the past (like oil paintings) will hang on too long to obsolete strategies and miss out on winning the battle for next big thing. 

Strategic Planning Analogy #465: Put Another Log on the Fire

THE STORY

One time while camping I began cooking dinner on a campfire.  The fire was nice and hot, so I thought cooking would be easy.  I filled a pot with some soup and put it on the fire.

The fire was so hot that it burned a hole in the bottom of the pan.  Not only did I lose my dinner as the soup fell through the hole, I also lost my fire which was doused by the soup.


THE ANALOGY
The purpose of a campfire is to provide light and heat for your camp.  This needs to be managed.  If the campfire gets too large and too hot, it is no longer useful for cooking and you cannot get near it to warm yourself.  It also can become very dangerous and quickly get out of control, perhaps burning down your campsite and the surrounding forest.

Conversely, if the fire is ignored and allowed to go out, then it takes forever to restart the fire and get it back to a reasonable size.  In the mean time, it is cold and dark.  And if you run out of matches, you may never get the fire restarted.

In my story, I mismanaged both extremes—I got the fire too hot to cook, which caused the fire to go out when the soup fell through the hole.  And the wet logs didn’t want to re-light.

In the business world, you can think of the logs as being like investments in the business and the fire as being like the financial output of the business.  If you don’t manage these inputs and outputs properly, you can end up in a mess, just like I did with my campfire.

THE PRINCIPLE
The principle here is that future growth should be managed in relationship to the current situation.  In other words, you are more likely to have a strong future if it is leveraged off the current strengths.  We can see how to do that by looking at the lessons of the campfire.

Lesson #1: All Fires Left Without New Fuel Eventually Die

There is only so much fire potential in a log.  Eventually, it will be completely consumed by the current fire and no longer produce additional fire.  Therefore, if you do not want the fire to go out, you have to keep adding new logs to the fire.

The same is true in business.  Like each particular log, each particular business strategic initiative eventually fails.   Times change; customers change; competition changes; technology changes; the environment changes.  New, superior solutions for the evolving customer needs make your old strategic initiative obsolete.  It no longer provides any financial output (the flame goes out).

As a result, you cannot just sit back and enjoy the success of today.  Even a perfect campfire right now will eventually go out if you do not add logs to it.  Similarly, perfect financial output today does not guarantee that it will go on forever.  You have to keep investing in the business (adding more logs).  Otherwise the business will die.

That investment can take two forms.  First, you need to invest in maintenance and upkeep.  As a lifelong retailer, I know what happens if you do not reinvest in the look of your store.  Eventually, it becomes so ugly and worn out that customers refuse to come back.  The fire goes out.  

Second, you need to invest in modifications to your business in order to keep it relevant to the changing marketplace.  

Remember, if you tie the success of your business to a single initiative, your business will die when the original logs of investment in that initiative are spent.  If you want your business to last beyond that, you need to keep investing in the business.

Lesson #2: Big Logs Require a Big Fire to Ignite

Big logs do not automatically combust into flame.  If you want to get a big log lit, you have to stick it in a place where a big fire already exists.  It then uses the current flames from the older fire to start the process of creating its own flames.

The same is true in business.  It is a lot easier to get a new initiative off the ground and running successfully if it can leverage off the power already inherent in the base business.  That power can come from strong customer relationships, a great distribution network, economies of scale from the base business, and so on.  The new business can “borrow” these strengths just as a fresh log “borrows” the flames of the old fire to get going.

This implies two things.  First, the best time to invest in the future is when you are still strong in the present.  If you wait until the flames go out before adding the new logs, the new logs won’t ignite.  You have to add the new logs while the old flame is still strong if you want them to quickly take off.

Although this is common sense with fires, this idea is often ignored in the business world.  In retail, I saw executives wait until people no longer wanted to shop a store before remodeling it.  By then it was too late (the fire had gone out).  Since customers no longer patronized the store, they did not see the improvements   They had already moved on to someone else’s store.  It was a wasted investment which didn’t catch on.  No, the best time for that remodel would have been while the customers were still in the store and had a positive feeling towards that store.  Then they would have seen the improvements and then felt even more positive about that store.  

For a more dramatic example, think of Kodak.  It stayed with the analog film “logs” way too long—all the way until their flame was nearly extinguished—before adding on the digital “logs.”  It was too late.  There was not enough power in the weakened core to ignite the new business. It never caught fire.  Instead, the digital fire belonged to the competition. 

Had Kodak made the transition to digital when they were at the peak of analog power and still had a strong brand and consumer franchise (i.e., when their fire was still strong), those digital logs would have had a better chance of catching on.  

The reason for waiting too long to invest in the future is usually a fear of cannibalizing the current core business.  But do we worry about cannibalizing the old logs of a fire when putting a new log on top of them?  No.  We understand that those old logs are going to die anyway and that they are most useful to perpetuating the flame if you put a log on them while they are still strong.  And besides, the goal is not to optimize a single log, but to optimize the entire campfire.  So we toss the new log on without a second thought. 

We should have a similar attitude in business.  Assume cannibalization is going to occur anyway (either by us or by someone else).  So if it is going to die anyway, it may as well be us to gets the future business.  And we are more likely to get it if we put the log of the future on now, when the flame of the current business is still strong enough to ignite it.  Leverage your strengths while they are still strong.

The second implication is this:  just tossing a log near the current fire won’t do anything.  It will just lie there unlit, even if the other fire is still blazing strongly, because the new log does not touch the current flame.  This is what happens when we invest in a future that does not leverage the current strengths.  It there is no fit with the core, it cannot leverage the flame from the core.  It is like trying to start a completely new fire next to the old one. 

And we all know how hard it is to start a new fire.  You cannot start with big logs.  You have to start with small sticks and easily ignitable tinder.  Then you can gradually increase the size of the sticks over time (if the small fire does not go out—which is common).  Eventually, you might be able to get that new fire to support a big log.

Wouldn’t it just be easier to leverage the fire you already have?  So as you invest in the future, find a future that can leverage what you already have built.  It makes the chance of it taking off quickly more likely.   Don’t be lured to invest in the hot new thing just because it is a hot new thing.  If it has nothing to do with your core, you bring no advantage.  You are starting a new fire from scratch.  You will most likely lose out to others who bring an advantage to the business.

Lesson #3: Managing Multiple Fires Can Be Difficult

This leads to the next point.  It is easier to manage one fire than two.  With two fires, one can become distracted and lose control of the situation.  This can lead to one of the fires either going out or burning up the camp.

That is why the principle of focus is so important in business.  Focus eliminates the distractions and allows you to excel at the point of focus.  It is better to have one great fire which goes on forever through careful, focused management than a handful of unrelated flames that are weak and always going out.

Lesson #4: Don’t Use Up Your Logs Too Quickly
If you toss too many logs on a fire too quickly, two negative consequences can occur.  First, you can lose control of the fire.  It becomes too hot to use and may engulf your entire campsite in flames.  Second, it uses up your logs too quickly, so you cannot keep the fire going a long time.

In business, there are also negative consequences to investing too much, too fast.  You can lose flexibility because all the resources are committed up front.  And if you invest faster than your company can manage it, you lose control of the business.  Instead, invest wisely for the optimum long-term results.


SUMMARY
Managing a business is like managing a fire.  To keep the fire burning successfully for a long time, you need to:

a) Put new logs of investment on the fire while the old flame is still strong.

b) Make sure the new logs can leverage off the strengths of the old flame by having strategic fit.
c) Make sure you don’t put too many logs of investment on too quickly (faster than you can manage).


FINAL THOUGHTS
Fires are fun to watch, but if all you do is watch, then the fire will go out. 

Strategic Planning Analogy #445: Stifling Creativity

THE STORY
Several years ago, I was reading a book review on a book about creativity (I forget the name of the book). The book stated that there tend to be two approaches used by creative people. The book used Orson Welles as an example of the first approach. Orson Welles had great success early in his career with works like “Citizen Kane.” The greatness of his early works set a high standard that Welles wanted to continue. As a result, he often abandoned projects early because he didn’t think the projects would end up living up to his high expectations. Net result? Orson Welles’ finished creative outputs over his career were disappointingly low.

The other type of creativity was illustrated by an opera composer, whose name I have forgotten. Unlike Welles, he was very prolific. He wrote a large number of operas. The secret behind his large output of operas? He did not pre-judge them. Over time, he had found out that some of the operas he originally thought would be mediocre turned out to be rather good. And some of the operas he originally thought would be great turned out to be mediocre. As a result, he pursued them all, not knowing which would be great. So the quality level varied in his output, but it did result in a number of very good operas.

I have seen a similar situation in my own music writing. My initial impressions of the quality of the music early in the composition process are not well correlated to my final impressions after the composition is completed. Therefore, following in the processed used by the opera writer in the book, I pursue them all (at least until they are roughly fleshed out).

THE ANALOGY
A significant part of strategy formulation is creative. Yes, the creativity is built within a context of knowledge. But merely gathering knowledge of the marketplace is not enough. To win in that marketplace, you need to create a winnable position. Many of these winnable positions are based on new propositions and business models which did not previously exist. They had to be created.

Think about Apple. Its success has not been based on Apple’s superior ability to gather data. In fact, Steve Jobs didn’t do consumer research. Instead, Apple’s success came from superior creativity in product and business model design. They created strategies which did not exist before, like the entire ecosystem surrounding its “i” products—the device, the software, the usability, the interconnectivity, the App Store, the Apps, the Apple retail store, and so on. This was very creative.

Given the importance of creativity to strategic success, it is worth examining the book referred to above. The book contends that depending on one’s approach to creativity, one can either enhance one’s output or stifle it. Let’s make sure we pick the right approach, so we don’t stifle our potential for success.

THE PRINCIPLE
The principle here is that great innovative strategies as originally conceived often tend to initially look like craziness. And if that initial impression of craziness scares you away, you will never find the nugget of genius within the initial thought which leads to strategic greatness. Therefore, we need to be less like Orson Welles and more like that opera writer. We need to give those raw initial ideas a chance to grow a bit before we pass judgment on their true level of craziness.

In particular, there are three key points to keep in mind.

1. Living in the Shadow of a Great Legacy
Orson Welles lived his life in the shadow of the great legacy which came from his early success. He felt so much pressure to surpass his early success that he found it difficult to start anything new later in life.

The same thing can happen to businesses. A great legacy business can cast a large shadow over the future of a company. The legacy business is huge and is throwing off boatloads of cash. There is great pressure to only come up with strategies which can quickly surpass the success of the legacy business.

Unfortunately, new businesses often start small and consume cash in their earlier years. That doesn’t look good when compared with the legacy business, so the new idea is not pursued.

This is what happened to Kodak. They invented digital photography, but their analysis showed that digital was a less profitable business model than the legacy film development business. Therefore, they did not aggressively pursue digital photography. Why destroy a great legacy business with an inferior profit model? That’s crazy, isn’t it?

Well the problem is that somebody will come along who does not have that large legacy business casting a shadow over them. They will be happy to make the profits available in the new business model and turn the legacy businesses into extinct dinosaurs.

The old record labels let their legacy analog businesses prevent them from aggressively pursuing the less profitable digital downloading of singles. Apple had no legacy music business, so they were willing to go after it.

Look at those exciting new social media companies. They aren’t coming from companies with great legacy businesses, because the early analysis of these ideas doesn’t show an easy path to profits.

But those ideas could have come from legacy companies, if the companies could have gotten out from under the shadows of their legacy business (which will eventually become an extinct dinosaur). Don’t get trapped by earlier success like Orson Welles.

2. Abandoning the Absurd too Early
Initial impressions aren’t always correct. As the opera writer discovered with his music (and I discovered with mine), the final output can often surprise you (both favorably and unfavorably). If you stop development too soon, you may kill a great idea before it has a chance to blossom.

Innovative ideas initially look crazy because they are so different from what people are used to and comfortable with. If you eliminate those types of ideas, all you are left with are minor variations on the status quo. You cannot radically reinvent the status quo with ideas that are only minor variations on the status quo. And without a tolerance for a little initial “uncomfortableness”, you will never be able to escape the status quo. You are stuck.

That is why I do not like to condense the entire creative part of strategy formulation into a one-week strategy off-site meeting once a year. That is not enough time to get beyond that initial uncomfortableness and discover the great strategic breakthrough. Great ideas will be tossed away too quickly, because not enough time was given to flesh them out.

Google has all sorts of experiments and idea incubations going on all the time. Sure, not all of them are winners, but that’s how you come up with the next Android idea.

I like to use a process I call the “illogical extreme.” The idea is to push the limits of an idea to the point of ridiculousness and then slowly walk the idea back towards the status quo until it starts to look good. That way, you find the sweet spot between being too far away from the status quo and being too close to the status quo. This takes time.

Remember, just because the first draft of an idea looks crazy does not mean that the final draft will be crazy. Take the time to try a second or third draft before abandoning an idea. You may be surprised about how good that last draft can be.

3. Knowing when to Focus.
Not all surprises are good, however. Sometimes a seemingly great initial thought can lead nowhere. Some of those operas which initially seemed fantastic did not pan out. Therefore, not all ideas should be followed through to completion. Yes, spend enough time in thought and incubation in order to get a more informed point of view. But eventually narrow the focus to the few ideas with the greatest potential.

If you try to go down every path, you will never excel in the execution of any path. And you will quickly run out of time and money. And you will confuse the customer about what you stand for.

Therefore, narrow the major efforts to a small number of high potential initiatives, chosen from among the broad-based, but small effort, incubations going on all the time.

And if a major initiative eventually turns out to be a bomb, it is okay to retreat and start over again. Netflix quickly discovered that their idea to split the company and drastically raise fees was a bomb and smartly retreated. Don’t let your ego keep you from admitting mistakes. After all, you can’t fix a problem until you admit you have one.

SUMMARY
Strategic planning has a significant creative element within the process. To ensure that the creative effort is allowed to create enough great ideas, one needs to avoid prematurely rejecting anything that initially sounds a bit crazy. Keep in mind that a legacy business will not last forever and if you don’t replace it, someone else will (often with an idea you rejected). Also, remember that it takes time to figure out which ideas truly have merit. Initial impressions can be wrong, so don’t be too hasty. Finally, if an idea goes bad during execution, it is okay to retreat and start over. Mistakes are only bad if you continue in them and do not learn from them.

FINAL THOUGHTS
A few losers don’t look so bad if they are surrounded by many more great successes. And sometimes the only way to get all those great successes is to take the risks which lead to a few losers. Doing nothing, in order to prevent any losers, also prevents any winners.