Strategic Planning Analogy #423: The Whole Canvas at Once

THE STORY
Back when I was in college, I spent one year as an art major. I had a professor who tried to teach me how to paint. This professor said that beginning novice painters tend to make the mistake of working on a painting one section at a time.

These new artists try to get one small section of the painting fully completed before moving to another section of the canvass. Then they try to fully complete the painting in the second section before moving to a third section, and so on.

The professor said this was a mistake because all of these little sections rarely fit together properly when the painting is completed. The colors don’t blend together right, the textures don’t blend together, and the overall effect feels disjointed rather than as one flowing statement.

Instead, the professor said that one should paint over the entire canvass all at the same time. First, you rough out the entire painting at the same time. Then you put on the finishing touches across the entire canvas at the same time. That way, everything flows together well and the painting makes a grand, unified statement.

Although this advice was excellent, my painting skills were not. It was soon thereafter that I switched my college major to something besides art.

THE ANALOGY
Painting and Strategic Planning are both creative processes. And, in my opinion, a great strategic plan (when completed) can be just as beautiful as a great painting. But both can appear rather ugly if one does not follow the advice of my art professor.

The strategic process is often broken down into its component parts, like mission statements, five forces analyses, vision statements, scenario planning, goal-setting, tactics, etc. Then, like those misguided painting novices, we can try to perfect each of these parts in isolation before moving onto the next component. It can be like following a check list. You do a strategic task to completion, check it off the list as “done”, and then move onto the next item on the list.

The problem comes when all the items on the list are finally checked off as done. Because each step was done in isolation and fully completed before moving onto the next step, the end result looks ugly. The parts don’t blend together. Everything is disjointed. There is no overall flow to the plan.

Because the pieces are not well integrated, faulty logic can creep into the strategic process, or even no logic at all to tie the parts together. The net result is a failed plan, because not only is the logic weak, but nobody could understand the flow and become committed to making the flow a reality.

Just like in painting, a truly beautiful strategic plan occurs only when you work the entire canvass simultaneously. That way, you can make sure that the logic flows properly and that people can clearly see the vision you have tried to communicate.

THE PRINCIPLE
The principle here is that strategic planning is not a series of isolated events, but an iterative process. You cannot effectively finish one part until you have finished all parts.

Each Part Influences Other Parts
All of the various parts of a strategic plan influence all the other parts of the plan. Therefore, one needs to work through all the parts together in order to take advantage of all the richness to be found in the interaction between the parts. The whole canvass needs to be worked as a whole—in an ongoing basis—allowing the knowledge gotten from feedback in one area to influence all the other areas.

For example, one can do a SWOT analysis (Strengths Weaknesses Opportunities Threats) and come away thinking you really know where your strengths are relative to competition. However, a later scenario exercise (or market test) may cause you to realize that if the environment unfolds in a particular manner, your “strengths” may not be as strong as you originally thought. You may need to go back and modify your earlier SWOT conclusions. And if your original mission was based on a strength you now feel is less secure, you may need to change the mission statement. Either that, or you may need a radical reprioritization of strategic initiatives in order to spend time restoring a strength you realize you no longer have.

Or let’s say you set a goal. Then later on in the planning process, you realize that the only way to possibly achieve that goal is by taking on more risk than you feel comfortable with. Based on this new information, you may need to go back and either change your goal or change your tolerance for risk. The worst thing you can do is not go back and change the goal (because that task is already “done”) and then disappoint everyone when the goal is not achieved, because the goal was never realistic in the first place.

Sometimes, you cannot tell if a vision is a good one until you work through all of its implications in the rest of the planning exercises. You may find out that it isn’t as good as you thought, or perhaps you stumble upon an even better vision. So you should be open to change as you go through the process.

Don’t Be Premature In Wordsmithing
I’ve seen planning processes grind to halt as executives struggle over each individual word in a mission statement or vision statement. Many weeks or months can go by as the simple sentence is edited, then re-edited, then re-re-edited, then re-re-re-edited, and so on. Major discussions envelop the choice of each word.

This is like the painter who labors forever over the perfection of the painting of a single tree in a forest landscape before moving on. So many layers of paint and scrapings of paint may occur on that single tree that it no longer looks like it fits into the rest of the forest. Similarly, so much effort is put into the individual words or a mission or vision statement that the big picture of the whole plan is missed.

Earlier, we saw that as we learn from the planning process, we may need to go back and modify prior efforts. A good idea for a vision or mission statement may not look so good anymore. It may need to be altered. Unfortunately, if you have just gone through this major, time-consuming struggle to perfect each word of the statement, it may not be possible to alter it any more. It’s taken on a life of its own and it would be a political nightmare to open it up for review.

Now, you are stuck with:

a) A statement no longer appropriate for the strategy; or

b) A strategy that matches the statement, but not the reality of the marketplace; or

c) A statement which eventually gets ignored because people know it is not relevant to what is happening (meaning that all that work was a waste of time); or

d) A strategy which eventually gets ignored because people cling too tightly to the improper vision/mission statement; or

e) A poor planning process, because the earlier-written statement blinds the executives from keeping an open mind about the realities in subsequent analyses.

None of these are good options. That’s why vision and mission statements should not be fully locked down into the final words until the full planning process has had a chance to “pressure-test” the statement, to make sure it is still completely relevant. Postpone the “wordsmithing” until you are sure you have a full understanding of the big picture. Don’t do it as a complete, unalterable, isolated event at the very beginning of the process.

SUMMARY
Because all the parts of the strategic planning process influence your knowledge base for all the other parts of the process, you cannot do effective strategic planning in a strictly linear manner. Instead of perfecting each part individually and sequentially (like a check list), one needs to incorporate a little back and forth into the process. New learnings need to be applied to prior strategy tasks to ensure that they are still relevant. Be willing to adjust and modify along the way. Work the entire strategy canvas together.

FINAL THOUGHTS
Just because the strategy process should be iterative does not mean that a plan is never completed. Painters work the entire canvas together in an iterative fashion, yet manage to eventually complete the painting. Everything on the painting gradually gets better together until everything looks great. The same is true of strategic planning. Yes, go back and forth to keep making everything better, but eventually stop when the whole picture comes together. Then start the implementation.

Strategic Planning Analogy #403: We’re All Number One

THE STORY
One of my first jobs after getting my MBA was to help a small retailer determine where to put its advertising dollars. All the local radio stations thought that I should be spending my advertising dollars with them. As a result, I was constantly being shown presentations by the radio stations about why I should be using them for my advertising.

What amazed me was that nearly every radio station in that market could use the ratings book to “prove” that their station was ranked number one. How could they all be #1? It was done by slicing up the market into sub-segments. As it turns out, for some time during the day for some sub-set of the demographics, each station could find a place where they were number one.

For example, one relatively weak station showed me that they were #1 with teenage girls at 2AM. I’m not sure how many teenage girls are listening to the radio at 2AM, and I’m not sure why I would want to talk to them at 2AM, but it was the rare opportunity when this one station could claim to be #1, so they bragged about it.

It didn’t take me long to figure out why the boss had given me the task of working with these radio stations. He knew from experience that these presentations were a waste of time. So to avoid them, he gave that job to me—the new guy.

THE ANALOGY
These radio stations all saw an advantage to being able to claim that they were the market leader. Therefore, they sliced up the data until they found any obscure data point that would allow them to claim some form of leadership, no matter how meaningless.

A lot of business strategies and mission statements also put a high priority on leadership. You’ll find goals to be “a market leader” or “industry leader” (or something similar) in many of them. And there is a lot of evidence showing that there are strategic benefits to being a leader.

The problem is that not all types of leadership are created equal. As we saw with the radio stations, it is possible to find leadership within minutiae that is so obscure as to be practically meaningless.

This same problem can occur with all businesses. Like the radio stations, they can find a way to claim leadership. If you look hard enough, almost all businesses can find someplace where they are a leader. But is the leadership meaningful? Is the leadership claim strategically significant, or just some trivial point of data with no power?

THE PRINCIPLE
The principle here has to do with smugness. Having a business which is a leader can be very satisfying. It can be a source of pride. It can make you feel like your strategic mission has been accomplished. It can make you feel smug…nothing left to do but put your feet up on the desk and watch the profits roll in.

In reality, however, there is no room for smugness in strategic planning. Just because you have found a way to define yourself as a leader today does not mean that you will remain a leader tomorrow. Worse yet, the type of leadership you have defined for yourself may not have any strategic power or significance.

While it may be true that all successful businesses are leaders, not all leaders are successful. You need leadership in a place worth leading.

Problem #1: Leaders Without Followers
The definition of a good leader is someone with lots of followers. Similarly, being #1 is only valuable if you are number one in a place with high demand. Being #1 in a place that everyone is abandoning is not much to brag about.

The largest threat to the power of leadership is obsolescence. It leaves the leader of the obsolete with nothing but memories, because their future is typically ruined. And pretty much everything eventually becomes obsolete. Therefore, if you smugly rest on your #1 position, refuse to abandoned your strategy, and hold on too long, you will eventually be a leader in a worthless position—abandoned by customers because it is obsolete.

This applies to leadership positions in specific products. Just think of all the analog products and business models made obsolete by the digital age. Being #1 in video tape players is worthless in a world of streaming movies off the internet.

Technology leadership is also vulnerable to obsolescence. Being the leader in the manufacturing of cathode ray TV picture tubes is worthless in a world of flat screen TVs. And as Clayton Christensen points out in his book on The Innovator’s Dilemma, data storage devices have gone through numerous technological transitions, and the leader in the former technology is rarely the leader in the next technology. Often, they cease to exist because they smugly clung too long to the obsolete technology.

Even entire industries can become obsolete. Think about the payphone industry. Being #1 in any aspect of the payphone industry is pretty worthless in a world of cell phones. Similarly, being #1 in the video rental store industry is fairly worthless, because the entire industry is obsolete. Just look at what happened to Blockbuster. Their leadership in the end could not save them.

Even leadership with a customer segment can be worthless if that segment goes away. I worked with a wholesale company whose core customer segment was small independent retailers. The small independents were disappearing due to the growth of Wal-Mart and other large chains. This wholesale company’s #1 position with independents was becoming worthless because independents (its customers) were becoming obsolete.

I know a story of a brewer who was looking at buying a beer brand. They did research and found out that although this brand had a leading regional position with a certain customer segment, that segment was starting to get old. They were starting to die off. No new customers were being added. In the not too distant future, so many members of the customer segment would be dying off that the leadership with this segment would be worthless. Dead customers are obsolete customers.

Problem #2: Leading in a Meaningless Place
Even in young, growing sectors, leadership can be worthless if the leadership is in a bad place. For example, some segments are just too small (like being #1 with teenage girls at 2AM). Even if you are the leader with 100% market share, it is not enough to provide an adequate return.

Think about satellite-based cell phones. About the only customers who desire them are people in places without access to cell phone towers. Unless you are out in the middle of the ocean (and few of us are) or in a very remote area (and by definition almost nobody can be in an area labeled “remote”), then you have virtually no reason to pay the extra expense for satellite-based phone service. Therefore, being #1 in satellite phones is fairly worthless. The returns will never justify the costs.

Another worthless place is being the leader in a broken business model. Even in young, rapidly growing businesses, if you cannot eventually find a path to profits, then that leadership is worthless. I can think of a lot of dotcom business which are leaders with a large number of followers. However, they have not discovered a way to adequately monetize that leadership. The business model is broken. In these situations, leadership will only allow you to burn through cash more quickly on your way to failure. The reason why dotcom bubbles and housing bubbles burst is because the industries are based on flawed models. Eventually, the flaw brings the market down, and even the leaders struggle to survive.

Avoiding the Problems
So how do you avoid these problems? First, don’t get smug and stop adjusting to the marketplace. Always be watching the marketplace for early signs that your position is in a place that is becoming obsolete. That will give you time to prepare to jump to the area that is making you obsolete. Better yet, consider initiating the act that will cause obsolescence. That way, you have a better shot at keeping leadership through the transition.

Second, don’t get smug and relax just because you were able to manipulate the data in such a way as to find some place where you are #1. It may be a worthless place of leadership. Do the math to make sure that all that effort to lead will end up in a place worth leading.

Third, once you have found the right place (a place where you can win and a place worth winning), work hard to be a leader there. This is when leadership really makes a difference, so work hard to get it.

SUMMARY
Doing nothing is rarely a good strategy. Marketplace conditions are too fluid. Even a market leader can lose out if their point of leadership becomes obsolete or is threatened by others with a superior business model. There is never an excuse for becoming smug and stopping the attempt to get closer to where the market is going. Rather than looking for ways to redefine the status quo as some obscure version of leadership, look for areas where leadership is really valuable and move from the status quo to get there.

FINAL THOUGHTS
As Clayton Christensen likes to point out, leaders at one point in time rarely survive the transition to the new when the old becomes obsolete. They are replaced by new companies created just for the new. And a major reason, I believe, for that inability for the leader to survive the transition is because they become too smug.

Strategic Planning Analogy #402: Strategy is Like a Resume

THE STORY
Since I am currently looking for a job, I have been spending some time talking with resume-writing experts. One of those experts said something which caught my attention.

He said that when recruiters see a job title in a resume, they usually have a pretty good idea of the duties and responsibilities associated with that title. Therefore, if the only explanation on your resume is the duties and responsibilities associated with that job, you haven’t really told them much of anything they didn’t already know.

Worse yet, the expert said you are not telling the recruiters what they want to know. What they really want to know is how successful you would be if they hired you for the job they are trying to fill. By only telling them the duties and responsibilities, you are not explaining how you approached those duties and responsibilities and why you were successful.

The expert referred to these as “transferrable skills.” In other words, what skills do you have which could be transferred to the recruiter’s company to create success there? After hearing this, I modified my resume.

THE ANALOGY
There’s an old acronym called WIIFM (pronounced “wiffum”). It stands for “What’s in it for me?” In other words, I have no interest in what you’re saying unless you first tell me how it affects me.

My original resume did not pass the WIIFM test. I hadn’t explained how any of it was relevant to the recruiter. Therefore, they had no reason to be interested.

The same principle applies to business missions. They need to pass the WIIFM test. Business Missions need to explicitly explain why the marketplace should care that you exist. In other words, they need to explain what’s in it for the customer.

THE PRINCIPLE
The principle here has to do with having an orientation towards others. When writing a business mission, it should be like a good resume—oriented towards why the customer should be interested in me.

Unfortunately, many mission statements and plans are like bad resumes—nothing more than bragging about how great I am. Recruiters don’t care about how “great” YOU are. They want to know how great you will make their COMPANY. Similarly, a good mission statement shouldn’t just say how great YOU are, but explain how your business model is great for your CUSTOMERS.

You can see the difference when looking at Ends and Means.

1. Ends (What is my goal?)
One way to tell a good mission/plan from a bad one is to look at the goal of the company. A bad mission plan has a self-centered, bragging goal, something like:

1) A huge sales goal
2) A huge profit goal
3) A huge growth goal
4) A goal to be the biggest or best in the industry (a leader)

It’s not that any of these things are necessarily bad. It’s okay to be successful. The problem is that these goals are not very useful from a strategic point of view. They do not provide any strategic insight.

It would be like a coach in sports saying his goal is to win games. That’s a great thing to do, but saying it provides no direction as to how those games are to be won. If the coach just told the players “Our goal is to win” he has not given them any strategy as to how to win. Everyone on the team may interpret the goal differently. As a result, there is no teamwork, no coherent game plan to follow that would lead to a win.

The key weakness of a self-centered goal is that the linkage to success is weak. There are lots of things one can do in the name of becoming great, but it doesn’t always lead to greatness.

For example, let’s say I wanted to have great sales. Tactics which might come out of that could include things like:

1) Selling everything below cost (which in the long run destroys success)

2) Getting people to purchase sooner than they normally would (which only reduces sales later)

3) Reducing the quality so that you can afford to sell cheaper (which will hurt future sales when people figure out that it wasn’t such a good deal at that lower level of quality)

4) Diversifying into all sorts of added businesses which divert the company focus, put you in places where you have no competitive advantage, and/or confuse the customer about what you stand for. All of this will hurt the company long-term

5) Expanding the appeal beyond an exclusive niche to reach the masses. This can destroy a fashion brand, because the core customers want exclusivity. They will abandon it once the masses have it. And once the core customers abandon it, the masses won’t want it much longer, either.

In other words, the pursuit of near-term sales-building tactics can lead to long-term disaster. Ultimate, sustainable success is often not achieved. Long-term failure is very likely.

Now, let’s compare this to the opposite approach—having an “other-centered” goal. Instead of saying “What’s in it for me” you say “What’s in it for my customer”. The new goal would be about providing a benefit for the customer. It could be something like:

1) I will save the customer time;

2) I will make the customer’s life easier;

3) I will improve the customer’s standard of living;

4) I will reduce the customer’s down time;

The idea is to form a goal around improving a particular part of your customer’s life. If you truly have a way to improve the customer’s life, they will give you their business. The sales will come naturally, without having to resort to the tricks like I mentioned above. This creates a sustainable business where customers come back because they want to, not because you bribed them or tricked them into coming.

With my resume, I was told to take out phrases that implied “hire me because I’m wonderful” and replace them with phrases which implied “hire me because this is how I can make your company better.” Similarly, instead of saying “my goal is to be great” in your mission statement, say “my goal is to benefit from focusing on making my customers’ lives better.”

2. Means (How Does My Business Model Allow Me to Please the Customer?)
Bad resumes just say how great the person is and list the duties the person had at previous jobs. The experts say that instead of focusing on duties, focus on “transferrable skills.” These are the things I am able to do that would work well at the new company. These skills are the means by which I achieved success at the old firms and can also bring success at the new firms.

This also applies to mission statements. It’s one thing to say you are oriented towards helping your customers solve problems. It’s quite another to have a business plans which provides the means to accomplish this goal (profitably). It is the skills you use to satisfy the customers.

Therefore, a business mission should also outline the means by which your company will win at serving its customers. These are the company’s skills which allow it to do a better job than the competition.

For example, one could say that their business mission is to “save their customers time by bundling all their entertainment needs into one convenient package.” So the end is saving customers time and the means is though the ease of providing it all in one bundle.

There are many ways to save a customer time. If you don’t pick one, the company will lack focus and waste its effort by moving in too many directions. Pick the means where you have the best chance of winning.

SUMMARY
A good mission statement is like a good resume. It communicates two things: the ends (what I can do for my customers) and the means (the unique skill-set and business model which makes it possible to profitably deliver the ends better than the competition). The final statement would generically look something like this:

My mission is to provide “X” solution to my customers by doing “Y” better than anyone else.

That provides a lot more strategic direction than saying “my goal is to be great.”

FINAL THOUGHTS
Resumes are short. Business missions should be short at well.

Strategic Planning Analogy #305: Act to Win

THE STORY
For Christmas, I received from my son a new board game which I had never heard of before. My wife and I opened up the game to see how you play it. Unfortunately, we did not immediately find any set of rules.

I assumed that the goal of the game is to win. Winning is nice. But if I have no idea of what I have to do to win, then the goal is pretty meaningless (and I cannot play the game).

Fortunately, I eventually found a piece of paper with the rules of the game on it. Now I know what to do.

THE ANALOGY
Strategic planning is about finding a way for your company to win. Lots of the goals or mission statements companies write essentially express this desire to win. They aspire for things like being a “leader” in something, being “the best” at something or providing the “most satisfaction.” These are the way the companies define winning.

The problem is if you stop there. Then you are like the situation I was in with the game I got for Christmas. I knew I wanted to win the game, but I had no idea what I was supposed to do in order to win.

Just as that game was worthless without the rules of play, your business missions and goals are worthless if those in your company do not know what behaviors are needed to win.

Just because you tell people that the company needs to win by creating excellence at something does not necessarily mean that they will know what to do to make that excellence come about. You need to connect the goal to desired behaviors.

THE PRINCIPLE
The principle here is that effective strategic plans outline and measure not only the final outcome (what winning looks like), but also provide an action plan of how to make this goal a reality (what to do).

To me, this seems pretty obvious—figure out what needs to happen and then make sure those things happen. Apparently, it is not all that obvious. The folks at Deloitte today held a web conference to teach what they called “Behavior-Led Strategy Execution” (BLSE). It’s a fancy name for saying that strategies need to be executed in order to be effective.

The BLSE process goes like this:

1) Make sure everyone understands the strategic goal.
2) Figure out what critical events need to happen to achieve the goal.
3) Figure out who are the key people or key departments in your organization that are most responsible for making these events happen.
4) Determine the key behaviors you want these key people to do to accomplish the key events.
5) Track and measure to see if the key people are doing the key behaviors.

In other words, give people the rules of play so that they know how to play to win. The typical rules of play that come with a board game tend to have five parts. We’ll look at each of those five parts and show how they would apply to a comprehensive business strategy/action plan (and help accomplish the BLSE).

1. Goal
Usually, the first thing the rules of play discuss is how you win the game. Usually winning comes down to either:

a. Getting the most (or least) points;
b. Getting the most money;
c. Finishing the game first; or
d. Outlasting your opponents.

Business equivalents could be something like:

a. Getting credit for the strongest brand image or most market share points;
b. Getting the most sales;
c. Being the first to capture a new market;
d. Consolidating the market in your favor.

If you don’t explicitly explain what winning looks like, then don’t be surprised when you don’t win.

2. Resources
Next, the game will tell you what all the pieces and parts are for playing the game. This will include things like the game board, playing pieces, decks of cards, dice, or whatever. You cannot effectively play the game unless you know what all the pieces are.

The business equivalent would be an understanding of the resources available to you and to others. Do you understand your own strengths and weaknesses? As in the Deloitte model, do you know who all of your key players are? Do you know how much manpower and financial resources you have at your disposal to achieve this goal? Do you understand the resources of your competition? Do you understand the “lay of the land” for the marketplace in which you are playing (your game board)?

The resources are all you have to win the game. Learn what they are and how to use them to your advantage.

3. Boundaries
Next, the rules of play for a game typically tell you what you can do whenever it is your turn to play. Certain actions may be allowed on that turn. Other actions may be unlawful. For example, in chess, you learn that each type of piece can only move in certain ways. A bishop can only move diagonally (any number of open spaces), but a king can move only one space at a time (but in any direction).

The business equivalent is an understanding of what behaviors are within acceptable bounds and which behaviors fall outside those boundaries. These boundaries may vary by individual in the organization. In the Deloitte model, it is an understanding of expectations for each of your key people (proper actions, improper actions).

It can also be an understanding of how far an individual can move before needing to seek approval. The idea is that movement is necessary for success. Unless the expectations for that movement are clearly outlined, you may not get the movement you desire.

This is not to say that you have to articulate every single step in minute detail. This is not about micromanaging. It is about setting boundaries and expectations.

4. Outcomes
The next section in a game’s rules of play is typically a description of how particular actions impact your ability to win. For example, if the goal of the game is to accumulate the most points, this section will explain all the ways you can gain (or lose) points. If the goal is to make money, it will explain all the ways to earn (or lose) money. If the goal is to finish first, it will tell you what actions speed up (or slow down) your progress.

The business equivalent is an understanding of which moves get you closer to your strategic goal, and which moves are counterproductive. In the Deloitte model, this would be understanding which behaviors you want your people to accomplish.

The idea is to connect actions to outcomes. This allows people to see which types of actions are most likely to lead to outcomes consistent with winning.

5. Keeping Score
If you want to know who won the game, then you’d better keep score. Keeping score during the game lets you know how well you are doing during the game (and how successful your style of play is). If your score is low, you may want to change your style of play.

Therefore, the rules of play let you know how to keep score.

In business, this is the idea of keeping track of how well you are achieving the desired actions. Are you getting closer to achieving your goal? A lot of businesses track financial performance. However, how many track action performance? Are the right things getting done? Who’s keeping score? This is also the important last step in the BLSE model.

SUMMARY
Winning in business is a lot like winning when playing a board game. If you want to win in a board game, learn the rules of play. If you want your business to win, use your strategic planning process to create your rules of play. Before you can win at a game, you have to first play the game. Similarly, strategic planning needs to go beyond just defining success, but helping a company to play the game.

FINAL THOUGHTS
Over the Christmas holidays, I played a different game with my daughter which I had never played before. I studied the rules of play before playing, but it wasn’t until I actually started playing that I fully understood the rules. The idea here is that you will not perfect your playing skills by just studying the rules. You have to get in there and play the game. At some point you have to stop fine-tuning the plan and start playing the game.

Strategic Planning Analogy #300: On a Mission

STORY
There’s an old story about a man watching workers build a church. He goes up to each of the workers to ask what they are doing.

The first worker says he is laying bricks. The second worker says he is laying panels for the floor. The third worker says he is building a place to worship and glorify God.

Guess which worker is probably doing the best quality of work.

THE ANALOGY
All three workers were doing a small part to help build a church. But they viewed the nature of their work differently. Two defined their work by the particular task they were doing—laying bricks or laying a floor. One, however, saw the big picture and defined his work a being part of what he viewed as a noble cause—building a place to glorify God. And of course, the one with the nobler definition of his work is the one who will tend to produce the greatest outcome, because he sees a deeper importance/significance to his performance.

Businesses have the strategic option of defining themselves just like these workers. They can define the work as being a mundane task—like manufacturing widgets—or as part of a larger, more noble task—like making the world a better place.

And the more you imbue a task with a noble purpose, the better off you tend to be. Strategic planning has an important roll in helping to frame a company’s mission so that it imbues the business with a noble purpose.

THE PRINCIPLE
The principle here is that companies with a noble business mission can tap into benefits than mundane missions cannot.

1) Additional Sources of Revenue
Noble companies have three additional sources of revenue. First, they can typically charge more for their products. According to the 2009 Corporate Citizenship Study, people are willing to pay more for products from socially responsible companies. Forty percent said they would spend between 1% and 10% more for a product from a socially responsible company.

Consider TOMS Shoes. TOMS Shoes was founded on a simple, noble premise: With every pair you purchase, TOMS will give a pair of new shoes to a child in need—one for one. To this, they also add the idea of having vegan shoes—no leather (save a cow).

TOMS’ shoes are not cheap. Their simple canvas shoes are about $50. I can go to Wal-Mart or Target and get a simple canvas shoe for half that price (or even less). Yet people are willing to pay a premium for a TOMS shoe. Why? They like the noble idea that whenever they buy a shoe, a person in need gets a free shoe. That is worth a premium price.

Second, a noble cause provides new sources of revenue. Who says you have to earn all of your income from your purchase price? That purchase price can be subsidized with additional income from other sources.

Consider many cause-related media companies. It is getting harder to be profitable in the magazine business these days. Many publications are calling it quits and shutting down because subscription and ad revenues are not enough to remain profitable. However, one cause-related magazine I subscribe to has started a new campaign with its subscribers. It is touting the noble purpose of the publication and asking for additional donations beyond the regular subscription price. It says that it is worth giving extra to keep the noble magazine and its important message in business. I’m sure that extra money is coming in. This is something that a mundane magazine cannot tap into.

If your cause is really noble, there are opportunities to tap into government funds, charitable funds/endowments, or sponsorship ties with other companies that will pay you in order to associate themselves with your noble endeavor.

An example would be St. Jude’s Children’s Research Hospital. In many ways, it is a hospital just like any other hospital. Yet, on top of this, they have imbued a greater sense of nobility to the hospital business. It does more cutting edge research and never turns away a child due to an inability to pay.

As a result, St. Jude’s taps into a lot of additional revenue sources more successfully than many other hospitals. It is strongly promoted by many in the acting community. It has a nationwide charitable program. It has a partnership program with many retailers, including Target, Kmart, CVS, Williams-Sonoma, Dollar General, Brooks Brothers and others.

The third revenue benefit of a noble mission is that there are the added revenues which come from having loyal customers who volunteer to be an advocate for your company. TOMS, for example, has a DVD describing their noble cause and encourages customers to hold DVD parties at their homes to spread the word. TOMS also encourages and helps customers set up parties in their homes to customize and decorate TOMS shoes. On April 8, 2010, they are encouraging customers to bring attention to the noble cause by going a day barefoot. And of course, there are all the web 2.0 opportunities with Twitter, Facebook and the like to build a strong, loyal TOMS community.

Loyal customers will buy more from you and act as evangelists to get others to buy from you as well. And this loyalty is stronger, the more noble the mission of the company.

2) Additional Ways to Lower Costs
Not only does increased nobility improve the top line. It can also reduce costs, further improving the bottom line.

Going back to the 2009 Corporate Citizenship Study, they found that people highly value the idea of working for a socially responsible company. Fifty-six percent said that it would make a positive difference for them. Even more telling, 40% said they would be willing to take a small pay cut to work for a socially responsible company.

For years, private schools with noble causes (principally religion-based) have traditionally paid their teachers less than those working for public schools. This idea does not have to be limited to just schools. Bring a greater nobility to the cause at your business. Not only are the employees who desire to work at noble companies more motivated, you do not have to pay top dollar to get them. The privilege of spending the day feeling a part of a larger, more noble purpose is worth sacrificing for.

This idea can also be used as leverage with your suppliers to negotiate lower costs. They may give you a break if they realize that their lower price to you is contributing to a greater noble cause.

Finding Your Nobility
Perhaps your sense of nobility is not as great as what was seen in some of these examples. But that doesn’t mean that you cannot change your business model to become more noble. St. Jude could have used a more conventional hospital business model, but they chose not to. You can change your business model to become more noble as well.

You could perhaps do a one for one program like TOMS on your product/service. You could be like Target, who gives 5% of its income to charities in the markets where it has stores. Best Buy is getting more involved in sustainability issues with the products it sells, accepting returns of old electronics items and working with its suppliers to help design more sustainable products. Wal-Mart is getting ever more active in environmental causes. The change in Wal-Mart’s reputation has improved significantly once they took a more noble approach and I believe it has helped them in many ways. The list goes on.

The way you define your strategic mission has a lot to do with how your employees, customers and other stakeholders view the company. It can not only change the perception, but also the reality of how noble a company you really are.

Consider these mission statements:

Google: To organize the world's information and make it universally accessible and useful.

Proctor & Gamble: Provide branded products and services of superior quality and value that improve the lives of the world's consumers, now and for generations to come.

Johnson & Johnson: To provide scientifically sound, high quality products and services to help heal, cure disease and improve the quality of life

Herman Miller: Herman Miller, Inc., works for a better world around you. We do this by designing furnishings and related services that improve the human experience wherever people work, heal, learn, and live.

And it cannot just be hollow lip service. The mission needs to be more than just words on paper. It has to be lived every day by senior management, supported by where the capital is spent, evidenced in how employees and customers are treated, and a key element of the discussion on all major decisions. In other words, it must be fundamental to the strategy. If done properly, not only will you do well (quality of social responsibility), but you should also do well (enduring, profitable company).

SUMMARY
Companies with noble missions have access to many advantages. Customers are more loyal and act as advocates for your company. You can get away from competing only on price (and perhaps raise prices a little). You can tap into more sources of revenue. You can attract highly motivated workers who do not necessarily need to be paid top dollar. And you can feel good about not only building a strong business, but also a better world.

FINAL THOUGHTS
Now you may be saying to yourself that your business really is rather mundane and that there is not a lot of nobility in what goes on. Yet consider the investment banking industry. Currently, many see investment bankers as the scum of the earth. Large sectors of the population see nothing noble in the way they operate.

However, listen to the way Goldman Sachs CEO Lloyd Blankfein defines his work (from The Sunday Times, November 8, 2009). “We’re very important. We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle. We have a social purpose.” He is, he says, just a banker “doing God’s work.” (something like the attitude of the church builder in our story?)

I’m not saying that you need to agree with Blankfein’s assessment. However, if he can find a way to put such a noble spin on what he does, I would think that you can do the same for your business.

Strategic Planning Analogy #299: Work Worth Doing

THE STORY
Many years ago, just before I was to receive my MBA, I met someone I did not know in the hallway at the University. He was also about to graduate.

Although I was trying to ignore him, he came up to me and started talking with a big grin on his face.

He said, “Do you know why I am graduating with a degree in accounting and getting a CPA?” He didn’t wait for a response and immediately answered his own question, “Accountants get one of the highest starting salaries right out of business school, and people who make the most money get the most sex.”

THE ANALOGY
Here was someone who had a personal “strategic” plan. However, it seemed a little bit one-sided to me. It was all about what was in it for him (money and sex). There didn’t seem to be much concern for the people who would be paying him that money or the people he would have sex with.

At some point, I would suspect that if the only reason he was an accountant was for the money (and he had no love for the profession) that the joy of money would decline and the hatred of accounting would increase. Similarly, if he was only able to get sex because of the money, then over time the joy of the sex would decline and the futility of the meaninglessness of that sex would increase.

This individual’s focus appeared to go straight to the ends (money and sex) without considering the means (the nature of the work and the quality of the intimate relationship). Over time, I think he will lose some of the joy for those ends because of not attaining them in a meaningful or satisfying manner.

This can also happen in business strategies. If the focus of the strategy is on one-sided ends (e.g., get huge bonuses, put big numbers on the bottom line) and ignores the means of how to get there (what the business does), it can lead to a long-term disaster.

THE PRINCIPLE
The principle here is that long-term success is more likely if you focus on the “means” rather than the “ends.” Therefore, strategic plans need to focus more on the means than the ends.

For most “for profit” enterprises, the end is to grow profits, i.e. make more money and improve the return on investment. Although this is not a bad goal per se, it is a lousy strategic focus.

A strategic mission statement saying, “We want to make a lot of money” is not very useful. It provides no guidance as to what to do. It doesn’t rally the troops around a particular type of work. And worst of all, it does not provide an incentive for potential customers to give you their money.

Business is a two-way street. In order to sell something, someone else has to purchase it. These purchasers typically have multiple options. They do not have to give you their business. They can give it to someone else. If your strategy does not focus on a way to get customers to prefer you, that ultimate goal of making lots of money won’t happen.

This is especially true today. Consumers are so angry at the perceived greed of business people, that they now are expecting even more accountability from them. More than ever, they want to patronize companies that have a social conscience, who are good corporate citizens. And thanks to the internet, they will find out how sincere you are. You cannot hide. The type of corporate citizen you are will help determine whether they buy from you. This is not a fad. This is part of the new normal.

That is why one of the most important strategic questions you can ask is “What can we do for our customers that will cause them to prefer us over their spending alternatives?” You can see this line of thinking in Proctor & Gamble’s new mission statement—“to touch and improve more people’s lives, in more parts of the world, more completely.”

This new mission has opened up a world of new sources of profits to P&G in places where they never went before. As C.K. Prahalad shows in his book “The Fortune at the Bottom of the Pyramid,” there are a lot of profits to be made among the poor if you focus on ways to improve their lot in life. This is what P&G is doing. But it only works if your focus is on bettering the poor rather than bettering yourself.

Here is the great irony. The more your strategic effort focuses on your customers (and the less it focuses on your rewards), the greater your rewards tend to be. There are three reasons for this.

1. Right Focus
When you focus on what the customer wants, you end up focusing on the “means”—the nature and process of what you do. You look for ways to meet the customer’s needs and desires. And when customers see you as the better alternative for them, they will give you their money.

Strategy is about helping you figure out what to do. Do the right things and the rewards will come. The right thing to do is to create a positive differentiation versus your competition on attributes important to a potential customer segment. This comes from focusing on what you do for others.

Unfortunately, this is not what all strategic planning processes do. I’ve seen businesses use their strategic planning session primarily to set a numeric goal as to how much money they want to make. The discussion is around how big of a number (Sales, Profits, Return on Investment, EVA) they want to achieve by a certain point in time in the future.

This is selfish one-way thinking. Just because you can build an elaborate spreadsheet and graphs showing what this type of goal looks like does not mean it will automatically happen.

What I’ve seen happen is panic set in when the company gets close to the goal year and is nowhere near hitting the numeric goal (because the plan never focused on the means for achieving the goal). Desperate measures are taken to hit the numbers. These desperate measures rarely lead to long-term success.

The better focus is to set goals for specific operational outcomes that are customer-centric (improving quality, reducing costs, improving the business model, adding features, etc.). The idea is to focus on making a better two-way street. Focus on finding ways making customers prefer you, and the ends will come.

2. Right People
If the only thing you offer people is a means to satisfy their greed, then you will attract greedy people. Overly greedy people tend to destroy the long-term viability of a firm. I saw a study several years ago which asked investment bankers if they would still be in that profession if it stopped paying exorbitant wages. Over 80% said no. They were only there for the money. They didn’t care much about the products they dealt with, the risks they took or the people getting mortgages they couldn’t afford or the people insuring those risks. And that attitude I believe had a lot to do with how we got into the big financial mess we are in today.

I was talking to an executive of Enron before its demise. We were discussing how Enron expected very high levels of effort, but rewarded people very well if they succeeded. I asked him if it was difficult to get people like that. He said that most of their hires came from investment banking and were used to that type of culture. Well, we saw what happened when you get too many people of that attitude at Enron.

However, if everyone sees you as a company focused first on the customer, you will attract the people who like putting the customer first. These are the people who are most useful in building a strong, lasting company, a place where customers want to spend their money.

3. Right Motivation
What do you think motivates the rank and file employee more—lining the pockets of the top executives with big bonuses, or making the world a better place? P&G’s new mission talks about making the world a better place. So do many other firms (see this prior blog for examples).

A noble purpose causes people to care more about what they do. When they care more, they tend to perform better. There is a greater motivation to do well, because it has more meaning to what is being done.

Strategic mission statements should provide that type of inspirational motivation, because people highly motivated to serve customers tends to lead to great results.

SUMMARY
If you want great financial results, don’t focus your strategic planning process on getting great financial results. Instead, focus on how to give customers greater benefits than they can get anywhere else. Customers are the ones who control much of your financial success. If you convince them that you are their best option, they will give you their money (making you financially successful).

FINAL THOUGHTS
This Christmas season brings to mind the idea of giving. If you keep this giving attitude all year ‘round, you have the foundation for a successful plan.

Strategic Planning Analogy #291: The Defining Moment

THE STORY
I friend of mine who worked in the brewery business used to like to tell this story. There was a bar across the street from a factory that made beer. A lot of the guys who worked at the brewery factory would go to that bar after work. Sometimes, the managers at the brewery would visit the bar as well.

One day, one of the managers from the factory was in the bar. He saw one of the factory workers in that bar drinking a beer made by a competitor. The manager was infuriated that one of the factory workers would dare to drink a competing brand of beer. To him, that was an act of treason.

The more he watched, the more incensed he became at what he perceived as the unloyal behavior of this factory worker. Eventually, the manager couldn’t take it any longer. He went up to that factory worker and shouted “Who do you work for?”

The factory worker answered, “The local of the International Union of Brewery Workers.” So much for the disloyalty argument.

THE ANALOGY
As the story points out, how one defines themselves has a lot to do with how someone behaves. The manager defined himself as working for a particular brand of beer. Therefore, he was loyal to that brand and could not conceive of why any employee would drink any other brand of beer.

By contrast, the factory worker saw himself as working for the local brewery union. As long as he was drinking any beer produced in a union factory, he was supporting the union. His loyalty was to his fellow workers rather than to the brand of beer they made.

One of the most important strategic questions a company must answer is this: What business am I in? How you define your business will determine how you act. If you choose the wrong definition, you will wind up doing the wrong actions. This will then lead to the wrong outcomes.

THE PRINCIPLE
The principle here is that a good strategic process needs to, at some point, define what business the company is in. I call this “the Defining Moment.” Here are three things to avoid when creating that definition.

1. Avoid Too Narrow of a Definition
If you define the business too narrowly, you will miss opportunities. Back in 1960, Theodore Levitt published what is considered to be one of the 10 most influential articles in the history of the Harvard Business Review. The article was entitled “Marketing Myopia.”

In this article, Levitt claimed that a lot of business stopped growing or failed because they defined their business too narrowly. For example, he claimed that the railroad industry stagnated because the members narrowly defined themselves as in the business of “railroading” instead of in the broader business of “transportation.” Transportation grew rapidly while railroading stagnated. Had the leaders defined themselves more broadly, they could have participated in that transportation growth. Instead, they went down with their narrowly defined product.

All products and service offerings have a life cycle. If you define yourself by today’s product or service, your company’s fate is tied to that lifecycle. You will die when that product dies. Kodak’s fate declined because it spent too long defining itself as in the narrow “analog photo business”, rather than in the broader “imaging” business. Imaging hasn’t gone away. It has grown. But Kodak missed all that growth because of defining itself too narrowly.

2. Avoid Too Broad a Definition
Of course there are also problems if you take the opposite extreme of defining yourself too broadly. If you define your mission as “making a large return on investment” you have provided no guidance to the company. The definition is too broad to have any meaning or direction.

Without direction, you have anarchy. Anarchy leads to chaos and destruction, not success. Success requires a focus. A company without focus one cannot excel at creating a point of competitive distinction that will allow them to win in the marketplace. Rather than being a team focusing its limited resources at a point where it can make a real difference, you are just a bunch of individuals working at cross-purpose to each other. A company definition needs enough detail to point at where you will focus your effort in order achieve that advantage.

3. Avoid Definitions Out-of-Sync with Your True Skill-set
In addition to finding the right balance between defining yourself too narrow or too broad, one needs to address the fit between you definition and your capabilities. For example, I could define myself as being in the low-cost transportation business. However, if I have an unusually high cost structure, I will almost assuredly fail at that mission. That definition did not match up with my capabilities.

Although it is possible to change a company’s skill-set or culture, it is extremely difficult. Most attempts fail. Therefore, successful business definitions tend to look for ways to exploit the good in the current skill-set or culture, rather than trying to start all over again from scratch.

I was reminded of this need to align with skill-sets this morning as I was reading the Wall Street Journal. There was an article on page 1 talking about firms which appeared to be on the verge of bankruptcy but were saved from that fate (or at least postponed it) due to an increased availability of refinancing options.

One of the “near death” companies getting a reprieve that was mentioned in the article was Blockbuster, the leading movie rental retailer. I believe that one of the reasons Blockbuster got into so much trouble was because of how they defined their business.

Blockbuster has traditionally defined themselves as being in the entertainment business. In 2007, the revised business mission continued this entertainment focus: “To provide convenient access to media entertainment.” Sure, Blockbuster rents a lot of movies and games, but is entertainment really at the core of their culture and skill-set?

Blockbuster has shown no real skill in creating entertainment. They have no unique skill in developing forms of entertainment media. My understanding is that within the entertainment community, most of the other players hold animosity towards Blockbuster to the point where it puts them at a disadvantage versus other partners in doing media deals.

If entertainment is not Blockbuster’s core, then what is? First, it is the ability to run small neighborhood stores. At their peak a few years ago, Blockbuster operated or franchised over 9,000 stores. Most of these were in neighborhood locations.

Second, Blockbuster is a pretty good deal-maker with outside partners. One of the reasons why the entertainment industry is hesitant to do any more deals with Blockbuster is because they did not like how well Blockbuster negotiated against them when the video rental business first started.

Now, if you define yourself as in the entertainment business, you might be prone to do many of the things Blockbuster has done in the past few years (try to align with Radio Shack, try to imitate Netflix, look into non-conventional media delivery ideas, etc.). Unfortunately, these moves have not produced very good results.

However, what if Blockbuster had defined itself as being in the neighborhood retail business? Perhaps then they would have considered other ways to leverage that retail infrastructure:

1) As a convenient pick-up point for packages purchased on the internet (so that they are not vulnerable to theft off your porch while you are at work).

2) As a convenient pick-up point for groceries ordered on-line (a place that can keep the cold items cold until you can get around to picking them up).

3) A convenient drop-off or pick-up point for items like dry cleaning, shoe repair, selling things on EBAY, etc.

Blockbuster could have focused on making deals with all sorts of non-media people and converted those stores into THE place to coordinate and protect all my neighborhood needs until I am ready to pick them up. Instead, they have been taking one of their most valuable assets—their dense network of neighborhood stores—and destroying it by closing down stores by the hundreds.

I’m not positive that this new approach would have saved Blockbuster, but I do know that their choice in how they defined themselves put this type of thinking out-of-bounds. Definitions impact decisions. Be careful in how you handle your defining moment.

SUMMARY
The way you define your business impacts the way you think about your business. This thinking them impacts how you act. The best strategic actions tend to take place when that definition avoids the extremes of being either too broad or too narrow as well as matching the definition with the key culture and skill-sets.

FINAL THOUGHTS
The defining moment can often be iterative. It may start out broader until the right strategic path is discovered. Then the definition may be narrowed a bit more around that strategic path.

Strategic Planning Analogy #278: Just a Few Words

THE STORY
Let’s say I had some land I wanted to sell. I could put one of two “For Sale” signs on the land. The first option is a sign that says “Farm Acreage For Sale.” The second option is a sign that says “For Sale: Zoned for Future Luxury Condo-Golf Complex.”

I suspect that I would get different results depending on which sign I put out on the land. The “farm acreage” sign would draw in farmers as potential buyers, who would evaluate the land based on its ability to produce crops. The “Condo-Golf” sign would appeal to resort developers, who would evaluate the land based on its luxury appeal.

The selling process would be entirely different, the offering prices would be entirely different, and the resulting use of the land would be entirely different. In both cases, the land is the same. The only thing I changed is a few words on a sign.

Pretty powerful words.

THE ANALOGY
A lot of people pooh-pooh the idea of Vision or Mission Statements. They say they are just a bunch of meaningless words on a piece of paper.

Yes, it may be true that there are some poorly written mission statements. But don’t blame the mission statement; blame the author of the mission statement.

As we saw in the story above, by changing a few words on a sign we can change the destiny of how land is developed. The words on the sign changed the way we looked at the property and how we envisioned its value. One sign caused us to look at the land as a place for growing crops. The other sign caused us to look at the land as a future resort complex. By changing our thinking about the land, each sign changed how people acted with the land.

Same land; different actions. All because of a few words on a sign.

The same is true with vision or mission statements. The words we use can frame the way we look at a situation. Depending upon the point of view those words evoke, we will act differently.

Same company; different actions. All because of a few words in a mission statement.

Some actions are far more profitable than others. As a result, it is important to choose the words in your mission statement carefully, so that they help us envision the right future.

THE PRINCIPLE
The principle here is that how we think about a situation impacts how we act. If you want the right actions, you have to properly frame the way people think about the situation. The mission statement is one way to create the right common mindset among your people, in order to end up with the right actions.

To illustrate how important a mindset is in determining actions, we will look at the Walgreens company. Walgreens recently changed the mindset for management. As a result, the actions now are totally different from before.

In the past, Walgreens envisioned itself as being a convenience-driven drug store company. Today, it sees itself as a consumer-driven health-care professional. By changing those few words, Walgreens has started a significant transformation of the entire company. This transformation is not dissimilar from the difference from seeing a plot of land as a place to grow crops to seeing it as a place for luxury condos.

The Convenience-Driven Drug Store
If your vision is to be a convenient drug store, you look for ways to make your drug stores more convenient. How is that done? Primarily by building a lot of drug stores. The more stores you have, the more convenient you are. So store growth is the key action which came out of that vision.

At its peak in 2008, Walgreens was building stores so rapidly that it was opening roughly one store somewhere in the United States on an average of every 16 hours. Walgreens now has 7,000 drug stores. Now that’s what I call convenience. I have one within walking distance of my house (as do many others).

The second aspect of convenience took place inside the store. The idea was that once they got you in the store, Walgreens would bombard you with as many impulse items as they could. The stores were crammed from floor to ceiling with a hodge-podge of whatever high margin item they thought you might purchase out of convenience. Again, vision dictated action.

Seeing the company as “convenience driven” also meant that Walgreens did not see themselves as “price driven.” This worked reasonably well for years at the pharmacy, where those with pharmacy insurance paid the same out-of-pocket price no matter where they went. However, the rest of the store was relatively non-competitive on price; but when you view yourself as in the convenience business, that is not seen as so bad.

The problem with this strategy is that the marketplace has redefined convenience in a way that puts drug stores at a disadvantage. First, mail order operations like Medco, Caremark and Express Scripts put the pharmacy in your mailbox, which is more conveniently located than the drug store.

Second, supercenter operators like Wal-Mart have redefined convenience from “locational convenience” to “one-stop shopping convenience.” They have all the basic drug store needs plus food needs, plus general merchandise needs all conveniently under the same roof. And this type of convenience is not a tradeoff with price. These supercenters can offer both. In fact, they have started pricing some pharmaceuticals at a lower retail price than the co-pay associated with insurance programs.

Suddenly that vision for Walgreens doesn’t look as good. It’s time for new actions. To get new actions, Walgreens needs a new way to envision themselves.

The Consumer-Driven Healthcare Professional
As a result, the new Walgreens CEO (Jeff Rein) has envisioned a new way to think about Walgreens. Instead of the product being the store, the product is now healthcare. Instead of the key attribute being convenience, the key attribute is consumer advocacy. Once you take down the “convenience-driven drug store” sign off the headquarters and replace it with a “consumer-driven healthcare professional” sign, change happens. New visions dictate new actions.

Here are some of the major changes.

1. Building fewer stores
The store is no longer the star of the show. The idea now is to serve the customer better, no matter where that takes you. Through the Complete Care and Well-Being program, Walgreens is putting pharmacies and health clinics right on employer campuses and worksites.

2. Re-merchandising the stores
When the focus moves from convenience to professional health care, the way the store is merchandised changes. In the new Walgreens test stores, the clutter of convenience-based products that have nothing to do with health are significantly reduced. Areas where health is relevant are expanded, to create destination-based assortments. New health-based categories are added, like the Take Care in-store health clinics, which tackle many of the health care needs that you used to have to go to a doctor for.

Rather than pushing a lot of high-margin general merchandise, the goal is to find ways to reduce overall costs in health care by leveraging the Walgreens infrastructure.

3. Re-deploying the pharmacist
Instead of being primarily an order-filler, the new role of the pharmacist is to be a health care expert and advisor. Walgreens is pushing much of the order-filling tasks upstream to regional centers, so that the in-store pharmacist can do other activities, like consulting with customers, administering immunizations and vaccinations, perform medication therapy management services, and improve patient compliance.

In addition to pharmacists, the stores are adding nurse practitioners and infusion therapists to the service mix. Walgreens is using these face-to-face interactions as a competitive advantage over competing alternatives, which rely on just telephones or the internet.

The new Walgreens currently coming about is quite a departure from the old Walgreens. It took a new way of looking at themselves to get there. Don’t shortchange the process and avoid time in crafting your mission statement. Those few words can be the catalyst to making the change happen.

SUMMARY
Mission statements are important, because they help frame how people look at a situation. People act based on how they view a situation. Therefore, if you want new actions, you need to first change the perspective. By changing a few words in a mission statement, you can change that perspective and accelerate a consensus around the new action.

FINAL THOUGHTS
If you don’t proactively put a stake in the ground and claim the vision for your company, someone else will. And if you let the competition or disgruntled employees/customers do it, you may not like the results.

Analogy #215: Slacker Terrorists

THE STORY
Here’s a story you’ll probably never hear—a story about slacker suicide bombers. Imagine if you will, suicide bombers who are indifferent to their task—not caring if they show up or not.

They come late to the meetings to learn how to make the suicide bombs, because they’re not really into the task at hand. Even though their bosses have set a date for when they are to perform their suicide mission, they say they’ll get around to it later. They only half-heartedly care about the greater mission of the terrorist group to which they belong. If it weren’t for the paycheck, they wouldn’t show up.

No, I don’t think there are very many slacker suicide bombers out there.

THE ANALOGY
There may not be many slackers in the ranks of suicide bombers, but there sure are a lot of them in the ranks of business. According to the Gallup organization, it is estimated that unengaged employees cost the US economy about $300 billion a year. They claim that about 17% of the workforce is “actively” disengaged. Each of these employees cost their employer about $13,000 a year in lost productivity.

To some extent, the quality of one’s strategy is irrelevant if the bulk of your employees are indifferent to it. Therefore, a strategy needs to be more than just sound...it needs to inspire.

This blog will look at terrorist organizations to see what we can learn about creating inspired and engaged employees.

THE PRINCIPLE
The principle here is that effective organizations mentally and emotionally engage their employees. As I’ve said earlier, dedicated patriots are more effective than mercenaries, who only fight for the money (see blogs “Soulless Capitalism” and “Sweat is Swell”).

Terrorists seem to do a very good job of creating this attitude. Not only are they willing to work hard for the cause, but die for the cause. These terrorist are willing to sacrifice a great deal for the cause. How much sacrifice do your employees want to give to the cause?

Here are a few things we can learn from terrorist organizations to create that engagement:

1) Create a Great Cause
People are not willing to die for a small cause, but they will do remarkable things for a great cause. Employees will be far more engaged if they feel like they are a part of a great and mighty movement, bigger than themselves. Mission statements can be an important tool to communicate that great cause.

You may be thinking to yourself, “Sure, it’s easy for a terrorist organization to extol a great cause. They’re fighting for freedom, eliminating oppression, furthering their religion. But all my company does is sell widgets. Where’s the great cause in that?”

Well, if you can’t find the great cause, don’t expect the employees to find it. There is a great cause out there for almost every company. Part of your job is to find it and then make it the common great cause for the organization. If you don’t supply a great cause, employees may conclude that their only mission is to make the boss wealthy at their expense. Now that has slacker written all over it.

Google could have said that their job is to make advertising more effective (ho-hum, yawn). Instead, their mission is to “organize the world's information and make it universally accessible and useful.” Now that’s something to get excited about…to be the first to conquer knowledge and give it to the world in a way that betters everyone.

ADM could have said they sell food-based chemicals. Instead, their great cause is to “unlock the potential of nature to improve the quality of life.” How’s that for inspiration?

Even someone like Avery Dennison, maker of stickers and labels, was able to find a greater cause in all that: to enable and transform the way consumers and businesses gather, manage, distribute and communicate information.

A bland statement like “optimizing shareholder value for our shareholders” is about as inspiring as cold oatmeal. The younger portion of the workforce is especially interested in working at inspirational companies. If you want to tap into this talent pool make sure you wrap your company’s work around a great cause.

2) Keep the Organization Small
It’s hard to feel like a nameless, faceless cog in a giant impersonal machine when the organization is so small that you know everyone by name (and they all know you). Small groups create more of a family-type atmosphere. And people will go to great ends to protect their “family.”

Terrorist cell groups are often very effective because they are intentionally kept small. Once they get to a certain size, they are split up in order to stay small. It’s hard to slack off when you know that everyone in the small group is depending on you. There is no place to hide.

Many successful companies do a good job of capturing this idea of keeping groups small. Some experts say that effective organizations stay under 200 people. Once you start approaching that size, split up the organization. Create a network of small companies, rather than one giant behemoth.

3) Spread the Glory
Terrorists are in the business of creating heroes. Everyone who works hard for the cause is a hero. They write songs about the great heroes of the cause. If you die for the cause, you bring honor to your family and perhaps are rewarded yourself with 50 virgins in the afterlife. Stories of great heroism become integral to the culture.

There’s no law that a company can have only a limited number of heroes. Making heroes is not like handing out slices of a pizza, where you can run out of slices if you pass them out too quickly. You can have an unlimited number of heroes. Don’t be stingy with the praise of heroics.

And don’t just give the praise to folks at the top. Spread the glory out into the front line troops. It doesn’t cost a lot and it creates tremendous engagement.

4) Demonize the Enemy
Terror groups are great at depicting their opposition as evil incarnate. “Death to Satan” can be a great motivator. The desire to beat the competition becomes more emotional and convicting when the competition is painted as an evil foe. Just as a great cause makes you want to work hard for your company, painting the competition as the enemy of that great cause makes you want to work even harder to stop them.

In the early days, when the founder of Best Buy was trying to build his company, he saw the much larger Circuit City as his enemy. In conversation, he always referred to it as “the Evil Empire.” And over time, Best Buy overcame that “evil empire.”

I know of many other firms companies that have also used the demonizing of their opposition to engage the troops.

5) Live the Cause
Decades after the revolution, Fidel Castro still wore army fatigues. Castro understood that if he stopped living the cause and started looking like he was living the life of decadence, the followers of the cause would stop following. Followers expect their leaders to live a life consistent with the cause. Hypocrisy will lead to a counter revolution.

Appearance is very important. Companies like Patagonia and W.L Gore have impassioned employees in part because they see that passion so integral to the lives of their leaders. It is real and genuine. It’s not just a slogan. Live the cause in a way that your people can see it in who you are.

SUMMARY
You just don’t hear about slacker suicide bombers, because only impassioned and engaged followers will desire the life of the suicide bomber. Terrorists have done a good job of building passion into their followers, and you can do the same. Follow their tactics of creating a great cause, keeping the organization small, spreading the glory, demonizing the enemy, and living the cause. Integrate this into your strategy and you will become a much greater organization.

FINAL THOUGHTS
People talk about the problems of finding and recruiting great talent. Terrorists seem to do a pretty good job of recruiting. In fact, once they get all the factors we talked about running smoothly, the recruiting almost takes care of itself. People flock to those types of organizations.

Analogy #181: Criticism Vs. Creation

THE STORY
Sometimes, I find it difficult to get customer service. It doesn’t always seem like the sales help want to volunteer the service. Therefore, I sometimes have to take actions into my own hands and create a reason for them to pay attention to me.

For example, one time I was at an airport and I couldn’t get a single airline employee to talk to me about a problem I was having. They kept walking away and hiding in an employee only room. Well, /I decided to react by going over to one of the locked doors leading to an airplane gate and started pushing numbers at random on the keypad on the door.

Well, suddenly one of those employees who had previously been running away from me started running towards me. Once I had their attention, I was able to explain to them my concern. (Note: I did this prior to 9/11. I’m not sure I would repeat that act in this new era.).

Other times, I have had trouble getting service in retail stores. I’ve found that if you get really, really close to their cash registers (perhaps even getting behind one and starting to randomly punch buttons), you can get some service rather quickly.

One time I was trying to purchase an automobile, but I couldn’t get the attention of any of the sales people. So after waiting about a half hour, I walked into the cubical area where salespeople’s desks were. I sat down behind one of the desks and started looking at all the paperwork on the desk. When I started doing that, it only took a few minutes before I got some attention from a salesperson.

So you see, if you cannot get people to volunteer to give you service, you can get them to quickly react to a problem. So create a problem and you can turn that into service.

THE ANALOGY
As these examples illustrate, many sales people seem to have far more difficulty voluntarily creating service than in reacting to problems. Perhaps reacting to problems comes easier to them.
Strategic planning is often a creative process. One has to create business missions, goals, strategies, documents, power point presentations, and so on.
Many people struggle with starting the creative process. There may be a psychological block, or an inability to know where to begin. The people may be self-conscious about being associated with something “creative” and afraid that people will make fun of their creativity.
As a result, it may be as difficult to get a creative strategic project started as it is to get someone to start giving you service at a store. Therefore, use the trick I learned in the story…don’t ask them to create something new. Instead, give them a problem for them to solve. If you give them the right kind of problem, solving it will result in the creative outcome you were looking for in the first place.

THE PRINCIPLE
The principle here is that, for most executives, it is easier to react to something than to create something. Therefore, instead of asking executives to do an unnatural act (e.g., creation), turn it into something like problem solving, which they tend to be good at and enjoy doing. We will now look at three ways to accomplish this, called “Butchering’” “Blathering,” and “Backing.”

1) Butchering
Although many people have trouble starting their own creation, they have no trouble criticizing the creation of someone else. Therefore, your job can be to roughly sketch out the creative part in advance—be it the business mission, the strategic intent, the targeted positioning, or whatever. Then let the crowds have at it and butcher away at what you came up with. It’s like art. Few people are good at creating it, but the great masses have no trouble criticizing it.

Don’t make it too polished. Then the crowd will feel like the content was thrust upon them. They want to feel like they had a say in its creation—they just don’t know how to create it. So rough out something that covers all of the key points which need to be addressed. Call it a rough draft. Then let the butchering begin.

People will gladly change words or phrases. Some of your word choices could spur on lively debates. In the end, the final content may bear little, if any, resemblance to the original document. But that’s okay, because in the end you got what you wanted—a creative document built by, owned by and agreed to by the group as a whole.

So don’t take it personally when your work is butchered. That was the whole idea. It was like me being a pest to get service at the store, airport and car dealer. My goal was not to be a pest, but to use that as a starting point to engage with the sales staff.

2) Blathering
Most executives I know love to hear the sound of their own voices. Getting them to talk is no problem. So take the key issues you want to be addressed in your creative strategic project and convert them into provocative questions. Then, shut up and let the group blather away in discussing the issues.

What comes out of the blathering discussion may not be very coherent or consistent. It can drift onto all sorts of adjacent topics. It will not be a polished piece of creativity. But that’s okay, because you will get a benefit from it. You’ll get the jargon the group is comfortable with, the consensus of how people feel about the issues, and a sense for how people link ideas together.

After the blathering session, you can take all of this raw material and sew it into a beautiful quilt. You take on the creative act of making sense out of the nonsense. You can create great mission statements or other strategic gems that have enough of their jargon in it that they feel they had a hand in writing it. You can prioritize things based on the priorities in the blathering.

In the end, it may not exactly mirror the discussion. Given that strategic choices must be made and more than one option was discussed, you will have to make the ultimate choices. But it will capture enough of the “feel” of the discussion that the group will buy into it as if it were their own.

This is similar to the concept I wrote in a prior blog about taking the minutes of a committee meeting (see"Minutes Last Forever”).

If necessary, after you write up the creative piece, you can subject it to the butchering process mentioned above.

3) Backing
A third approach is to give people the opportunity to vote. Provide some options and ask the group to pick one or to rank order the list. Executives are used to making these types of decisions, so it should come very naturally to them. Once the voting is in, you know what aspects the group is willing to back and which ones they would not choose to back.

Then, your job is to craft the creative document based on knowing what was backed as a priority. Once the votes are in, the decision is made, so the executives should have little difficulty accepting your creativity if it matches the way they voted.

Again, if you want, you can subject your creativity based on the voting to a butchering session.

SUMMARY
The act of creativity can be very difficult for many, particularly the beginning part of starting the process. Therefore, instead of asking people to start creativity from a blank slate, start the process in a less threatening way. Use tools like blathering, butchering and backing to elicit opinions which can then be crafted into the final documents.

FINAL THOUGHTS
When you rely more on criticism than creativity from executives, you will feel the heat of the criticism. Don’t take it personally. It is part of the job. A dear friend of mine used to say that if you want to be successful as a strategist, you had better like pain.

Analogy #170: Night Light

THE STORY
Over the years, I’ve spent a lot of nights in hotel rooms. After spending all of those nights in hotels, I’m convinced that the designers of hotel rooms intentionally try to hide the light switches. They are never, ever where I intuitively think they should be.

When I first enter a hotel room, it seems like the door immediately shuts behind me, leaving me in total darkness. I stick my arms out to feel for a wall. Once my hand touches a wall, I feel around for a switch for what seems like forever. Three thoughts cross my mind. First, why do hotel doors close so quickly, before I have a chance to find a light switch? Second, why isn’t there a light switch within arm’s reach of the door? Third, I sure hope those walls I’m feeling with my hands are clean.

Usually, I am forced to fumble around until I find the hotel room door again (hopefully I find the door with my hand, rather than my knee or my head). Then I prop my luggage in the doorway so that the door cannot slam shut. This allows a little of the hallway light to peek into the room. That hallway light is just enough to help me find the unusual place where the light switch is placed (often nowhere near the door).

The problem repeats itself if I wake up in the middle of the night and need a glass of water or the rest room. It is so dark that I end up stumbling all over the place—stubbing my toes and crashing me knees into furniture—all because I cannot find a light switch. By the time I finally feel my way to the rest room, my eyes are starting to get used to the dark. Therefore, when I finally find the light switch in the rest room, the brightness blinds me so that I still cannot see. So I crash and stumble some more.

One time I had the opposite problem. There was a nice painting over the top of the headboard of the bed. It had a bright light shining on the painting to show it off. Well, I found it impossible to sleep that night with that bright spotlight shining right over my head. It felt as if there was a huge semi truck coming my way all night with its headlight aimed over my head. It wasn’t until the next day that I found the switch to turn it off. It was near the ceiling on a wall nowhere near the painting or the light. I had to get on a chair to turn it off. Is that a logical place to put the switch?

THE ANALOGY
Few things are more frustrating than being in an unfamiliar place and having no light to see what you are doing. As in the story of the hotel, one ends up fumbling around—getting bumps and bruises along the way. If only the hotels had made it easier to find some light, things would go a lot smoother.

Strategies often take your company to places which are unfamiliar as well. The process of innovation or repositioning can lead your people into unknown territory. Because strategies can often have a goal of being the first to own a particular position, you may be going to places where nobody has gone before. There are no maps. You can feel totally in the dark.

In the unknown in the dark, one can end up wandering aimlessly, hurting one’s self bumping into the furniture. Many strategic initiatives can also lose their way in the dark, as people get tired of bumping into unexpected obstacles and give up.

To succeed, one needs to give people handy access to a source of light. With light, the unknown becomes known, so that you can successfully navigate around the obstacles. Your roll, as a strategic leader, is to help people find that light switch.

THE PRINCIPLE
The principle here is that strategic planning does not end when the journey begins. It must stick around for the entire journey, providing the light so that people can see into the unknown. It must illuminate by being both the long range beacon (the North Star) and the close range flashlight (the Illuminator).

1. The North Star (Beacon)
When sailors tried to navigate ships in the dark when on the ocean, there was very little to guide them. The ocean looked the same in all directions. To stay on course, they used the positioning of the distant stars. By knowing that the North Star is always to the north, they could navigate by positioning themselves relative to that known northerly light.

Similarly, when the slaves in the southern US wanted to escape to the north to find freedom, they relied on the phrase “follow the drinking gourd.” The Big Dipper constellation looks like a drinking gourd. As long as one is traveling in the direction of the constellation, one is heading north, because it is always in the northern sky.

This same principle applies to strategies. If properly designed a strategy should have a beacon which—like the North Star—can always be seen and help orient people in the proper direction.

For example, everyone at the Four Seasons hotel group understands that excellence in personal service is a strategic beacon for their company. Therefore, whenever a Four Seasons employee is confronted with an unknown situation and feels a bit lost, all they have to do is look for that beacon (excellence in personal service) and they can quickly reorient themselves to sail through the unknown. Just sail towards the light of providing that excellent service, and you will help move the company towards its strategic goal.

At Wal-Mart, the beacon is “low prices.” When Wal-Mart is confronting the unknown, it just needs to find the light of low prices and the proper path will become apparent. The problems at Wal-Mart during 2007 were due in large part to drifting away from that low price beacon and moving too far into the choppy waters of upscale and fashion.

At Google, the beacon is to organize the world's information and make it universally accessible and useful. Thus far, that beacon has helped them find many great new opportunities in the unknown without getting lost or without losing time stumbling around in the dark.

As a strategic leader, one must continually point out to everyone and remind them where your particular North Star is, so that people can intuitively find it when the unknown occurs.

2. The Illuminator (Flashlight)
The beacon provides the long range light. Looking up to that light, you see the big picture. But sometimes one also needs some short range light so one can look down to make sure that one’s knee is not about to bump into something. That requires a flashlight.

Flashlights illuminate a small area in front of you so that you can know what is directly ahead. In strategy, this is done via knowledge gathering. The more you know, the more you understand what is right in front of you. That allows you to avoid those near-term bumps on the way to your strategic goal.

It is quite common for companies to spend a lot of time and money on research prior to embarking on a strategy. This includes research on the consumer, the competition, the environment, and so on. However, it is not that uncommon for firms to significantly cut back on strategic research once the journey begins.

Once you move down the path of your strategy, changes will occur. Your new actions will cause competitive reactions. Consumers may react to your strategy in a different way than you expected. If you stop the research once the journey begins, your knowledge of the environment will quickly become obsolete. That would be like driving with outdated data in your GPS navigational system. It may have been correct at one time, but if you rely on it now, you may end up crashing into a ditch.

Before Tesco entered the United States with its Fresh & Easy retail concept, it spent considerable time researching the marketplace. It spent months with families, going grocery shopping with them, watching them prepare meals, and taking inventory of their refrigerator contents. This research provided the illumination behind developing the Fresh & Easy strategy.

However, after getting a handful of these stores up and running long enough to have impacted the consumers and the marketplace, Tesco had a preplanned breather in their growth strategy to reassess the marketplace. They wanted to gather new knowledge so that they could illuminate the path in front of them and make the proper adjustments.

There will always be a need for strategic adjustments. Therefore, there will always be a need for strategic research.

SUMMARY
Being in an unknown environment in the dark can be unproductive. Like a dark hotel room, all you end up doing is bumping into things. To be productive, one needs light. Strategic planning can provide two kinds of illumination. First is the long term directional illumination from a simple, universally understood vision statement. As long as that major goal is known, it can act like the North Star to orient your actions in the proper direction, even when in unknown territory.

Second is the near term directional illumination which comes from research and data gathering. All along the journey, strategic information can help update people on what the environment right in front of them looks like. This is like the flashlight that you can point at your feet to make adjustments along the way to avoid obstacles. Flashlights are not just needed in the beginning. They are necessary for the entire journey.

FINAL THOUGHTS
Some hotels have gotten smart and incorporated a night light into their light switches. That way, you can see the light switch in the dark. Don’t forget to put night lights into your strategic journey.