It's All About the Beans

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

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

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

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

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

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

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

1) Strategic Planning is Important

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

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

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

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

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

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

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

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

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

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

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

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

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

2) Focus is Important

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

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

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

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

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

3) Positioning is Important

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

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

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

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

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

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

Strategic Planning Analogy #445: Stifling Creativity

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Strategic Planning Analogy #411: Strategic Pep Rallies

THE STORY
Back when I was in high school, we used to hold a big pep rally for our football team. All of the students would leave their classes to go to the gymnasium and sit on the bleachers. The band would play peppy music.

There would be speeches about how wonderful the football team was. The team would come out on the gymnasium floor. The students would scream with excitement. It was a fun time of camaraderie filled with inspiring speeches and things designed to boost everyone’s emotions regarding the coming football season.

These pep rallies were done because it was felt that it built up fan support and made the team feel more confident about winning. All of this was to help increase the success of the football season.

THE ANALOGY
High School football teams are not the only ones looking for success. Businesses want their strategies to succeed as well. So maybe companies should also hold pep rallies.

In a way, many companies do. Think about those annual strategy retreats. They’re a lot like pep rallies. People leave their offices to congregate together. There is lots of camaraderie and lots of inspiring speeches. People get more emotionally tied to the strategy. Enthusiasm to win is increased.

A lot of people complain about these types of strategy retreats. They think they are a waste of time because not a lot of serious strategic activity takes place. But consider this…you don’t see the football coaches doing serious planning activities at pep rallies. They aren’t sitting there at the pep rally developing their playbook. They are not designing their plan of attack against the next opponent.

I’m not even sure that such activities could even be possible with the band playing loudly and the students screaming in the background. Yet schools continue to hold pep rallies because they see value in the activity.

So maybe there is even value in a strategy retreat when strategy is not created at the event.

THE PRINCIPLE
The principle here is that strategic success requires more than just a well thought out mission and viable plan of attack. At the end of the day, strategies have to be properly implemented by people in order to succeed. Ignore the people element, and even well thought out plans are usually doomed.

People are both rational and emotional beings. And for most of them, strategy work is layered on top of a full burden of day-to-day activities (with lots of pressure to get them accomplished). If you do not break through the clutter of the day-to-day and create enthusiasm for the plan at both a rational and emotional level, the strategy will lose the battle for attention against the day-to-day. Implementation will suffer.

Studies show that strategies typically fail due to weak implementation. Strategy retreats can help “rally the troops” around the strategy in a manner which increases the enthusiasm for the plan. This improves the level of commitment in the people and increases the likelihood of successful implementation.

Here are some suggestions about how to make the best use of a strategic retreat.

1) Don’t Try to Use Strategy Retreats to Create Strategy
As it turns out, strategy creation is a complex, time consuming process. Great strategies cannot be created over a weekend once a year. Besides, not everyone is great at strategy creation. It takes a different kind of thinking to be great at strategy creation. Therefore, trying to create strategy at a strategic retreat is a waste of time. Don’t even try.

Instead of trying to get people to “create” strategy, try to get them to “react” to strategy. As I’ve mentioned in a prior blog, most people are better at reacting to ideas than creating them. Therefore, use the retreat to deal with reactions. Find out:

a) Where the rational and emotional resistance lies among those required to implement it.
b) How the strategy can be improved.

By incorporating this feedback into the plan, you give the people a sense of having participated in creating the plan without actually having a creation session. This minimizes implementation resistance and increases emotional commitment in a very efficient manner. And efficiency is important if all you have is a weekend at your disposal.

Pep rallies don’t create strategies. Follow their lead.

2) Use Strategy Retreats to Break Through the Daily Clutter
It is difficult to get enthusiastic implementation from people who do not fully understand or comprehend what it is they are being asked to implement. Lack of comprehension can be one of the biggest enemies of implementation. Therefore, use the retreat to maximize comprehension and understanding of the strategy.

It often takes time for all the rationale and all of the nuances of a strategy to sink in. It cannot be done in little “sound bites.” Back at the office, where all the daily pressures take place (the “tyranny of the immediate”), about all the time the strategy can get is little sound bites—spoken when the audience is only half-listening. The real benefit of the retreat is that it pushes away the tyranny of the immediate, so that the ears have the time and the attention levels necessary to fully comprehend and embrace the strategy.

Use that time to fully explain why the strategy is so critical to future viability and success. Explain how the environment is forcing a need to change and why this is the best change to take. Explain the dire consequences of the status quo. Show how its importance truly eclipses the day to day. Show why this strategy is worth becoming a priority in their life. Make them BELIEVE in the rightness of the strategy, both rationally and emotionally.

This is more than just lecturing. Make it come alive through demonstrations and role playing. If you let them play the part of the competition who seeks to destroy the company, they will quickly see the vulnerability of not embracing the right strategy. Show them interviews with disgruntled customers. Let them experience the competitor’s products first-hand. Appeal to all the senses—seeing, hearing, touching, experiencing.

Keep the daily pressures as far away as possible. Ban electronic devices. Prevent digressions into daily problems. Don’t let them communicate with the office. That way you have the full attention of all the senses. Then you can make the strategy truly come alive and become something more than just a clever slogan. It is then something real which can be understood, believed and embraced.

3) Use Strategy Retreats to Break Down Silos
Not only does strategy implementation require people, it requires people to cooperate. Cooperation relies on three elements:

a) A willingness for people to set aside personal agendas for the greater good.
b) A willingness to trust others and work together.
c) An understanding of how your role fits within the larger picture—what you are responsible for and how that interacts with what others are responsible for.

Strategy is not a “corporate” thing. It is an “everybody” thing. If people don’t understand how they fit into the implementation plan (and make it a priority), they cannot fulfill their part of making the implementation a success. It has to get very personal at all levels.

Strategic retreats are a good time to break down those individual silos and improve cross-departmental cooperation. After all, this may be one of the rare times when these executives get to interact with each other in a neutral environment where daily pressures don’t get in the way. It is a time to build bonds of trust.

It is a time to show how all the pieces fit together…a time to for people to see how they fit into the plan and what they need to do. Never let a strategy retreat end without people seeing how their role fits into the strategy implementation. You may never get a better opportunity.

Pep rallies break down own individual concerns and get us thinking about the entire school and the entire football team. It makes us want to do whatever we can to help the TEAM win. That sounds pretty good for businesses, too.

SUMMARY
Although strategy retreats are not great places for strategy development, that doesn’t mean they are a waste of time. Strategy retreats are a great place for improving the rational and emotional commitment of people to the strategy. And that goes a long way towards improving strategy implementation. Use them to increase understanding, get feedback and increase cooperation.

FINAL THOUGHTS
Pep rallies are not the only time students think about football. They also go to where the games are played each week. The support follows where the action goes.

The same principle should apply to businesses. The strategy cannot be isolated to a remote location once a year. It needs to come along to where the game is being played every week. Regular interaction is needed so that people are reminded of the strategic implications of their daily decisions. I think that strategists should have an audience with senior management at least once a month in order to keep the commitment to strategic implementation strong all year long.

The retreat should just be one small piece in the larger context of influence.

Strategic Planning Analogy #392: Sunday Best, Part 1

THE STORY
Back when I was a child, I had two types of clothes in my closet. There were the “Sunday Best” clothes, which were only worn to church on Sunday, and the “Everyday” clothes, which were worn the rest of the time.

I didn’t care much for the Sunday Best clothes. I had to button the shirt tight around my neck so that I could put on an uncomfortable tie (something no young boy wants to do). In addition, since I wore the clothes infrequently, they didn’t get replaced as often. That meant that as I grew, the clothes would become ill-fitting and uncomfortable. The shoes were stiff and hard. And then I had to be extra careful not to get the Sunday Best clothes dirty or messed up.

I much preferred the everyday clothes. They fit well and were comfortable. And I didn’t have to worry about them.

THE ANALOGY
Just as the clothes in my closet were separated into two categories, businesses often separate tasks into two categories—Everyday Tasks and Strategic Tasks. Everyday tasks are like the everyday clothes I wore as a child. These are the tasks you do most frequently and where you feel most comfortable. They fit well with your area of expertise. It’s the place you feel most comfortable.

Strategic Tasks, on the other hand, are more like my Sunday Best clothes. These tasks are done less frequently. The Strategic Tasks feel less comfortable because they tend to stretch beyond your comfort zone or area of expertise. Strategic Tasks tend to involve more cross-functional teams where people feel less in charge what they are doing (another source of discomfort). And strategic tasks seem to have less impact on how you are judged for raises and bonuses—so uncomfortable work seems to have little reward.

In addition, there is usually more interference and supervision from corporate headquarters on strategic tasks, which feels choking like that tie I wore to church. This also means you have to be more careful about not messing up, because Corporate is watching. And some of the strategic forms they want you to fill out feel as hard and stiff as those Sunday Best shoes.

It is no wonder, then, why so many people in a company dread working on strategic tasks. They’d much rather work on everyday tasks.

THE PRINCIPLE
The principle here is that if you want effective strategic activity in your company, you need to avoid creating such a large separation between everyday tasks and strategic tasks. As we will see later, this large separation of how we approach these tasks leads to both sub-optimal strategic work and sub-optimal everyday work.

Instead, strategic tasks need to feel more like everyday tasks and everyday tasks need to become more strategic. You shouldn’t feel like you have to change clothes in order to switch from one to the other. It should blend together more.

I will try to illustrate this principle by looking at two tasks which tend to get separated. The goal of finding higher levels of growth beyond historical organic growth tends to be placed in the “Strategic Tasks” category. The goal of lowering expenses tends to be placed in the “Everyday Tasks” category. By labeling them this way and treating them differently in the organization, we sub-optimize. Growth is less than it could be and costs are higher than they could be, because this separation gets in the way of effectiveness. In today’s blog, we will look at the growth issue. In the next blog, we will look at the cost issue.

Growth Ignores the Core
Studies have shown that successful growth tends to be more difficult the further one moves away from one’s core strengths. Yet, when we place the growth mandate outside the realm of everyday tasks, we are almost by definition forcing the task further away from the core.

It tends to work like this. People in the everyday world of the core businesses don’t want all that uncomfortable outside process (called strategy) to get in the way of doing their business. So they wall off their organic business growth from that strategic uncomfortableness and say that this kind of growth is “everyday” work (and should be treated as any other everyday task). That way, they can be left more alone to handle it as they please.

I’ve had several experiences in my career where the operators have done everything possible to try to block my ability to add a more strategic approach to looking at their business growth. They claim that they are the “experts” and that my “interference” into their everyday work will only make matters worse. In their mind “strategic tasks” have no place in their “everyday” work world.

As a result of issues like these, the only uncontested space where the strategic work can usually take place is outside the everyday. The strategic focus for growth then looks mostly at diversifying. It can be a diversification into new products, new customer segments, new channels of distribution, new businesses, or some combination of the above. These are areas where the company is more likely to fail, because their expertise in assessing the risks and/or implementing the diversification may be lacking. Again, as I said earlier, the further you get from the core, the more problematic things usually become.

Worse yet, since “strategic” tasks tend to be less linked to compensation, you may not be getting people’s best effort on these projects. You may only get the time left over after the “everyday” tasks are first completed. There may even be attempts to sabotage some of this new growth if it is seen as a threat to someone’s core business (and the bonuses it produces) or a threat to their position of power in the current structure. Less than full dedication in an area with less than full expertise does not sound like a recipe to optimize your growth options.

The Handoff from Strategy to Everyday
And then comes the problem of implementation. Eventually all of this activity to create new growth has to become a new part of the core business. In other words, it eventually has to be a new form of everyday work. If all of the process to create the diversification was done outside of the everyday, then there eventually needs to be a time of hand-off when the work is transferred from being a “strategic” task to being an “everyday” task.

The more separation there is between these tasks, the more difficult the handoff will be. If the eventual operators of the business (the one’s charged with everyday work) are mostly left out of the loop when the business creation occurs (strategy work), they may not feel as bound to the strategic emphasis behind the startup. They could destroy all that initial effort by taking the handoff in the wrong direction.

I have personally seen this happen over and over and over again. Bad handoffs are virtually a given if the two groups only interact at the time of the handoff. Think about acquisitions (a key way to get into diversification). Most acquisitions fail. And a primary source of that failure is a bad handoff. All those great synergies and growth never happen because the integration of the acquisition into an everyday part of the company fails. The transition goes too slow, not enough cuts are made, and not enough integration occurs.

Why such a bad handoff? It is because those doing the acquiring are rarely the same people who end up running the acquisition (because they are seen as different types of tasks). The separation of tasks hurt the handoff. When you look at companies which are more successful at acquisitions, you tend to see more blending of the tasks, with the everyday people getting input into the process earlier and the strategy people sticking around later. It is shared work, not segregated work.

Making Core Growth Strategic
By contrast to task separation, consider what would happen if the walls were taken down protecting the core businesses from a more strategic approach. You could combine the expert in the area with a fresh set of strategic eyes. Innovative approaches could arise that the everyday person wouldn’t have otherwise seen, because that person may be too close to the trees to see the whole forest. Bad ideas wouldn’t get very far, because the everyday expert would provide a reality check.

Because this type of approach to growth is closer to where people are compensated, one is likely to get more intense effort. And because it is closer to the core, it is more likely to succeed. And because the business is more comfortable here, they are probably going to do a better job of implementing what it takes to create the new growth near the core.

SUMMARY
Companies tend to separate tasks into two piles—the everyday and the strategic. Then each pile is treated differently. By doing so, the everyday becomes less strategic and the strategic becomes less relevant to the everyday. And this is a mistake. To get more value out of each task, the areas need to be better integrated.

FINAL THOUGHTS
Strategy isn’t something that happens way out there away from the everyday. Remember that who you are is just a sum of what you do. Your true position is not what was written on an easel at an off-site planning meeting. No, your true position is what the customers think of you, and most of that thinking comes based on their experience with your brand and what you do. Great strategy doesn’t separate the everyday and the strategic. It realizes that the two need to be greatly intertwined.

Strategic Planning Analogy #138: Stay the Course

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Strategy Takes A Holiday

THE STORY
Over the years, I’ve organized a number of off-site strategy sessions for top management. They tend to go something like this. First, the CEO tells you what time he or she has available, which is never enough time. Then you scramble to find a resort that is available for that time.

Next, you start carving out time for expected activities. For example, the executives always want time for an inspirational speaker as well as time for a golf outing (and maybe some special dinner event).

Then, if you want to have any discussions and get any feedback from all the executives invited, even if you put them into groups and limit their presentations to about 20 minutes apiece, you pretty much have used up an entire day.

So when you subtract out all of these activities, whatever time that’s left can be used for strategic pursuits (which is never enough). After the meeting is over, everyone goes home, and most of the attendees do not think much about strategy until next year’s outing.

THE ANALOGY
I’ve heard people say that they no longer believe in doing strategy, because they see no value in the process. When you probe a little deeper, I typically find out that these people equate “doing strategy” with the “process” of going to a resort for a strategic off-site session. They see these meetings as a waste of time, so they figure that doing strategy is a waste of time.

If the only strategic activity of a company is to have an annual outing at a resort, then I would agree that the “process” of strategy is flawed. As I tried to illustrate in the story, offsite meetings have a number of agendas which often have little to do directly with strategy. A few hours a year is not enough time to give strategy justice.

According to business strategists Gary Hamel and C.K. Prahalad, executives should spend about 30% of their time on strategic activities. In their research, they found that the typical executive spends only about 3% of his or her time on strategy. Without investing serious time in strategic thought throughout the year, strategy off-sites become little more than pep-rallies or worse, boondoggles.

Given that this is the Memorial Day holiday, I thought that it would be good to dispel the myth that good strategy is like going on an off-site holiday.

THE PRINCIPLE
Good strategy involves much more than just showing up at a resort. There are six essential elements to a good strategic process. They are:

1) Research
2) Option Formation
3) Option Selection
4) Resource Allocation
5) Rallying the Troops
6) Monitoring the Process

These are discussed briefly below.

1) Research
Good strategy is rooted in facts. This is not to imply that all the facts need to be in before making a decision, since strategic decisions can often move a company into uncharted territory. However, strategy is more than just wild guesses. Certain things can be known through research, and that research should be done before making strategic decisions.

For example, consumer trends can be tracked in order to get a better idea of where consumer needs are heading. You can find out what consumers think about you—what are you known for? The more you know about the environment and the more you know about your strengths and weaknesses, the better you can determine how to best fit your company into that environment.

All of that takes research…something that cannot be done at a resort.

2) Option Formation
Before one can decide the proper strategic path, one needs to first come up with some strategic options. After all, it’s hard to make the right choice if you have nothing to choose from.

Developing strategic options requires brainstorming around the knowledge gained from the research. Although a limited amount of brainstorming can take place at a resort, I believe that a better list of options can come from dedicating a larger block of time than afforded at an off-site event.

3) Option Selection
Even if one had the time at an off-site event to develop options, there would most likely not be enough time to do that AND choose which option is correct. To know which option is the correct path to choose requires more than just having a list of options. It requires further analysis of these options. One needs to assess the risks, perhaps do a bit of financial modeling. One may need to ponder what unintended consequences may arise from a strategic decision (for more on this topic, see the blog “The Chisholm Trail”).

Hence, even if you want to choose an option at the off-site, someone needs to prepare in advance some assessment of the options—the pros and the cons of each, base on analysis.

4) Resource Allocation
Choosing an option is not enough. One needs some idea of how to make the vision a reality. This requires an understanding of how to allocate your resources—how to spend the company’s time, its talent and its money. In other words, there needs to be some discussion on what work needs to get done, who’s going to do it, and what do they have to work with to get it done.

Given all of the politics and sensitivities related to these issues, these might not be the types of issues which work well in a large, public discussion. With strategy comes power…and some will see their power grow while others do not. Some hard choices need to be made, since there are typically not enough resources to go around. It may be better to do this type of decision-making in a more private, one-on-one environment, than in a large gathering at a resort.

5) Rallying the Troops
Once the first four topics have been covered, the fifth task is to communicate the vision to the organization and rally the troops around supporting the decision. Off-sites are actually rather good settings for this type of activity. You can control the environment at an off-site and get people focused on the vision without a lot of distraction. There are opportunities to motivate people to action through razzle-dazzle and powerful presentations.

Of course, if you skip the first four steps (which require substantial time prior to the event), there isn’t much to rally people behind.

6) Monitoring Progress
Once a strategy is set in motion, the task is still not over. One needs to monitor progress to ensure that:

a) Tasks are getting done properly, timely and within budget.
b) Tasks are leading to the proper outcome. If not, then what modifications are needed to get the strategy back on track?

Neither of these two points can be done at the off-site meeting. They can only be done later, after the strategy is set in motion.

SUMMARY
Strategic off-site sessions at a resort may be a useful (but not the most critical or most necessary) element in a larger strategic process. Without the entire process, however, these off-sites can become little more than “corporate vacations.” Leave the vacations to your personal time, such as the Memorial Day weekend.

FINAL THOUGHTS
Sometimes today, about the most sophisticated a strategic discussion gets is whether or not to sell out to privatization using money from a hedge fund. That type of discussion certainly does not require time at a resort. And I’m pretty sure the hedge fund won’t want you to spend a lot of money on time at resorts, either.