Strategic Planning Analogy #539: Great Players Make Lousy Coaches

THE STORY
Have you ever noticed that top athletes usually make for lousy coaches?

The reasoning behind this is simple. The great athletes have natural skill and abilities far above the norm for the sport. They are naturally good because they are naturally gifted. It all comes too naturally for them. They don’t even really have to think about it. They just naturally perform well.

As a result, top athletic performers have no real connection with the struggles of the average athlete. The top athletes never had those kind of struggles. They never had to think about how to overcome them.

As a result, the top athletes are relatively clueless as to how to coach the average player through all of this. Their coaching can sound a little silly to the average player when they say things like:

“Just hit the ball to where you want it to go, like I used to do.”

“Just run a little faster, like the speeds I used to go.”

“React faster to the action around you, like I did.”

“I don’t know how I did it. I just did. So you do it, too.”

That’s why average players usually make better coaches. They’ve had to struggle. They’ve had to think of ways to overcome the struggles. They’ve had to find ways to motivate themselves when times were tough. They’ve had to listen more closely to the teaching of their coaches. They’ve had to try a lot of different approaches to the game in order to find their edge.

The journey of the average player is usually a better learning ground for gaining the skills needed to be a coach. So don’t hire the superstar player to coach your team. Hire average.

THE ANALOGY
The CEO is sort of like the coach of a team. Sometimes when looking for the next CEO, we look for the replacement among the best performers in the company. Since they are such great performers, then they will be a great CEO, right?

But that’s like saying the best athlete will be the best coach. It is not necessarily true and is most likely a false assumption.

Therefore, we need to be very careful when choosing our business leaders. The pool of our best performers may not be the best place to look.

THE PRINCIPLE
The principle here is that different roles require different core competencies. Therefore, excelling in one role may make you unsuitable for another role if the needed competencies are radically different between the two roles.

For simplicity’s sake, we will illustrate this principle by dividing a company’s work force into three layers: The Frontline, Mid-Management, and Leaders. As we will see, excelling at one lever does not ensure success at another level.

The Frontline

The frontline is where the basic work of the business occurs—the manufacturing of the manufacturers or the service of the service industries. Success at the frontline is all about doing your task and hitting your numbers. If you have a specialty, success is about being the best at doing that specialized work.

Therefore, the core competencies to excel at the frontline are twofold: a) understanding your task, and b) doing it at the speed and quality required (if not better). Do that well, and you will be a frontline superstar.

Mid-Management

Mid-management is the connection between the leaders and the frontline. Mid-management tries to appease the leaders by making sure the expectations of the leaders are met by the frontline.

Therefore, the core competencies to excel at mid-management are to: a) understand what the leaders want, b) motivate the front line to get it done, and c) report the results back to top management. Do that well, and you will be a mid-management superstar.

Leaders

Leaders run the company. Their job is to decide what the company should be doing and make sure the business has the competencies, capabilities and resources to pull it off.

The core competencies of leaders are: a) Vision, b) Communication, and c) Appeasing all the conflicting demands of the various stakeholders (shareholders, bankers, employees, the community, etc.). Do this, and you are a superstar leader.

The Difficulty of Moving Between Layers

Although these are very simplified descriptions, they do show how each layer in an organization is different. The core competencies are different as well.

The top frontline performers are great doers of a task. But that doesn’t mean they will continue to be top performers if promoted to mid-management. Mid-managers are not expected to be great doers of a task. They are expected to be able to motivate large numbers of other people to do a task. That’s a different skill entirely.

It is like automatically expecting an athlete who was naturally great at throwing to be naturally great at teaching others to throw. As we saw above, that tends not to be the case. And so is the case in the business world.

Since the top frontline person succeeded by doing, they tend to revert to that when a mid-manager. The result is unhealthy micro-managing—an attempt to continue doing rather than motivating.

Similarly, if you find a top mid-manager, that does not necessarily mean that they will excel at leadership. Mid-managers excel at getting someone else’s goal accomplished. Leaders, by contrast, are the ones that have to dream up what is to be accomplished.

The skills needed to get a task accomplished are far different from the skills needed to determine what should be accomplished. Therefore, promoting a top mid-management performer to leadership does not guarantee success.

Therefore, when a top mid-management performer is promoted to leadership, they resort back to their old skills of getting someone else’s vision accomplished. So they take the vision already in place and keep pushing that agenda, even if that agenda is no longer relevant. They don’t change the vision with the times, because they weren’t skilled at that vision thing. So the company becomes obsolete and dies.

Relevancy for Strategy

Great strategies rely on great insights, great vision, and an ability to think outside the box. These are not qualities needed to be a superstar at the frontline or mid-management. Therefore, if you promote from the top of the frontline and mid-management ranks to get your top leadership and strategic leadership, there’s a very good chance you will not get those necessary qualities. Therefore, you run the risk of having lousy strategies.

It drives me crazy when I see companies promote people into key strategy positions who do not have the core competencies for strategy. They may be great at budgeting, financial models, implementation, or operations, but that doesn’t mean they have a clue about insights and visioning.

There are three ways to mitigate this problem, First, hire for the part. If you want a great leader at the top or in strategy, hire people with the skills needed for that part. Instead of looking backward to see how well a candidate was at doing or implementing, look forward to see how they are at visioning and insights. So what if they were only mediocre at doing or implementing, so long as they are great at what the new role requires.

Second, train your leaders to be better at the skills of leadership. There are ways to make people better at the skills of visioning and insight. Invest in your leaders to shore up these key competencies.

Third, don’t be afraid to bring in the experts. There are all sorts of strategy experts out there who would be happy to consult with you. They have the proper skills. Take advantage of them.

SUMMARY
Just because one is a top performer at one level of an organization does not mean that person will excel when promoted to the next level. Since the core competencies needed at the new level are different than the former, there is probably a greater likelihood that the person will no longer be a top performer after the promotion. To minimize this problem:

1. Promote people based on the new skills rather than the old.
2. Train people to become better at the new skills.
3. Hire experts/consultants to help.

FINAL THOUGHTS
Don’t hire a superstar athlete when what you need is a superstar coach.

Strategic Planning Analogy #461: Watersheds

THE STORY
Years ago, I was hiking in a wilderness area in northern Minnesota.  I felt like I was out in the middle of nowhere.  But there on the ground was a small plaque.  The plaque said that I was standing at the Hill of Three Waters.  This was the point where three great watersheds meet.

To the north of this point, all of the water flowed north to Hudson Bay in Canada and into the Arctic Ocean.  To the southeast of this point, the water flowed into the Great Lakes and the St. Lawrence Seaway, eventually flowing into the Atlantic Ocean.  To the southwest of this point, the water flowed south into the Mississippi River and eventually into the Gulf of Mexico.   All three watersheds get their start at this point in the wilderness. 

Of course, since this was the high point in the area, there really wasn’t any water here.  It had already drained into the three great watersheds.  So I poured a little water on the point to see which way it would flow.  It didn’t flow at all.  I was just absorbed into the dry ground. 

So much for my great experiment.

THE ANALOGY
Watersheds are powerful systems.  They channel huge amounts of water into a singular direction.  The force of gravity pushes the water on its predetermined path.  The water doesn’t have a choice.  It goes in the direction dictated by the watershed it is in.

The water doesn’t get to vote on where it goes.  If it is in the Northern (also called Laurentian) Watershed, it will go to Hudson Bay.  If it is in the St. Lawrence Watershed, it will flow to the Atlantic Ocean.  If it is in the Mississippi Watershed, it will flow towards the Gulf of Mexico. 

Similar forces take place in society and in business systems.  Certain situations will come together in such a way that the pull on the economy will be like the gravity on the watershed.  Society will naturally flow in particular direction and you won’t be able to do much to change it.  If your strategy runs counter to the flow of society, it will have difficulty succeeding.  However, if it exploits the power of the watershed, then success can be multiplied many times over as cash naturally flows in your direction.

THE PRINCIPLE
The principle here is that business ecosystems operate like watersheds.  Individual companies/brands have the power to not only exploit the forces of these watersheds, but to change the contour of the watershed.  Just as a bulldozer can change the contour of the land, a business can change the contour of the marketplace.  The result can cause even more cash to naturally flow in your direction.   Therefore, strategic planners need to consider more than just their own internal business.  They need to create plans which encompass the entire watershed.

We will now look at four key points in planning the watershed and then show examples of two companies which have done this well.

1) The Flow is Most Obvious Near the End of the Journey

When I was at the Hill of Three Waters, I could see no evidence of the three watersheds.  The land was dry.  This is because the beginnings of the water flow are very small.  However, if I were to go to the ends of these watersheds, I could easily see the power of the water flow.  As the Mississippi River gets near the Gulf of Mexico, or the St. Lawrence Seaway gets near the Atlantic Ocean, you can see the great accumulation of water moving strongly towards its goal.

But here is the problem.  By the time the flow of the watershed is that obvious, it is really strategically too late to do much.  The flow is already set in place.  And just as the end of the flow is a consolidation of huge number of earlier tributaries, mature business watersheds are consolidated into a small handful of firms.  It is too late to break in and make a big difference.  This is not the time to push into the system.  The winning company (river) has already been determined.

So the dilemma is this…the best time to make a strategic move into a business watershed is early on, when you have more power to control the flow to your advantage.  However, that is also the hardest time to detect where the great watersheds would be.  It is not as obvious. 

As a result, companies need to step away from the obvious of today and envision where future flows of cash could go.  This is part research (science) and part imagination (art).  Consider the beginnings of Starbucks.  The idea of converting a society used to buying cheap coffee as an ingredient in supermarkets to buying expensive finished product coffee in restaurants was not obvious.  That new ecosystem (watershed) really did not exist in the US at that time.  It looked like the dryness of the Hill of Three Waters. 

Yet instead of going down the established flow of the old system, Starbucks crossed the divide and created a new watershed.,,and was very successful.

This is somewhat akin to the Blue Ocean Strategy approach.  Rather than fight the flow of water when it is strongest against you (in a mature structure at the end of a watershed), go to a new location and build your own flow of water.  This is where you have the power to mold the flow to your advantage.

So don’t just strategize around where the water is today.  That game is likely already set against you.  Go to new watersheds, where you can build flows that come to you.

2) Manage the Entire Watershed

Depending on the contour of the land, more or less water will flow in your direction.  Similarly, the contour of the marketplace will determine how much flows towards a particular company.  Suppliers have choices.  Distributors have choices.  Customers have choices.  If you proactively contour the marketplace, there will be a natural desire for those choices to be made in your direction.  Just as gravity naturally moves water in a particular direction, your actions to shape the greater marketplace will move business in your direction.

Don’t assume that if you run your small part of the ecosystem well that everything will naturally flow your way.  It may not.  Take strategic steps outside your small part to encourage the rest of the ecosystem to give you preference.  By working together, Microsoft Windows and Intel created a strong “Wintel” watershed which made software developers and computer manufacturers naturally prefer to work with them over any competing system.  It became a near-monopoly standard.  Like gravity, practically the entire business computing world flowed in the direction of Windows and Intel, because they locked up all the key players into their watershed.

As we shall see below, Apple and Wal-Mart have also been extremely successful because they built strategies to encompass the entire ecosystem.  This forced more business to flow through their core operations.  This doesn’t mean that you have to own the entire ecosystem.  But it does mean you need to exert a degree of control over it.   Spend time to find ways to create advantages with all the players in the system.  Help define the standard operating procedures for the entire system in your favor.   Make this a key part of your strategic plan.

3) Grow By Exploiting the Flow You Already Control

One part of strategic planning is to find new avenues for growth.  This is often best accomplished by taking advantage of the advantages one has already developed in the marketplace.  In other words, take advantage of the strong water flows you have already created, rather than start from scratch.  This is akin to the idea of building on one’s core.

The problem is that businesses which appear to be near the core may not necessarily benefit from your watershed.  Consider Anheuser Busch a few decades ago.  They saw the salty snack business as being very similar to their core beer business in the US.  Both businesses used direct store delivery to get to similar retailers.  Both businesses were relatively inexpensive indulgences.  They were often consumed together.  So Anheuser Busch made a big push into salty snacks with Eagle Snacks.  It failed.

Why?  As it turns out, all the power flowing through Anheuser Busch’s beer business really didn’t provide a competitive advantage in salty snacks.  Rather than being the same watershed, they were parallel watersheds.  And the salty snack watershed was already mature and flowing into Frito Lay.    

Example #1:  Wal-Mart

Wal-Mart was successful because it followed these principles of the watershed.  In the beginning, rather than fight the entrenched watershed of discount retailing which flowed through large cities, Wal-Mart crossed the divide and built a watershed flowing through small towns.  Here, the game was wide open and they could write the rules in their favor.

Second, Wal-Mart knew that to be successful in small towns, it would need to control the entire supply chain (watershed).  It built its own distribution network, to make it the most efficient path to reach small towns.  It built the most sophisticated data network, so that it knew what was happening across the system.  This created the superior system, so both customers and vendors flowed to its stores like gravity.

Finally, when Wal-Mart wanted to grow beyond its US base of discount stores, it stayed within its watershed.  It added food to the mix to create supercenters.  This took advantage of the infrastructure and power already in place and made it even stronger.

Example #2: Apple

When Steve jobs came back to Apple, he didn’t try to fight the entrenched Wintel watershed.  Instead, he crossed the divide and created a new watershed around specialized portable computers dedicated to music (the iPod).

Apple did not just create the iPod device.  Instead they created the entire ecosystem, with the iTunes store, the Apple store, the software to easily download tunes, and so on.  As a result, they had designed the contours of the digital music space so that they were the superior place for everything to flow.  It all worked together well because the entire system was strategically designed to work together well.

Finally, when it was time to diversify and grow, Apple built off the strengths of the iPod watershed and exploited them with the iPhone and the iPad.  They utilized many of the same strengths Apple had already built in the marketplace.  The music flows flowed into the phone and the pad.  The distribution channels, the strength in design, the app store as an extension of iTunes, and so on.  It was building on prior flows, rather than starting over.

   
SUMMARY
Exceptional levels of success require exceptional levels of business activity to flow in your direction.  This does not occur by accident.  It occurs when one proactively makes plans for the entire business ecosystem.  And it is easiest to influence the direction of the ecosystem when it is still young.


FINAL THOUGHTS
Once your watershed is built and the water is flowing strongly in your direction, there can be a desire to just sit back and enjoy the flow.  Unfortunately, the business landscape is not as stable as a physical landscape.  Society may shift; competitors may dam up your river; rain may pour into a new watershed.  You need to remain diligent in managing the watershed.

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 #396: Short Timer

THE STORY
I knew a man who spent his career in retail operations. To advance your career in that field, you have to move around a lot from city to city. First, you are an assistant manager in one store…then you move to be store manager in another city…then you move to become a district manager, then a regional manager, and so on. These people move more often than a career military person.

My friend said that for a large part of his career, he moved on average about every two years. When you move every two years, you become an expert in how to move. This is what he learned:

1) Always buy a “starter” (entry level) home. They are the quickest and easiest to resell when you have to move again.

2) Buy a home where everything is already fixed up to perfection (no “fixer-uppers”). Why? First, you won’t have time in two years to do all the necessary repairs. Second, a home in great shape now will probably still be in great shape two years later when you sell it. This way, my friend never had to bother with painting walls or repairing roofs and still had a great looking house that would be very easy to sell.

By following these rules, my friend made moving in and out as easy and effortless as possible.

THE ANALOGY
When you know you are only going to be somewhere for a short time, you act differently. Before going into the situation you already have a plan for getting out quickly and easily. You make choices that a long-timer would not make.

In the case of my friend, he didn’t get emotionally attached to his homes. He just wanted something easy to buy and easy to sell. He didn’t want the responsibility of investing a lot of time, money and energy in fixing them up. They were just a place to temporarily sleep until he moved to the next temporary location.

A similar situation can occur when people chose where and how they will work. If employees (or even leaders) expect to be with the company for only a short period of time, they will make different choices. They will choose different types of jobs and companies go in with. They will look for places with a relatively easy and effortless way to get out. They will not get emotionally attached. In other words, they will treat the company just like my friend treated his houses.

For example, why try to tackle a difficult strategic repositioning if you only expect to be in the job for a little while (especially if you are a leader)? After all, repositionings are difficult work. And all that effort usually reduces near-term earnings. By the time the new strategy kicks in and financials rebound, the short-time leader will have already planned to move on.
So a short-timers will ask themselves: why put up with the difficult work and get blamed for the temporary downturn, just so the successor can get credit for the rebound? No, short-timers would rather choose a situation where things are humming along just fine and nothing serious needs fixing. They will avoid fixer-uppers…just like my short-timer friend and his houses.

THE PRINCIPLE
The principle here is that long-range strategic plans are difficult to implement in a culture with a short-term orientation. The commitment needed to transform a business long-term just isn’t there when people plan to move on before the task is completed. Consider the fact that for many C-level positions, the average tenure is only three years or less (about the length of time my friend stayed in his home). That doesn’t provide much incentive for aggressiveness on implementing five-year plans.

In these cases, short-term people instead look for the easy, immediate return—something that will bear fruit while they are still around. Unfortunately, near term gains are usually fleeting. Often, they aren’t even true gains—they are merely borrowing from the future.

Remember all those government incentives during the great recession, like “cash for clunkers?” These incentives temporarily increased the sales of cars, appliances and houses, but when the incentives ended, the sales plummeted. As it turns out, that sales bump was not additional sales. It was merely future sales made earlier. A similar situation often occurs when businesses seek a short-term stimulus.

If you want large, transformational improvements which will last, you need to go beyond minor tweaks to the status quo. You need to implement transformational strategic initiatives. And that takes time.

Therefore, strategic planning cannot be satisfied with merely dreaming up a great vision of the future. The plans also need to address the barriers which can get in the way of implementation. And one of those barriers can be a short-term culture.

Here are some suggestions about how to overcome this barrier.

1) Hire Well
When hiring, look for people who not pre-planning their departure as a short-timer. Look for people with longer-term commitments, people who become more emotionally invested in the company. I know that lifetime commitments are a thing of the past, but at least you can weed out the worst short-term offenders.

I have seen this at high profile companies which look good on a resume. They are places people like to say they are from. They are a great step to somewhere else. If the only reason people want to be with you is so that they can use it on their resume to go somewhere else, then you shouldn’t want them on your team. They are merely mercenaries. Avoid them, as I have spoke about in earlier blogs (here and here).

2) Create Bridges to Larger Issues
If you want emotional commitment, give people a reason to get emotional. Create visions which transcend merely making money and embrace larger agendas and causes. Younger employees in particular are concerned about the impact the places they work for have on the greater society. If you link up to these causes, you can get greater commitment to achieve your long-term objectives. Even if they don’t have much emotional commitment to your firm, you can still tap into the emotion around causes that are meaningful to them, no matter where they work. Google has embraced “do no evil.” Wal-Mart has embraced “sustainability.” It can be done.

I spoke more about this topic in an earlier blog.

3) Change incentives
People tend to act based on the way they are rewarded. If you want to encourage long-term commitment, then create incentives which reward long-term gains. Bonuses can be stretched out over time. Rewards can be based on future stock prices. Payouts can be determined in part by outcomes which take place even after a person has moved on. Penalties can be placed on gains which are merely shifting sales forward. Perhaps long-term efforts can be diced up into a series of smaller steps, where achievement of smaller steps are rewarded.

I know these can be tricky to implement, but there are ways to at least put some rewards into a long-term pool which only pays out when long-term goals are achieved. That way, even if people aren’t there for the whole journey, they have a stake in helping make the journey occur.

SUMMARY
Truly transformational strategies take time to implement. In a world where many employees (and their leaders) don’t plan on being around very long, trying to get effort around implementing the transformation can be difficult. Therefore, a portion of the strategic plan needs to address these barriers and find ways to encourage commitment to longer-term efforts.

FINAL THOUGHTS
I worked with a CEO who was close to retiring and did not want to take on major transformational efforts in his final years. Fortunately, the internal person who succeeded him as CEO had been listening and he implemented the strategy once he took over. What I learned from this was that sometimes you have to shift your strategic appeal from the current leaders to the next generation of leaders. After all, the next generation has more at stake in the long-term. So when you are going through the strategic process, make sure you include the future leaders in the discussion. They can be some of your best allies.

Strategic Planning Analogy #371: Strategy by Spying

THE STORY
Back in December, I visited the Museum of Communism in Prague. It was a very interesting museum. One display talked about all of the spying that was done back around the 1950s. The Communist governments in those days did not trust the loyalty of their people, so they continually spied on their citizens in order to assess their loyalty.

The museum showed examples of some of the spying devices used back in the 1950-60s. There was a special camera mounted onto a rifle frame for taking long-range photos. There were also all kinds of tape recorders. However, the most common form of spying was by just getting people to talk to officials about their neighbors.

This was a very expensive and labor intensive program, and the results were usually not very meaningful. Therefore, the spying on citizens by the Communist governments was eventually scaled way back.

Today, it’s a lot easier to know what’s on people’s minds. All you have to do is go to their Facebook page, listen to their Tweets on Twitter, or visit their blog. People today seem willing to volunteer all sorts of intimate details about their lives and their passions—for free. Burglars know exactly when it is safe to break into people’s homes because it is so easy to track where people are.

With data so easy to obtain, it kind of takes away the fun of being a spy.

THE ANALOGY
The communist governments did not get a very good return on all the investments they made into spying on their citizens. Yet today, many businesses are following a similar tactic. They are, in essence, using internet tools to “spy” on their customers. It may be wise to ask if the returns on those investments are worth it.

In fact, customers are so willing to share a dialogue with businesses that it can hardly even be called spying anymore. This has led to a business strategy approach I call “Do Whatever The Customer Says.” The reasoning behind the approach is as follows:

1) Companies succeed by serving the needs and wants of the customers.

2) Customers know what they want.

3) Technology makes it easy to find out what they want. It’s hardly even spying anymore.

4) So use the technology to find out what the customers want and then give it to them. In other words, the strategy becomes “do whatever the customers tell you.”

Unfortunately, these premises are wrong. As a result, the conclusion is wrong. And just as the communists eventually figured out that managing a county by spying on their countrymen was not very effective, companies will eventually figure out that managing a business by spying on their customers is not very effective, either. Just because it is easier does not make it better.

THE PRINCIPLE
The principle here is that although much benefit can be gained by staying close to the consumer and listening to them, this is not an effective way to create company strategy. There are two basic flaws to the “Do Whatever the Customer Says” approach to strategy.

First, companies do not succeed merely by serving the needs and wants of the customers. Instead, they succeed by having a viable business model. As we will see in a minute, these are not the same thing. Second, customers do not always know what they want, particularly when it comes to new and transformational ideas for which they have no prior exposure.

Therefore, if serving the customer is not necessarily the core of success, and the customer is not always knowledgeable about the best way to serve them anyway, then why put them in charge of determining your strategy?

Let’s dive into this a little bit more, to explain this in more detail.

1) Your Goals and Your Customer’s Goals are not Necessarily the Same
Customers’ goals tend to center around things like solving their problems, increasing their enjoyment, or enriching their sense of self-worth (status issues). By contrast, a company’s goals tend to center around things like making a profit, providing its investors with an adequate return on investment, or providing a great income (or status) for its management, etc. As it turns out, you can focus on meeting those customer goals (and succeed wildly), yet still not achieve the company goals.

For example, look at companies like Facebook and Twitter. Both are wildly successful at meeting an aspect of consumer goals. Large sectors of society love them and use them all the time. However, neither company is providing an adequate return on investment. And unless these companies change their business models, I highly doubt they will ever achieve an adequate return on investment.

At the current time, the Facebook and Twitter business models are broken. They will not lead to the types of returns necessary to pay back their investors at an adequate rate relative to the size of their investments (particularly the latest investments in Facebook brokered by Goldman Sachs). And, for the most part, the users do not care about the fact that Facebook and Twitter have broken business models. In fact, they like many of the reasons why it is broken, because the lack of adequate monetization makes the businesses “free” and more consumer-friendly.

Many of the ideas which have been thought of to “fix” the business models of companies like Facebook and Twitter require monetization schemes which the customer does not want. And the consumers have made it clear that if the business model is tweaked too much against them, they will bolt, en masse, to an alternative which does not impose those negative constrains on them. With all the cash-rich investors out their looking for the next “Facebook” or “Twitter”, a start-up with the old broken business model will be well funded and replace them, leaving Facebook and Twitter in the dust if they monetize improperly.

The point here is that just pleasing the customer is not good enough. Pleasing the customer does not necessarily lead to a long-term successful business. Businesses need a viable business model in order to succeed. And since customers really don’t care all that much about your business model, they are the wrong people to ask to develop that business model for you. Their advice will lead to a business model which maximizes their concerns, not yours. And that will lead to financial ruin.

Yes, a successful business model depends upon having customers willing to patronize it, so you cannot ignore their needs and wants. However, if your business model is solely based on doing whatever the customer says, it most likely will not succeed over the long haul. This is because their goals are not the same as your goals.

In other words, you cannot abdicate business model development to the consumer. You must control it internally. You need to make the tough decisions—the difficult tradeoffs—which balance the needs of the customers against the needs of the company. You cannot always give the customer everything they want, because they will want it all and they will want to pay less for it than it costs you to deliver it. These are tough issues to deal with, and require sophisticated strategic planning (and serious thinking time) to resolve. The answers will not come from a quick question broadcast to your customers.

2) Customers are Poor Sources for Transformational Ideas
The second problem with abdicating strategy to your customers is that fact that they are not the best source for creating something new within the unknowns of the future. Customers, for the most part, are focused on near-term concerns. The problems of today are more than enough to occupy their mind.

If you ask a customer what you should change to be better, most of the answers will be incremental improvements to what already exists. In other words, they can tell you how to tweak the status quo. However, they rarely have the insight to create the next great paradigm shift. Consumers have almost never begged for what became the next big revolutionary thing before it occurred. Consumers didn’t beg in advance for the Apple iPod business model or the iPhone Apps Store. Consumers didn’t beg in advance for the Google search algorithm. Consumers didn’t beg in advance for Facebook. They only reacted after it was presented to them.

Why? Customers are great at telling you what bothers them about things they have experienced. However, they are not that good about discovering things for which they have no prior experience. They have not yet experienced the future, so they are not good at articulating the best way to approach the unknown.

Consumers are too busy trying to live today’s life and cope with the current crisis. Their lives are preoccupied just trying to stay afloat while swimming in the current red seas. They are too busy to imagine for you some yet-to-be discovered blue ocean. If you find it, they may follow, but they will not find it for you.

Their job is not to preoccupy their time pondering revolutionary new ways for you to make money off of them in the future. They do not have the time nor the inclination to do so. That’s YOUR job. YOU need to devote the time and energy into envisioning a better future. You can use the customer as a sounding board to evaluate your visions, but don’t use them as the primary source of your vision.

Envisioning a radical new future takes the time and effort that will only occur if you proactively devote meaningful amounts of internal resources to that effort. It will not come by merely asking a question to your customers.

SUMMARY
While it may be true that it is impossible for a company to succeed if it does not please customers, it is equally true that it is impossible to succeed if all you do is what the customer tells you. First, the company’s needs are not identical to the customers’ needs, so if all you focus on is the customers’ needs, you may not fulfill the company’s needs. Second, customers may be good at providing incremental improvements to the status quo, but they are not well equipped at inventing a radically new paradigm for you. Therefore, Strategic Planning should not be abdicated to the customer. This is your responsibility and you need to be proactive at it, devoting sufficient time and effort to the cause.

FINAL THOUGHTS
The Museum of Communism showed that even with all the power behind the communist system, it could not endure, because it was a flawed model. Similarly, all your power will not save you if you have a flawed business model. Eventually, you will fail like Communism. This task is too important to be left entirely to the consumer.

Strategic Planning Analogy #348: Bigger Vision

THE STORY
Back in the 1980s, David Graham was trying to figure out a way to revive the economy of southwestern Indiana. His conclusion: the economy was poor because there was no interstate highway running through the region.

Mr. Graham tried to get the government to extend interstate 69 from central Indiana to southwestern Indiana. Unfortunately, a 1990 study said that the project didn’t make financial sense. Nobody in government would back the project.

Normally, that would be the end of things, but then Mr. Graham ran into David Reed. Mr. Reed had a broader vision. Interstate 69 already ran from the Canadian border southwesterly towards central Indiana. What if this road was extended all the way to Mexico? It would become the centerpiece symbolically connecting the three countries of the newly being formed North American Free Trade Agreement (NAFTA).

All of the sudden, interstate 69 was getting fans from all over the country. All the politicians from areas located along the pathway to Mexico were rushing to back the plan. Large, national lobbyists were backing the plan. It was getting attention at the nation’s capital.

And, of course, if a road is to be built all the way to Mexico, it will have to go through southwest Indiana.

THE ANALOGY
This story is based on a review of the book “Interstate 69,” which appeared in the Wall Street Journal. The concept here is fascinating. Mssrs. Graham and Reed took a local project which nobody was interested in and made it a national passion all because they found a way to attach their local agenda onto something larger which others could get excited about. Had they stuck to just their own local agenda, nothing would have happened.

Every business has its personal agenda—things which they want their business to accomplish. They may want to increase sales, or increase production or increase profits—something which will benefit the company. However, if a business only promotes its own personal agenda, it may not get much support. Why should others help promote the profitability of any one business if there is nothing beneficial in it for anyone else?

If a business wants assistance in getting its personal goals accomplished, it helps if you can align those goals with a greater purpose which has an established base of supporters. That way, as all the support behind the greater purpose moves forward, you can ride the coattails and get your agenda accomplished as well.

THE PRINCIPLE
The principle here is that strategic planning often needs to reach beyond just what is in the interest of the company to include a broader base of constituents. Unfortunately, it is easy to get caught in the trap of localism when devising strategic plans. By this, I mean strategic planning which only selfishly looks at what is best for the company. After all, isn’t the primary goal of strategic planning to create a better future for the company? What could be more selfish than to create plans to improve a business’ prospects for success?

However, the irony is that often one can be even more successful if effort is diverted from a purely personal agenda to a larger agenda. Rather than starting a strategic planning process by asking “What will make me better?,” perhaps a better question is “What great, larger cause can I get behind that will open doors of opportunity for my business?” Because Mr. Graham got behind a larger cause of building a route between Mexico and Canada, he significantly increased the likelihood of getting the opportunity to have a major interstate expressway run through southwest Indiana. If he had stayed focused on just what is best for southwest Indiana, the potential of getting that expressway would have been 0%.

Department Store Example
There are many examples of this principle in action. I am reminded of a book called “Merchant Princes,” which came out in the 1980s. This book told the stories of the families which built all of the great local department stores in the U.S. back in the late 1800’s. In almost every case, these leaders spent a great deal of time on projects beyond the scope of their department stores. In particular, they spent a lot of time on projects designed to boost the economies of their local community.

These leaders knew that economic growth is not spread evenly. Some communities grow faster than others. They also knew that there was a greater chance that a community would grow better than average if there were groups designed to proactively promote the community. And if this larger agenda of building a strong, growing community was achieved, there would naturally be greater opportunities for their local department store to take advantage of that growth.

If these department store families went around begging community leaders to make them more profitable, they would not have gotten much support, if any. But by asking people to help them create a better local community, they got a lot of support. That support indirectly benefited the department store.

By contrast, what if these department store leaders had only concentrated on their own local business? They could have built one of the greatest department stores on the planet. However, if they ignored the larger issue, that store could end up located in a small, shrinking, dying economic area. All their effort would be for naught. Without growing populations of prosperous people, there is little chance for those department stores to be successful. It is only by embracing the larger agenda that they could maximize their local agenda.

Automotive Example
A more recent example would be in the automotive industry. The great recession was making it difficult for automotive companies to survive. The industry players needed help. They discovered that they were more likely to get government assistance if they embraced a larger agenda. That larger agenda included things like trying to protect local jobs and trying to move to greener electric automobiles.

A lot of people would be against bailing out wealthy business leaders just so that they can become wealthier. However, if you tell them they are helping to save jobs and save the planet, then you are more likely to get support. And indirectly, that effort to save jobs and save the planet also saved some automotive businesses.

Applying the Principle to Strategic Planning Process
So how do we apply this principle to the strategic planning process? Well, instead of focusing the planning process on one question, we should consider three questions. The one question we usually focus on is “How can I build my business?” This is the selfish, narrow question. To this, I would like to add two more questions:

a) How Can I Build My Base of Alliances? And
b) How Can I Build My Base of Opportunities?

Again, the irony is that if we spend less time focusing on “How to build my business” and divert some of that effort to building alliances and opportunities, we will end up building a more successful business.

Building Alliances
Mr. Graham improved the likelihood of getting his highway when he started moving his focus to building alliances. He started the Mid-Continent Highway Coalition. This became a tool for gathering a broad base of allies. The more allies he had, the more voices there were putting pressure on the government to get the highway built. To get those allies, he had to change his strategic vision to include more than just concern over southwest Indiana.

When you are creating your strategic vision, are you making it broad enough to entice allies to rally around your cause? Are you then building tactics around that vision to proactively seek a broad base of allies? Are you then building tactics to leverage your allies to your mutual benefit?

Building Opportunities
As part of Cisco’s strategy, they spend a great deal of effort sending people to developing nations to teach them about the benefits of investment in telecommunications infrastructure. They are not selling the benefits of Cisco. They are selling the benefits of infrastructure. Cisco points out how telecommunication infrastructure investments can be the best and fastest path to get a developing nation to the next level of prosperity. It will make the leader of that nation a hero.

The goal of these efforts is to build more infrastructure creation opportunities. Cisco does not always win the bid to build that infrastructure when it goes to bid. However, by devoting effort in the strategy to education, Cisco creates more occurrences when a developing country decides to build such an infrastructure. So even if Cisco doesn’t win all the bids, it ends up with more business than it would otherwise have gotten, because it has created more business to bid on.

This is like the department store leaders who worked on building prosperous cities. There was no guarantee that all that prosperity would be spent at their department store, but it certainly increased the potential pool of money that they had the opportunity to go after.

How much of your strategy is spent on building the opportunity pool to extract your business from? Being the best soccer player in the world while working in a country which hates soccer is not nearly as lucrative as being merely a very good soccer player in a country which worships the sport. Just as building the sport builds the player’s potential, spending time building your industry can improve your company’s potential.

SUMMARY
The irony is that if you want to selfishly optimize your success, it usually pays to spend less of your strategy time on your selfish ambitions and add to your strategy broader concerns. These broader concerns tend to provide you with more allies and more opportunities, which in the end provide greater potential for those selfish ambitions. This is not about merely doing good for the sake of doing good, but about building a stronger path to a larger pool of profits.

FINAL THOUGHTS
Most of the extension of interstate 69 still isn’t built. Even if you have lots of allies, when money is tight, progress is difficult. However, the state of Indiana has recently started work on extending interstate 69 into southwest Indiana. And that is success that would not otherwise have occurred.

Analogy #198: The Magic Eye

THE STORY:
Back in the 1990s, there was a popular entertainment diversion called the “Magic Eye.” These were colorful pictures that at first glance looked like just random patterns with no meaning. However, if you changed the way you looked at them, you could see a 3D image pop out of them and float in the space in front of the picture.

The secret to finding the hidden 3D shape was in the way you looked at the Magic Eye picture. If you focused your attention too sharply on the picture, you would never see it. Instead, you had to let your vision relax. Then, all of the sudden, the 3D image appeared.

It was a strange sensation. At first, you would look and look and look at the picture and be frustrated that you couldn’t find the 3D shape. Then, once it appeared, you were amazed that you had not seen it sooner, since it was now so clear to you.

At the top of this blog is one of those Magic Eye pictures. Later on, I’ll tell you what 3D image you should see in it.

THE ANALOGY:
Finding the proper vision for your company can be like trying to find the 3D image in a Magic Eye picture. Somewhere in that messy looking future is the proper vision, but at first it is hard to see.

Like with the Magic Eye, sometimes you need to relax your eyes in order to see the vision. Then it will pop out and look incredibly obvious. Once the obvious vision pops out, you can rally the troops to create the path which will make that vision a reality.

In this blog, we will look at some mental tricks to help make your vision pop out and become obvious.

THE PRINCIPLE:
The principle here has to do with taking advantage of the way your brain functions. In a recent issue of the New Yorker magazine (dated July 28, 2008), Jonah Lehrer wrote an article entitled “The Eureka Hunt.” This article looked at some of the recent brain research focused on how we, as humans, create moments of great insight—called Eureka moments.

In studying people who have had great insights into difficult problems, the scientists detected a pattern. First, the person would focus on the difficult problem at hand—gathering information, pondering the issues, struggling for a solution. Eventually, this effort would lead to an impasse—a dead end, a mental block. After all of that mental effort, no solution would present itself…it would seem impossible.

After the mental block, the person would walk away from the project and spend time in some innocuous activity—either some rote routine activity like taking a shower or some form of mind-numbing entertainment. Whatever the activity, the point would be that the former problem had slipped out of the conscious mind and the person was not aware that any further consideration was being given to it. It was as if the mind had taken a mental vacation from problem-solving and was in a passive mode—like on autopilot.

Then suddenly—out of the blue—the solution would present itself. It would be clear and obvious. There would be a sense of certainty that the problem was indeed solved. It would just take a little time to work out the little details.

How did the brain do this? Scientists said that first the brain intensely focuses on the issue. It shuts down a lot of the sensory areas in order to block out distractions. Then, primarily the left side of the brain goes to work seeking information and looking for a solution. This left hemisphere searching tends to reach that impasse.

That’s when the problem is shifted over to the right side of the brain. Although the right side of the brain tends to be less logical and less precise, the right side is better at connecting the dots for the big picture. It can draw from a larger, more diverse, more abstract world. This is all going on in the background while you are unaware.

When it finds a solution, the right side of the brain gets the attention of your consciousness, creating that eureka moment. Although it appears to be a sudden flash of insight, it is really the result of hard work in the mental background.

But here is the true secret. If you spend all of your time consciously focusing on the issue, you will keep the brain too isolated in the left hemisphere. You will never get past the mental block. To get the problem into your right hemisphere—where it is solved—you need to walk away from the problem, unfocus yourself and sort of let your conscious brain vegetate.

To quote the New Yorker article, “The relaxation phase is crucial. That’s why so many insights happen during warm showers…The big ideas seem to always come when people are sidetracked, when they are doing something that has nothing to do with their research.”

It’s like that Magic Eye. You can only see the 3D image if you stop staring intensely and let your eyes relax. Similarly, you can only catch the vision if you stop focusing intensely and let your mind relax.

So what are the implications for vision hunting?

1. Stop Focusing So Much On Focusing.
Yes, initially one needs to focus. But then, one needs to relax. Some people are known to use focus enhancing drugs, like Ritalin, to help them find insights. This article says to stop that. Those drugs keep the mind in the wrong place.

2. Walk Away and Find Diversions
It’s okay to take a leisurely break every once in awhile, even on company time. The article praises firms like Google that put ping pong tables in their headquarters. Firms need to encourage some of this more playful behavior. It was even suggested that companies might encourage sleeping on the job, since many great ideas come in that half-conscious state when one first wakes up (for more on this topic, see my blog “Genius Sleep”).

When I used to work at the former Best Buy headquarters, at those times when we would hit an impasse I would suggest a trip to the “automotive sculpture gardens.” Although it sounded glamorous, what I was referring to was a path on the property that went through a wooded swamp. There was a rickety bridge going over the swampy area. From the swaying bridge, you could see where someone had dumped old auto parts into the swamp. A few of the larger pieces stuck out of the wet and mucky goo. Hence, the “automotive sculpture gardens.”

The point was that a walk through a wooded swamp (with the accompanying insects and smells) was a distinct departure from the sterile and intense world of the corporate headquarters. It was a chance to get away from it all, so that your brain could subconsciously shift to the right hemisphere while you were mentally diverted into a more restful activity. This diversion helped create great insights.

3. Don’t Force Visioning Onto a Timetable
The more you force a timetable onto visioning, the less productive it becomes. Just because you take an Outlook calendar and block off 10AM as the time when a vision occurs does not mean it will happen that way. Studies show that great insights tend to come when people are in good moods more often than when under pressure.

Rather than trying to force an entire strategic planning cycle into a single, tightly-scheduled, meeting-packed week, let it be running in the background all year round. Annual strategic offsites are better served for communicating that “obvious” insight (which popped out at you earlier) and rallying the troops around it, rather than as the time when the insight is forcibly created.

SUMMARY:
If you want great visionary insights, first spend some time focusing intensely on the problem. But then walk away and relax. Both tasks need to be encouraged in your corporate culture.

FINAL THOUGHTS:
The item you were supposed to see in the Magic Eye picture at the top of this blog was a dollar sign. If you follow these principles, you should see more dollar signs in your business as well.

Every Intersection is Not a Crossroad

THE STORY
One time, a colleague and I were talking about how some companies do their strategic planning. Once a year, they bring together a large gathering of their executives for an offsite planning meeting. At the meeting, a big announcement is made that the company is “at a crossroad” in their strategy and that major changes are needed to get back on track or to choose a new direction.

It got me thinking. In the average city there may be 12 blocks to a mile. If you are able to maintain an average speed of 30 miles per hour, you will drive past an intersection about every 10 seconds.

You would think a driver was rather crazy if he stopped his car every ten seconds, got out of the car, and started telling everyone excitedly that he was at a major crossroad. Then, if he held a long business meeting to decide which direction to go every time he came to an intersection, you would really think he was mad. At that pace, it would take him all day to get across town.

So I turned to my friend and said, “When you’re driving across town, you will go past hundreds of intersections. You can’t call every one of them a major crossroads.”

THE ANALOGY
Automobiles are like companies, driving towards their future. Intersections along the road are opportunities—opportunities for a company to change its strategic direction. Just because every intersection provides an opportunity to turn does not mean that you need to turn at every intersection. In most cases, a driver ignores the majority of the intersections and does not even consider them while driving, because he knows that they will not lead to his destination.

In the same way, every opportunity presented to a company does not require a rethinking of strategy. Most opportunities can be ignored. Instead of leading to someplace special, they will just take you on a detour that goes nowhere, while at the same time keeping you from reaching your intended strategic destination. These “opportunities” turn out to only be opportunities to get side-tracked, waste resources, and fail in achieving a lasting strategic success.

Often times, the most important aspect of a strategy is not what it tells you to do, but in defining the greater list of things you are not supposed to do. Knowing what you can ignore can free you to better focus on the few essentials needed for strategic success. The likelihood of success becomes much easier, because you can focus on only those things that help you reach your strategic destination. Using the driving analogy, let us say that your strategic destination is Paris. As you are driving along, you can ignore all of the roads that do not lead to Paris and only focus on the smaller subset of roads that moves in a direction towards Paris. As a result, you will get to Paris sooner and enjoy it longer.

Of course, just because you can ignore many of the intersections does not mean that you can ignore every intersection. If you stay on any single road long enough, eventually it will lead to a dead end. The same is true with strategy. It never runs exactly in a straight line. You may need to drive around a roadblock set up by your competition. You may need to make a small side trip to acquire new competencies for the journey ahead.

Therefore, ether extreme will get you in trouble. If you turn at every possible intersection, you will end up driving in circles and end up getting nowhere. At the same time, if you never turn, you will end up running out of road before you reach your destination.

THE PRINCIPLE
Effective strategic planning has three elements:
1. A vision of an attainable position where you can win/prosper in the future.
2. A path showing the steps necessary to get from where you are today to the vision.
3. A feedback loop to ensure that you are going in the right direction once you start the journey down the path.

The Vision
Creating a vision that properly motivates your team to act properly has a lot to do with getting the right perspective on timing. If you have chosen a vision that is too far into the future, the people in your business may not know which path to take to get there, because they cannot find the link between where they are today and where the future vision is. For example, if you told the driver in our analogy that the ultimate destination is to go to the moon, he may have no idea how to get his automobile closer to the moon. Worse yet, he may think your goal is too outrageous and is impossible to achieve, so he stops listening to you and drives wherever he wants. Now, not only are you no closer to the moon, you no longer have a team.

Goals that your people cannot relate to because they are too far away or too different from what they understand fail to motivate. Instead, they may have the opposite effect of paralyzing the troops or leading them into chaos or defection.

Now it may be true that for your business, it is necessary to build a future that eventually takes you as far away from where you are today as the moon is distant from the earth. But, to make the vision real for the team that you want to take there, you may need to break it down into smaller chunks. For example, instead of just saying you are going to the moon, tell the team that the first goal is to get to Florida, where the Cape Canaveral space launching pad is located. Now this is something they can find on a roadmap and draw a path and a plan to get there.

Of course, there is a different problem if you break down the vision into too small of a block of time. If the timing around your vision is too short, you will not be able to build a suitable path. For example, let’s say that instead of telling people we are going to the moon, all you tell them is that the vision is to back the car out of the garage. This is something the team understands and can easily accomplish, so they rush out to the car and back it out of the garage. Then they get out of the car and come back to say, “We’ve accomplished our vision! We’ve reached our goal!” This is followed by a celebration.

Well, now you need to give them a new vision, so you tell them to get back into the automobile and back down the driveway to get to the street. So the team goes back to the car and gets to the end of the street and start to celebrate again. This is starting to sound like our earlier example, where the man sets his goal only a block away at a time, requiring a need to stop every ten seconds to set a new vision. At this pace, you will never get to the moon.

Worse yet, because the team has no idea of the larger vision, they will only prepare for the shorter vision. If all you think you are doing is backing a car out of the garage, you may just hop into the car quickly and do it, without bothering to even put on a coat or shoes. You certainly wouldn’t be thinking about packing a suitcase with spare clothing, bringing along snacks to eat, or checking to make sure the engine is in fine working order. However, if you knew that you were eventually driving 1000 miles to get to the space launching pad in Florida, you might prepare differently. Without proper preparation, you may never reach your goal.

Therefore, the ideal vision should describe a destination that is far enough away from today that people will adequately prepare for the journey (further away than just getting to the end of the driveway), but not so far away that they have no idea how to prepare for the journey (not as far as going to the moon).

The Migration Path
Once the vision is described, the task moves to designing the migration path to get there. Designing the migration path would be like getting a map and determining the best roads to take to get to Cape Canaveral in Florida. Just as the perfect vision requires getting the right balance in terms of timing (not too short, not too long), the perfect migration path needs to get the right balance in terms of detail (not too much, not too little).

The team should not spend years on trying to design the absolute perfect path to get from here to Cape Canaveral. That level of detail is impractical. After all, there may be detours along the way. Changes in weather may affect which route is the best. Unexpected road construction may occur. There may be unexpected problems with the automobile. All of these occurrences will create a need to alter your route, no matter how much time you spend perfecting it.

In the business world, you cannot entirely control your destiny. Therefore, acting as if you can and spending too much time designing perfection into your plan is a waste of time.
On the other hand, if you do not prepare at all, your vision will never be reached. You will be reacting to your environment, rather than helping to direct how the future evolves. If you do not try to help direct how the future evolves, your competition will, and I can assure you that they will try to form a future that advantages them over you.

Hence, you need a balance in your migration path—enough detail to show what big activities need to be accomplished to help control your destiny and reach your vision, but not so much detail that there is no room to flex with the inevitable change.

Feedback Loop
As you start implementing your plan, you need to monitor your progress through a feedback mechanism, in order to:

• Ensure that you are not unintentionally deviating from the vision and migration path; and

• Determine whether changes in the environment necessitate modifications to the vision and/or migration path.

The beauty of driving past a new intersection every ten seconds is not that you have to stop at every intersection. The beauty is that if you find out that you are off course a little bit, you are only ten seconds away from an opportunity to readjust your direction to get back on track. Each intersection should not be seen as a major crossroad requiring a new strategic initiative, but as an opportunity to adjust to stay on plan.

SUMMARY
Strategic planning is about determining a destination for your business (a vision) and a means to get there (a migration path). If you find yourself frequently making major changes to your vision or migration path, then you have probably:

• Set your destination too close to where you are today (and thereby never make any meaningful forward progress); or

• Set your destination so far away or made your migration path so vague that the team members do not understand what to do to get there (and thereby get nowhere); or

• Not monitored your progress through a feedback loop often enough to see when current actions need to be adjusted to get back on track (before it is too late).

It’s okay to adjust the focus of the company every year based on where it is along the migration path, but if your business reinvents its overall strategic plan and migration path every year, then you really do not have a plan at all. You just have a series of unrelated tactics.

FINAL THOUGHTS
We might laugh at a person driving across town one block at a time, stopping every ten seconds at each intersection to replot his course. However, this is not that different from a company that only plans out one quarter at a time, stopping every three months to plot a new course.

In general, if your long-term destination is correct, most of the quarters along the way will be successful. However, if you only look out one quarter at a time, the cumulative direction of all of your quarters strung together rarely moves in a positive direction, and your business will “run out of gas” before reaching a more desirable future.

Name That Tune!

The Story
Back in the early days of radio, there was a game show called “Name that Tune!” It was so popular, that when television came about, the show moved to television. The object of the game was to name the title of as many tunes as you could before your opponent could name them, by listening to the melodies being played by a band.

One segment of the show was called “Bid a Note.” In this segment, the contestants would bid against each other for the right to be the first to have an opportunity to guess the name of a tune. The bidding was based on how many notes you were to hear before you had to guess the name of the tune. Unlike auctions, where the bidding increases, here the bidding decreases.

For example, contestant #1 might start out the bidding by saying, “I can name that tune in five notes.”

Contestant #2 would continue the bidding by saying, “I can name that tune in four notes.”

Contestant #1 could then continue the bidding by saying, “I can name that tune in three notes.”

Contestant #2 could continue the bidding process by saying, “I can name that tune in two notes.”

The bidding would continue until neither contestant wanted to bid a lower number. Then, the contestant who won the bidding would hear only as many notes as they bid and have to guess the tune. I was always amazed at how many contestants would bid only two notes. I was even more amazed at how many guessed correctly based on only two notes.

The Analogy
Let’s suppose, for a moment, that your business decided to run its own game show. The name of the show would be “Name that Vision!” Contestants would be picked at random from your employee base. The game would have rules that were similar to Name That Tune, except that instead of using notes, your game would use words. The contestant who could name your business’ vision statement in the fewest number of words would win.

How many of your employees could correctly name your business’ vision in only a handful of words? How many would need an entire page full of words in order to describe your business vision? How many are so confused about what your vision is that they could not recognize it no matter how many words you used?

If you had ten different employee-contestants playing your game, how many different statements would your hear from them as they try to name your vision? Would their statements be in agreement or in disagreement with each other? How much chaos and disfunctionality would there be in your organization if all ten of these contestants tried to implement their own understandings of your vision at the same time?

If your game show had a segment called “Bid a Word,” how many of your employees would be willing to say, “I can name our vision in two words”? Three words?

Unfortunately, the business world is not a game. It is serious work. If the work is to be successful, then everyone must be working to achieve the same vision. If the vision is confusing or difficult to articulate, there is a good chance the work will not be focused. Then, you will not just be faced with losing a game show, but in losing the battle for the customer.

The Principle
There is a difference between a strategy and a vision. A strategy is a detailed long-range plan that explains topics like:

• The position to be owned by the business in the marketplace.
• Why that position is winnable and desirable in the future environment.
• How that position will be held and defended from competition.
• Who the business is serving and why they will prefer that business.
• What needs to be done to achieve these goals, how they will be achieved, in what order they will be sequenced, and who is held responsible for achieving each part.
• The financial implications of the plan.
• How to fill the gaps between current state and desired future state in terms of competencies, business outcomes, and profits.
• Contingency Plans.
• Key Indicators of Success
  

As such, the strategy serves as the rational guidebook to answer all of the Who’s, What’s, When’s, Where’s, Why’s and How’s of what needs to happen between today and the end of the plan as well as how it will be accomplished.

By contrast, the vision of a company is much shorter and more emotional. It is an inspirational rallying cry intended to get everyone in your business excited about what the business is trying to accomplish. Sometimes a vision is used to embrace a short-term goal that changes every year; other times it may be an aspirational goal that lasts for several generations. In either case, the vision motivates right behavior by giving employees a sense that they are doing more than just a job—they are part of a bigger, and very important, mission.

Another common characteristic of a vision is that it is directional. It points in the direction of which types of activities are within scope and which are not.

A vision is something that all of your employees should be able to articulate with only a handful of words. Often times, it only takes two words to “Name that Vision”—typically a verb and an object of that verb. Examples of the types of two-word visions available would include:

• “Build” a “Competency"
• “Change” a “Structure”
• “Beat” a “Competitor”
• “Win” a “Space”
• “Create” a “Better World”
  

These are all described in more detail below.

“Create” a “Better World”
This type of vision tends to have the longest life and may last several generations. The idea is to tie the work of the business to highly noble causes. Examples may include “eliminate hunger”, “improve lives”, “create fun”, “extend life”, “improve environment” or “enrich life”. Typically, these long-term two-word aspirations are connected to the current strategic means by which they will be accomplished, like “eliminate hunger via bio-engineering” or “improve lives by making technology affordable”. This type of vision works best with people who want their job to be more than just a way to earn a living, but rather a way to make a difference in society. It can give a sense of pride to having a small part in a larger cause.

“Beat” a “Competitor”
This type of vision is typically used by newer or smaller companies that want to become larger and greater than the established leader. The general format is “Beat Company X”, where Company X is the market leader. This type of vision appeals to people with more of a militaristic or athletic mindset, where in order for you to win, someone has to lose. This is typically focused around market share, where the targeted enemy/opponent is the one you are taking share away from. This was popular in the 1960s and 1970s in Japan when Japanese firms were trying to overtake the larger American companies. Now, the younger Asian economies are using it against Japanese firms.

“Win” a “Space”
This type of vision tends to focus on the position that the business wants to own in the minds of their customers. It is what the company wants to be known for, the leverage point for success. It could be centered around an attribute (like “own price”, “win on service” or “best quality”) or it could be centered around a category or business ecosystem (like “own farm equipment”, “win appliances”, “dominate sports news”, or “home security leader”). This vision tends to be measured more with top of mind awareness or preference. It tends to be a vision that works well with market leaders who want to expand the market space, expand their reach in the market space, or defend their position.

“Change” a “Structure”
This type of vision is typically used when trying to change how people think of internal processes. Examples include “reduce bureaucracy”, “eliminate silos”, “build efficiency”, “customer driven”, or “rapid response”. This is a common vision approach when a company is in transition or trying to get out of a financial slump.

“Build” a “Competency”
This tends to be one of the shorter term rallying cries. It is designed to help fill a gap in a strategy by adding a new capability to the organization. Examples would include “go online”, “launch prototype”, “quality first” or “ISO ready”. This type of vision tends to work well with smaller, temporary teams designed for a particular purpose.

In some ways, it doesn’t matter which of these two-word phrase categories you pick. They tend to be linked. For example, it is difficult to “beat a competitor” without doing a better job of “winning the space” the two firms are competing in. “Winning a space” often requires doing something different, like “changing a structure” or “building a capability. In the end, it is hard to “beat a competitor” without providing superior value to the customer, which is often wrapped up in “creating a better world.” The idea is to pick whatever works best to motivate and bring clarity to your organization.

Summary
Strategic planning doesn’t end once a position is chosen and the general path to get there is known. The next step is to communicate that strategy to the entire organization in a simple way that motivates behavior leading towards the desired strategic outcome. This is called the vision statement. By boiling the strategy down to a vision statement consisting of a single sentence—or even as few as two words—you can make it as memorable as the name of your teams’ favorite songs. Then, if your company had to compete at “Name That Vision” you would not only win the contest, but win the ultimate prize of success in reaching your vision.

Final Thoughts
Albert Einstein is often quoted as saying, “Make everything as simple as possible, but not simpler.” Good strategic plans are typically comprehensive and involve the coordination of a large number of tactical initiatives. There is a risk of oversimplifying the complexity to the point where the strategy loses its power. Do not fall into the temptation of boiling down the strategy into something that is so simple that it fails to encompass all of the key elements necessary for success.

However, when creating the annual communication of the vision to the business employees who have to implement the strategy, make the vision statement as simple as possible—perhaps even as simple as two words. If people need further clarity, they can always refer back to the greater strategy.