Analogy #193: Chase or Stand

THE STORY
Once upon a time, there were two dogs—Bingo and Duke. Both loved to chase cars.

Bingo especially loved convertables. Whenever Bingo saw a convertible going down the street, he would chase it. Wherever the car went, that’s where Bingo went, mile after mile after mile. It was very tiring for Bingo, but he found it very satisfying. Occasionally, he would even catch the convertable.

Duke had a different approach. He would hang out at the race track. Rather than run after the cars, Duke would just stand by the edge of the track. Duke knew that he wasn’t fast enough to catch those race cars, but he also knew that because the track was oval, eventually those cars would come around and be right next to him again. Every time the car completed a lap, it had to pass by Duke. Each time the car passed by, it felt to Duke as if he had “caught” the car.

At the end of the day, Bingo would be extremely tired and have very few “catches.” By contrast, Duke would be well rested and have lots of “catches.”

THE ANALOGY
For the dogs in the story, the goal was to catch a car. For businesses, the goal is typically to complete a transaction with a customer.

Each dog took a different approach. Bingo locked in on a particular type of car and chased it wherever it went. Duke locked into a particular location and let the cars come to him. Both had success.

During the strategic process, one must choose a method for creating customer transactions. One can either lock in on a particular customer segment and chase it like Bingo, or one can lock into a position and let the customers come to them (like Duke). Both can work. But you have to make a conscious decision during the planning process as to which option you are going to choose.

THE PRINCIPLE
Strategies are based upon finding the best way to sell something to somebody. This involves making some choices:

- What to Sell (product/benefits strategy)
- How to Sell (the winning formula, the attribute strategy)
- Who to Sell to (the marketing target strategy)

When choosing the “somebody” of strategy, there are essentially two options: Chase or Stand. Chasing is all about following a particular customer. Wherever they go, you try to anticipate and serve them, just like Bingo.

Standing is about owning a particular solution and then serving whomever crosses your path in need of that solution. Customers come and go, but you stand solid. This is what Duke did.

Are you going to be person-focused (chase) or solution-focused (stand)?

This question comes up in business all the time. Take MTV, for example. Over the years, it has created strong bonds with teenagers. Unfortunately, teens eventually grow up and become twenty-somethings. This leads to a strategic choice—do you “grow up” with the audience that loves you and chase them into their twenties (person-focused) or do you let them go and wait for the next crop of teens (solution-focused)?

There are pros and cons to each. On one hand, it’s hard to create strong consumer bonds to a brand. Once you have a customer who loves you, why let them go? Why not chase them into adulthood, modifying the brand to keep up with their changing demands? This is what Bingo would do.

On the other hand, MTV knows the youth market. They may not succeed in the transformation to older fare. And, just as Duke knew that the cars would keep coming, MTV knew that there would always be more teens coming down the road. So why not stick to the teen position?

One thing MTV did know is that they could not succeed with both alternatives using the same brand. They had to make a choice. MTV chose to be like Duke—stick to its position and then grab each generation of teens as they passed by. VH1 then became the brand you were supposed to migrate to when you grew up.

This strategic choice worked well for a long time. Unfortunately, the latest crop of teens is less enamored with a TV-centric approach. Brands like You Tube and Ipod are starting to take the place of MTV. Like an old dog, MTV was slow to learn the new tricks. Just because you choose to stand does not mean that you can stop innovating.

Sears right now is trying to win over the teen customer. They have set up a prom website, are starting an exclusive line of teen clothes from LL Cool J, and are partnering with MTV on the movie “The American Mall.”

This strategy will be tough. Other retail brands already have strong bonds with that segment. Sears’ current strength is with older customers who remember the glory days of the brand. Perhaps Sears would be best served finding more ways to chase the older customer through time—to migrate the brand into exciting new areas which appeal to the boomers as they age.

Let’s look at a couple of grocery retailers: 7-Eleven vs. Whole Foods. 7-Eleven is not chasing particular people, they are owning a position—convenience. Sometimes people are looking for convenience, sometimes they want something else (selection, low price, etc.). 7-Eleven is counting on the fact that although you may not want convenience all the time, almost everyone wants convenience some of the time. 7-Eleven doesn’t care about chasing those people around as their desires change. They just stand firmly on convenience, and take whomever at that moment wants convenience. As long as there are enough of these desires at any time, the strategy works.

By contrast, Whole Foods is locked into a particular type of person—someone who sees food as more than just fuel. They have a passion for health, wellness and natural, organic items. Whole Foods will chase this customer wherever they go. That is why Whole Foods has expanded into healthy organic restaurants, healthy organic catering, natural organic health care and well-being products, and so on.

When chasing, you typically want to grab a large percent of the spending over a large span of time from a small group. This is the “share of wallet” or “Lifetime Value” strategy—empty the pockets of a small group who loves giving you their money for all their needs.

When standing, you don’t mind taking a small percentage over a short period, provided to total demand pool is large enough. This is more of a “toll booth” strategy—grab a little from everyone as they pass by.

For another example of chasing versus standing, let’s look at the retailing of Christian-related products. On the one hand, there are Christian “Bookstore” chains, like Lifeway that are chasing the advocate of the Christian lifestyle. I don’t even know why they call them bookstores anymore…books are only a small part of the mix. Instead, they are selling the entire Christian lifestyle. They have coffee bars, hold Christian music concerts, and sell tons of knick knacks with Bible verses on them.

These Christian lifestyle stores are going after that lifetime share of wallet. They chase a small group of people (those advocating a Christian lifestyle) and try to sell everything related to that lifestyle. Whatever the latest fad is in that lifestyle, they are there, because their customer is there.

By contrast, Wal-Mart also sells some of this Christian merchandise. But Wal-Mart is not chasing this customer. They are standing firm on low price. As the economy ebbs and flows, the number and types of people who are looking for low prices varies, and Wal-Mart takes whomever is interested in low prices at that moment.

Some of these people are interested in Christian literature at a good price, so Wal-Mart sells it. However, Wal-Mart also sells literature that has nothing to do with Christianity. So rather than trying to get all of the Christian advocate’s wallet, Wal-Mart is just looking to get a small “toll” from them as well as all sorts of other people who are drifting through a price sensitive phase of their life.

SUMMARY
Strategy is about making choices. One choice to be made is how to approach consumers. Either you can focus in on a particular group and go wherever they go (chasing strategy) or you can focus on a solution and grab some money whenever someone drifts into needing that solution (standing strategy). Both can work, but your strategy will most likely fail if you try to do both. You have to make a choice.

FINAL THOUGHTS
There are these rope chew toys for dogs where the dog clamps its mouth on one end and the owner grabs the other end. The game is to see if the owner can yank the rope out of the dog’s mouth. Almost always, the dog wins, because they have such a strong grip on the rope. Whether you are using the rope of chasing (chomping on a group of customers), or the rope of standing (chomping on a solution), you need to grab on as tightly as those dogs do.

Analogy #192: Pick a Pew

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Analogy #191: Plugging Along

THE STORY
Ever since Mary had children, she has been excited about setting up the Christmas tree—especially seeing the glow of all the colorful lights on the tree. Well, Christmas time was here again, so Mary eagerly set up the tree.

After setting up the string of lights on the tree, she tried as hard as she could to get the lights to go on. Unfortunately, nothing happened. Mary thought that perhaps the bulbs needed to be rearranged, so she moved all the bulbs around on the string of lights. Still, there was no light.

Then she thought that perhaps she needed to replace the old bulbs with new bulbs. Mary tried that and still got no light. Mary was starting to get desperate. She thought about how she had placed the string of lights counterclockwise around the tree. Maybe, thought Mary, if she put the string of lights on the tree clockwise they would work. So Mary restrung the lights in the other direction, but still the lights did not go on.

Finally, Mary’s little son Bobby came by. Bobby watched his mother struggle trying to get the Christmas tree lights to go on. Finally, Bobby said to his mother, “Mom, why don’t you try plugging the lights into the wall?”

THE ANALOGY
Mary is not the only one who sometimes has trouble getting things to work properly. Businesses deal with poor performance issues all the time.

Mary’s responded to a lack of performance in her Christmas lights by trying reorganization. First, she reorganized the location of the bulbs. Then she tried an organization of new bulbs. Finally, she reorganized how the string of lights laid on the tree.

When businesses get into trouble, they often first try a little reorganization as well. Think of those Christmas bulbs as being like people. We can reorganize by shifting people around in the organization or in bringing new people into the organization. And changing the way the string of lights is put on the tree is like redrawing the lines on an organization chart—same bulbs, just shifting their orientation towards each other.

Mary’s problem was that without the power of electricity, it was irrelevant how she organized her bulbs. They were not going to light up until she plugged them into the wall socket.

The same is true in business. Unless there is power flowing through the organization, it is powerless to function properly—regardless of the way it is organized.

THE PRINCIPLE
The principle here is about understanding how plugs and switches impact organizational effectiveness. Often times, a little work on fixing the plugs and switches will create far greater productivity gains (faster and more economically) than work on totally reorganizing the business.

Switches turn power on and off. In the business world, many people can have the ability to give or take away permission to get something done. These are the people or processes which can give the “okay” or can veto the action. The “okay” turns the switch on and the veto turns the switch off.

Plugs are what connect us to the source of power. In today’s environment, one of the great sources of power is knowledge. The more connected you are to the knowledge, the more powerful you can be. Taking away access to that knowledge is like unplugging the string of lights. The illumination disappears.

Three consultants at Booz & Company (Gary Neilson, Karla Martin, and Elizabeth Powers) have an article in the June 2008 edition of the Harvard Business Review. The title of the article is “The Secrets to Successful Strategy Execution.”

In this article, the authors talk about their research into the effectiveness of organizations at implementing their strategies. After studying over 1,000 organizations, they found that about 60% have trouble translating important strategic decisions into action. In my terminology, although everyone had the beautiful string of lights, only 40% were able to get them to light up.

The Booz & Company consultants looked at four factors which might cause the lack of action:

1) Access to information (in my words “are you plugged in?”)
2) Decision Rights (in my words “who controls the switch?”)
3) Motivators (in my words “desire to see the lights go on”)
4) Structure (in my words “how the bulbs and string are arranged on the tree”)

What the authors discovered was that getting the plugs and switches right (information and decision rights) was twice as important as getting the motivation and structure right.

The authors concluded that rather than rushing to reorganize, businesses should first spend time fixing decision rights and access to information. In my terminology, first make sure you have not done anything to cut off access to power. Then you can play with improving the beauty of how the lights look on the tree. Without the power, the structure is irrelevant.

The article provides 17 traits that characterize organizations which are effective at translating strategy into action. All of the most powerful traits revolve around plugs and switches.

#1) Everyone has a good idea of the decisions and actions for which he or she is responsible. (In my words, everyone knows where the switches are and who is in charge of each switch. In addition, each person with a switch knows what they are supposed to do with it).

You can’t be effective at “doing” if people don’t know what to do. And even then, you cannot do it if organizational power is not flowing in that direction. And unless someone is specifically held responsible for monitoring that flow, it can be subverted. All of the “okays” (switch is “on”) need to aligned with the strategy and all of the vetos (switch is “off”) need to prevent hindrances to the strategy.

This means that you can’t have a bunch of half-informed people clamoring to get their hands on the switch. They’ll be turning the power on and off in all sorts of directions. At best, you will get a little flicker of light. At worst, you’ll blow out a circuit. It helps if the keeper of the switch is close to the action and can see the lights, rather than isolated at headquarters.

#2) Important information about the competitive environment gets to headquarters quickly. (In my words, keep the headquarters plugged into what is going on in the field.)

You cannot make good decisions based on outdated or inaccurate information. Decision makers need to be plugged into the current reality of the situation in the field.

#3) Once made, decisions are rarely second-guessed. (In my words, once a switch is turned on or off, it is left alone in that position)

Inability to delegate can cripple action, since it creates a huge bottleneck at the top. Push those switchboxes down into the organization, tell the switch-holder what his or her responsibility is, and then trust them to handle the switch properly. Don’t keep second-guessing them.

#4) Information flows freely across organizational boundaries. (In my words, keep everyone plugged into the same circuitry.)

Most every successful action these days requires interdisciplinary cooperation between multiple functions. You cannot do it alone. Put egos aside and work together. Share your power and knowledge. If you put more than one string of lights on your tree, they only work if they are all plugged into each other on the same circuit.

#5) Field and line employees usually have the information they need to understand the bottom-line impact of their day-to-day choices. #6) Line managers have access to the metrics they need to measure the key drivers of their business. (In my words, they keepers of the switches know how their choices impact the big picture).

The field operators need to be plugged into the rest of the organization, so that they can receive the proper information feedback. Ignorance rarely creates great decisions. Wrong behavior won’t change if you did not know it was wrong.

One of the biggest contributing factors to the housing credit melt-down was that the ones approving the credit were disconnected from the big-picture risks they were creating. By disconnecting the sales making from the risk-taking, a mountain of bad risk was created.

SUMMARY
When results are disappointing, rather than rushing in to reorganize everything, focus on your switches and plugs. Make sure the switches are pushed down into the organization, given to knowledgeable people who are empowered to make the decisions. In addition, make sure everyone is plugged into the information grid, so everyone is both informed before making decisions as well as can see the impact of their decisions.

FINAL THOUGHTS
Back in the early days of PCs, before they had much memory, you had to save everything externally on huge floppy disks. One day back then, I had worked long and hard on a project and started to save it onto the floppy disk. While saving, a colleague tripped over the electrical cord to my PC and yanked it out of the plug. The computer stopped, and all of my work was destroyed. Don’t destroy all of your strategic work by getting it unplugged from the organization.

Analogy #190: Who's Bribing Whom?

THE STORY
Back around 100 years ago, San Francisco was a pretty wild place for doing business. The city was growing rapidly and it was busy putting together its infrastructure—utilities, transportation, etc.

If your company became a part of that infrastructure, you would become extremely wealthy. Therefore, companies were highly motivated to use bribery to convince the San Francisco city aldermen to include their companies in that infrastructure.

Examples of companies who were bribing city officials at the time included PG&E (Pacific Gas & Electric), Bay Cities Water, and United Railroads. United Railroads had a $200,000 pool of money just to be used for bribery (which would be a huge amount in today’s dollars).

One of the biggest scandals was in the telephone utility. Pacific Telephone and Telegraph was currently serving customers in San Francisco. Newcomer Home Telephone Company wanted a piece of the action and allegedly paid $5,000 per official to get approval, along with $125,000 for political boss Abraham Ruef. Of course, Pacific Telephone did not want to lose its monopoly, so it bribed the officials to keep out Home Telephone. They supposedly spent about $50,000 in bribes.

Home Telephone appears to have made the bigger bribes, so on March 5, 1906, the San Francisco city supervisors awarded Home Telephone Company a 50 year franchise to operate in the city.

While the city was using bribery to build up the city, Mother Nature decided to tear down the city. On April 18, 1906, little more than a month after the Home Telephone decision, San Francisco was destroyed by a great earthquake and a fire lasing four days. Shortly after cleaning up from the earthquake, the city cleaned up its government. In March of 1907, the city officials and the businessmen who bribed them were convicted in a court of law. Abraham Ruef was charged on nearly 70 counts of accepting bribes.

THE ANALOGY
Although most businesses today do not resort to the level of bribery found in San Francisco 100 years ago, “bribery” is extremely common today. I’m not referring to the illegal type of bribery, but a legal form of bribery.

In reality, any time one must resort to added incentives to get a customer to make a purchase, you are “bribing” them. In essence, these incentives show that you cannot create sufficient sales at the original value, so you have to “bribe” people with something beyond the original value (such as a price cut), in order to get them to act as you want and buy your product/service.

Recently, I got a call for a time-share resort company who was willing to offer me all sorts of prizes and gifts in order to get me to drive to their resort to hear a sales pitch. All of their bribery in incentives was not enough to get me to go, though. It would take a much higher bribe to get me to overcome my lack of desire to hear their sales pitch.

The worse your original value proposition, the higher the bribe (in added incentives and price cuts) is needed to get customers interested in making a purchase. Ultimately, this cuts into your profits. Although this type of bribery will not get you convicted, it is not a very efficient way to earn profits.

THE PRINCIPLE
The principle here is that offerings with an inherently strong internal value are typically more profitable than offerings where bribery is needed in order to create sufficient value.

Take, for example, the automobile industry. GM and Ford are currently offering huge bribes in terms of incentives and price cuts in order to sell their slow-moving gas guzzlers. By contrast, Toyota can sell all of the Hybrid Prius automobiles they manufacture at full-price (and a premium price at that).

Because the Prius is more in tune with what customers want, Toyota does not need to add any bribes to the offering. The basic offer is strong enough on its own and can command a premium price. On the other hand, the big gas guzzlers at Ford and GM are out of tune with the marketplace. Consequently, they have to load on so many bribes to move the goods that there is very little left to create a profit. As a result, GM is in serious risk of going into default, while Toyota is doing well.

This is not an unusual example. Throughout history, one can find industries where one firm has such a superior perceived value that it can sell at a premium, whereas the competition has to resort to bribes in order to get any attention. Just compare Ipod to its competitors. Or look at Virgin Atlantic versus traditional airlines, where extensive bribery through special promotions and discounts has been a financially disastrous way of life.

Although he does not look at the issue in terms of bribes, J.C. Larreche covers similar territory in his book “The Momentum Effect.” Larreche is a marketing professor at INSEAD. Based on his studies, Larreche discovered that firms which spend a lot of marketing money to “push” goods on consumers (with what I call “bribes”) do not grow as fast, have lower stock prices, and are not nearly as profitable as companies who focus on creating the types of superior values which do not require bribes.

To paraphrase, Larreche’s advice is that rather than rushing to get a product to market, one should stop and first take the time necessary to ensure that the product you have has enough intrinsic value that it will sell without the need for bribery (what he calls achieving “compelling value” or the “power offer”).

Well, that all sounds logical and intuitive—superior offerings sell better (and more profitably) than inferior values. But how do you create these compelling power offers?

There really aren’t any shortcuts. It’s a lot of hard work. I divide the work into three buckets: Left Brain (Rational) Work, Right Brain (Emotional) Work and Whole Brain (creative) Work. The idea for the first two buckets is that you have to choose a particular customer segment and then get inside their brain. You have to understand all of their needs/wants/desires as well as what triggers satisfaction.

Some of these discoveries will be highly rational. Some will be highly emotional. You need to understand both. It is not always the technologically superior product that wins. Instead, it is the product which connects best with the customer on all levels, including emotions and psyche. Apple is very good at making the connections on all of these levels. Their products are technologically great, esthetically great, and create great emotional connections with their customers (see “Reason Vs. Rationale” for more on combining both rational and emotional appeals).

This takes time. It requires getting close to your customers…spending lots of time watching and talking to them…getting below the surface to the true human motivations. This is the data gathering phase.

But it doesn’t stop there. I know lots of companies which brag about being fact-based operations. But facts alone are not enough. It takes intuition and creativity to convert those facts into original superior value propositions. This is the third bucket of work.

Sure, it takes time and money to go through these three steps. But this is a far more productive use of your funds than using them for bribes.

And the beauty of the whole thing is that if you do this properly, the bribes will start flowing in the opposite direction. Instead of you having to bribe others, others will start bribing you.

1) Customers may start bribing you by offering to pay a premium to achieve faster access to your products. Customers can even start to act like free sales reps, singing the praises of your product to their friends.

2) So many people will want to work for your company that they will do whatever it takes to get a job there. They may even be willing to work for free as interns in order to be a part of this great value.

3) Other firms will want to do tie-ins so that they can have their products associated with your products. They will come up with all kinds of legal bribes to try to get permission from you to do this.

With all of these benefits, it should come as no surprise that I recommend that strategic planning efforts focus around trying to come up with a position which is so compelling to your customers that bribery is unnecessary. Your strategic planning process needs to incorporate some form of these three buckets (rational, emotional, and creative).

SUMMARY
It is more profitable to offer unique, compelling values than to push mediocre products. Pushing mediocrity requires an expensive form of bribery. However, if your value is compelling enough, people will start bribing you. Compelling values come from those who do the hard work of first leaning the deep-seated motivations of their customers (rational and emotional) and then finding a superior way to deeply satisfy them.

FINAL THOUGHTS
These days, whenever I look at advertising or an advertising budget, I imagine them as being distasteful bribes. It’s as if your advertising budget is like the $200,000 United Railroads had set up as their bribery budget back in San Francisco 100 years ago. Once you get into this mindset, one naturally starts to focus on ways to create extra internal value, so that you can get out of the distasteful business of supplementing your mediocre value with bribes.

This is not to say that advertising disappears. It just becomes more productive through informing and reinforcing the value, rather than trying to overcome the lack of sufficient value.

Analogy #189: Driving for Success

THE STORY
Back when I was in high school, it was a really big deal to learn how to drive an automobile. However, before you could get a driver’s license, you had to take a course in driving (called Driver’s Ed). I really wasn’t sure what to expect from the course, because the father of one of my best friends taught Driver’s Ed, and I knew from personal experience that he was a terrible driver.

In class, they showed us lots of movies of gruesome automobile accidents, to frighten us into driving safely. Then, before we could get out on real roads, they let us practice driving on the school parking lot. We drove around in a large circle. On every lap, we would pass a spot where students stood to wait for their turn to drive. There were some pretty girls waiting there for their turn after me. On each lap, I would roll down the window and offer to give them a ride. I thought it was hilarious; they thought I was a moron.

The school provided us with a list of rules—everything we were supposed to do, from when we first got into a car to drive all the way to what we were to do when we finished driving. They told us that we should repeat this list whenever we drove for the rest of our lives.

Most of the items on that list made a lot of sense to continue doing. There was one item on the list, however, which I never did after leaving Driver’s Ed. They said that after completing your driving, put the car key into the outside lock on the driver’s side door (so that the next student could find the key) and walk away.

THE ANALOGY
The primary purpose of driving is to get from one place to another. This is also a primary goal of strategy. In essence, the role of strategy is to help determine the proper destination for your business, as well as the best means for getting there.

Since driving and strategy have similar goals, perhaps there is something we can learn from Driver’s Ed that can apply to strategy. This blog will look at these applications.

THE PRINCIPLE
The principle here is that many of the rules which lead to effective driving can also lead to effective strategic planning. The basic rules I learned in Driver’s Ed were based on the “Smith System” of driving. These rules had been developed by Harold Smith and Ford Motor Co. Since I went to Edsel Ford High School, which was across the street from the huge Ford R&D Research Center in Dearborn, Michigan (headquarters city of Ford Motor Co.), it is no surprise that we used something sponsored by Ford. By the way, Ford also donated the cars for the program.

There were five rules to the Smith System of Driving. We will look at each rule and then apply it to strategic planning.

1) Aim High in Steering
The idea here is that the further out in the distance you focus to anchor your steering, the better. Studies have shown that if the driver is barely looking out beyond the front bumper of the car, they are more likely to swerve back and forth through over-steering. Looking further out tends to stabilize the ride.

The same principle is true in strategy. If you never look out more than a month or a quarter into the future, you will feel pulled in all sorts of directions by every little whim in the marketplace. It is only by keeping firmly focused out on the more distant prize that you can get the proper perspective on where to steer.

Not every little blip in the road requires rerouting the company. Most can be ignored. By aiming high in your timeline horizon, you can tell which blips one should truly adjust to. However, if you manage one blip at a time, everything will look like a crisis and you’ll swerve all over the road trying to avoid them, never reaching your ultimate destination. (We talked about this principle in detail in “Every intersection is not a crossroad”)

2) Keep Your Eyes Moving
Drivers should never fixate on only one thing. Although most of the time should be spent looking forward, drivers need to occasionally move their eyes to look in the mirrors and look at the dials and gauges on the dashboard.

The same is true in strategy. Although most of the time should be spent looking forward towards the strategic goal, one needs to glance at other things as well. For example, one needs to look around in the mirrors to see what the competition and the consumer are up to. If you fixate in one direction only, you can miss out on some of these key changes in the external environment—information which requires a response.

In addition, one needs to look at a dashboard of key statistics to make sure that your internal performance is on track. The beauty of dashboards is that they allow you to assess your condition with a quick glance. They do not require you to pull over and stop the car to do extensive investigation under the hood.

It is amazing to me how many companies drive cars without dashboards. They may have reams of data printouts, huge reports, and great data warehouses on their intranet, but nothing they can quickly glance at while driving to the future. Just as you wouldn’t want a driver with their head down reading a complicated data report while speeding down the highway, you don’t want your people drowning in data to the point that they cannot move ahead.

Not all data is equally important. Distill out the most relevant indicators, put them on your dashboard, and glance at them from time to time.

3) Get the Big Picture
Drivers drive better when they adjust their driving to the total environment. Weather conditions can impact the drive. The condition of the pavement can impact the drive. Time of day can impact the drive. Once you know what type of traffic is around you, you can start anticipating how their movements affect your driving experience.

It is easier to drive when you can anticipate in advance what might happen. By putting all of the data into a single big-picture perspective, you can more safely adjust, because you are more prepared.

The same is true in business strategy. The better you understand the big picture, the more likely you will choose the right strategic goal and the right path to reach it. You do not drive in a vacuum. Understanding the context surrounding the strategy creates a better strategic process.

4) Make Sure Others See You
Drivers who are unseen get ignored when decisions are made by others. Being in another car’s blind spot is dangerous, because they could unknowingly swerve right into you. By contrast, the more other drivers on the road are aware of you, the more they will take into account your location in their own driving decisions.

This makes things safer for everyone. Now, not only are you looking out for yourself, but you have others doing so as well. Therefore, it is a good idea to make sure you are as visible as possible.

The same can be true for your organization. What good does it do to have a brilliant strategy if nobody in the company knows what it is? Employees cannot execute to achieve a goal that they are unaware of. Make sure the employees see the strategic goals and tactics on a regular basis. Otherwise, they will make decisions that could run over and crush the strategy.

Similarly, what good does it do to develop a great positioning in the marketplace if the consumers in the marketplace are unaware of it? An unknown position is like having no position at all.

Never assume that everyone knows where you are, strategically. Keep reminding employees and consumers, so that they can react properly to it. (We talked about this in more detail in “Psst. It’s a Secret.")

5) Leave Yourself An Out
It is dangerous for drivers to get into a situation where there is no escape if things go bad. Getting boxed in by a group a trucks is undesirable. The same thing is true in strategy. Even the best-laid plans can run into problems. However, the more you can anticipate in advance a way out of these binds, the more you can avoid the pain which comes with problems.

In strategy, we call this contingency planning. Think in advance of what could go wrong so that you can develop a way to avoid it. Typically, a rational contingency plan created during an earlier calm will be more effective than a plan quickly put-together in the heat of the crisis, when emotions are high.

Race cars carry fire extinguishers during the entire race, so that they are prepared for whenever a crisis could occur. They do not wait until after the crash to try to run an extinguisher out to the car. Your contingency planning should work the same way—ready in advance.

SUMMARY
Strategic Planning for a business is like driving a car. Therefore, the five driving rules of the Smith System equally apply to strategic planning. First, Aim High in Steering (keep a long-term perspective). Second, Keep Your Eyes Moving (periodically check out the external environment and internal performance indicators). Third, Get the Big Picture (put everything into context). Fourth, Make Sure Others See You (don’t keep your strategy a secret). Finally, Leave Yourself an Out (through contingency planning).

FINAL THOUGHTS
Before you can legally drive, you have to get a driver’s license. I could not get a driver’s license until I passed both a written and driving test with the local police department. Alas, not all “drivers” in business could pass a strategy test, yet they are still allowed to be out there. Beware!