Strategic Planning Analogy #131: Gimme Shelter (In a large Infrasructure)

THE STORY
In 1993, Walt Disney Pictures released the movie Cool Runnings, which was the story of the beginnings of the Jamaican Bobsled team. Although the movie took great liberties with the facts and showed little resemblance to what really happened, it did get a few things right:

The Good News:
1) The Jamaican Bobsled team had some very talented athletes.
2) The Jamaican Bobsled team had some talented coaching
3) The team worked hard to condition itself for competition

The Bad News:
1) The Jamaican Bobsled team had difficulty getting sponsorship and funding.
2) Relative to other Bobsled teams in the 1988 Calgary Olympics, The Jamaican team had virtually no support infrastructure and very little practice time on a bobsled course.

As a result, the Jamaican Bobsled team did poorly in the 1988 Calgary Olympics. The fans loved them, but love alone was not enough to win.

THE ANALOGY
Many businesses start out like the Jamaican Bobsled Team. They have several key components necessary for success. Just as the Jamaican team had talent, coaching and conditioning, these businesses may have talent, great ideas, and great managers.

However, visions of greatness can be shattered without the proper infrastructure. If the Jamaican team had been part of a stronger Winter Olympics infrastructure, had better financing, and better training facilities, it most likely would have seen far greater success. Similarly, if a business tries to seek success with insufficient infrastructure, it can also fare very poorly.

Consider tiny East Germany, which won far more Olympic Medals in the 20th century than a country of its size should normally expect. Was East Germany blessed with exceedingly better athletic breeding? No, East Germany had unusually good success because it built one of the finest Olympics infrastructures in the world.

Therefore, when considering a strategic plan for success, do not forget to consider the Strategic impact of your infrastructure.

THE PRINCIPLE
A couple of blogs back (see “Time for a Change”), we talked about how it can be a mistake to throw away a company just because its current business model is obsolete. Rather than abandon the firm and shift investment to a new start-up in a growing industry, it is often better to reinvigorate the established firm with a revitalized strategy. This blog will expand on that topic by looking at the power of an established infrastructure.

In the December issue of Portfolio magazine, there is an article talking about this very issue (and was referenced in the November 20, 2007 issue of the Wall Street Journal).

According to the article, Andy Grove (co-founder of Intel) has been working with Stanford University on research into business innovation. The conclusion? Firms with large infrastructures are often best suited for tackling the problems of innovation.

To quote the reference in the Wall Street Journal: “When people think of radical innovations, they usually think of start-ups that shake an industry from the ground up. Some sectors are hobbled with ‘intractable, industry-wide problems’ that only a large company can solve.”

The research found that large companies from outside the industry have two factors which make them most successful in innovation. First, they are not hampered by outdated internal industry conventions because they are outsiders. Second, their large size and infrastructure give them the clout and credibility necessary to effectively get the industry to rewrite the rules.

For example, many small startups tried to rewrite the rules of the music industry to innovate it out of the CD era and into the digital downloading era. All of these small startups failed. It wasn’t until a large established company from outside the industry (namely Apple) entered the game that the innovation was possible. Apple’s large position and infrastructure was necessary to budge the artists and labels into accepting a new paradigm.

On the other side of the issue, the problems of the small start-up can be seen in the story of Robert Black and Clean Shower. Back in 1993, Robert’s wife asked him to clean the shower. He hated the task and vowed never to do it again. Being a chemist and inventor, Robert Black decided to invent a product that would prevent the need for cleaning showers. His research lead to the invention of Clean Shower.

By the late 1990s, Robert’s innovation was selling well and starting to look like a huge success. And he got that far with virtually no infrastructure. The big consumer product companies could see the potential and were starting to make big offers to buy his company.

Robert decided at the time not to sell out to any of the big infrastructure companies. Instead, he decided to go it alone. However, once the big companies discovered they could not buy Clean Shower, they decided to compete against it. They used their huge infrastructure and large budgets to out advertise and to influence the retailers. Over time, the big companies with the big influence, big money and big infrastructures started to win the battle for market share. Robert Black and his little company began to suffer.


Eventually, Robert could see that his little company was not in a position to win against the big firms, so he sold out to the Arm & Hammer folks (presumably at far less than he could have gotten earlier). Eventually, even Arm & Hammer couldn’t compete against the lead of firms like Dow and they discontinued the product.

So here is the point. Great, innovative ideas are important, but so are other factors. Many people had the great idea of rewriting the rules of music, but only someone with clout the size of Apple could pull it off. Robert Black had a wonderful innovative idea, but it was the firm with the big infrastructure (Dow) who benefited from it.

So, if you want to innovate and rewrite the rules, here is what you need to consider:

1) Do I have enough clout to break through the conventions of how things are done today and get the rules of the game rewritten?

2) Do I have enough staying power to withstand competition from the big players once they start going after my success? (And they will attack. For more on this, see my blog “Bombs Start Wars”)

If you answer no to at least one of these questions, then you may want to seek shelter by joining up with someone who can say yes, either by selling out early to a big company or by forming joint ventures/strategic alliances. And if you are a big company, perhaps your strategy should involve looking for places in other industries where you can change the rules.

SUMMARY
In many cases, the best way to innovate is not by starting up a small little company. Instead, the best way to innovate is to be a large company with a strong infrastructure and be from outside the industry. As an outsider, you have nothing to lose in changing the industry. As a big player, you have the resources and clout to get the job done.

FINAL THOUGHTS
After doing the research with Stanford University, Andy Grove decided that one of the best ways to get breakthrough innovation in the automotive industry and lessen our dependence on oil would be if GE decided to build an electric car. According to his logic, GE has little to lose by rewriting the rules of the automotive industry. In addition, they have the technical know-how and credibility to pull it off.

Strategic Planning Analogy #546: It Depends on Company Fit

THE STORY
To earn money during college, I worked on a landscaping crew. We had two types of mowers: large riding mowers and small trimmer mowers that you had to push. The riding mowers were great on large, open, flat lawns. The push mowers were great around trees, fences and other such objects, where the large mowers wouldn’t fit or cut delicately enough.

The old timers on the landscaping crew always took the easy job of sitting on the large mowers. The college students got the tougher job of trimming around the trees with the small mowers. At least I got a tan and built up some muscles.

THE ANALOGY
Are the big riding mowers better for cutting grass or are the small push mowers better? Well, it depends. If you have a large flat lawn, the large riding mowers are better. If you are trying to trim grass around trees, the small push mowers are better. Each mower is appropriate for one type of job and inappropriate for the other type of job. The trick is to choose the appropriate tool for the job you have.

The same can be said of strategy. Some strategies are more likely to be successful in the hands of large companies. Other strategies are more likely to succeed in the hands of small companies. If you put a strategy into the hands of the wrong company, it won’t work.

That’s why you cannot evaluate strategies in isolation. Most of the time one cannot say “This strategy is universally good” or “This strategy is universally bad.” The better answer is “It depends on what company is executing the strategy.” The same strategy may be great or terrible, depending on who is trying to execute it.

So, just as choosing the right tool matters when cutting grass, choosing the right company matters when executing strategy.

THE PRINCIPLE
This is the second of two blogs looking at what makes a strategy good or bad. The first blog looked at how timing impacts success. This blog looks at how the type of company impacts success.

The principle here is that there needs to be a fit between strategy and those being called to execute it. If the fit is good, then the likelihood of success goes way up. If the fit is poor, the likelihood of success goes way down. Therefore, one needs to choose strategies which align best with who they are.

This would seem to be an obvious principle, but I see it violated all the time. A typical case is when a company in an industry does something successful. Others in the industry see that success and try to imitate it. These imitators think “That company has found a good strategy. I should have a good strategy, so I will imitate their strategy.”

However, just because the strategy worked for that first company does not mean it will work for all of the other companies equally as well. It just may not be appropriate for who your business is. It would be as if your company was like the little trimmer mower who was trying to imitate the strategy which worked for the large riding mower. You won’t succeed, because your company isn’t built for success in that area.

There are many elements which influence whether your business is a good fit for a particular strategy. These elements include:

• Culture
• Values
• Competencies & Expertise
• Centralized or Decentralize Management
• Tight or Flexible Controls
• Access to Resources (Money, Talent)
• Connections in the Supply Chain
• Level of Patience on Financial Returns

This list can go on and on. However, to illustrate the principle, I will focus on two elements: Clout and Agility.

Agility

An agile company is a lot like that small trimmer mower. The trimmer mower has the flexibility to cut around all types of obstacles.  It can adjust quickly and make sharp turns when necessary. The same is true of an agile company. It can quickly adjust to lots of obstacles in its path.

Agile companies are well suited to strategies in new spaces where there are a lot of unknowns and where flexibility, speed, and unconventional approaches are keys to success. That is why most of the dramatic disruptions in an industry come from small upstart companies rather than the large status quo firms. The small upstart companies are better suited to having success with the disruption—they are more agile and have less to lose from disruption.

IBM understood this when it tried to invent the PC industry. Management knew that the core of IBM at that time was more like the large riding mower. It was great for mowing down the competition when going after large accounts with large processing needs in established industries. But it was the wrong tool to implement a PC invention strategy. They needed something more agile.

Therefore, in order to make the PC strategy succeed, IBM had to first create a business that was properly fit for the task—something more agile. IBM set up a separate business in a separate location with a culture dis-similar to the rest of IBM. Had they not first set up this separate, more agile culture for the strategy, most experts feel the PC strategy would have been a failure.

Other large companies often try to follow IBM’s example and set up separate, more agile divisions for their start-up strategies. But I’ve seen many of them screw it up by forcing the small division to still use the corporate shared services. The idea is that the shared services will make the start-up more efficient. Instead, I’ve seen the opposite. The start-up is strangulated by all the red tape and bureaucracy from the shared services. They end up becoming less efficient, and worse, less agile. It’s like taking a small trimmer mower and putting a huge engine and seat on it. It can no longer act like a small trimmer mower.

Clout

But small, agile companies are not the best for all strategies. Sometimes clout is more important than agility. As an expert in retail, I’ve been approached by others asking me if a particular retail strategy is good. Sometimes, I respond by saying, “That depends. Is Walmart going to implement the strategy or is it a small upstart?” The reason I say that is because some strategies can only work in the hands of someone with tremendous clout. In the consumer space, Walmart has clout that other can only dream about. So it can implement strategies others cannot.

Since Walmart is typically the largest customer of most consumer products companies, Walmart can ask its vendors to do all sorts of things—and the vendors will do it due to the clout Walmart has with them. Smaller firms would not be able to pull this off.

Walmart’s huge size gives them the scale to do things outside the scope of others. Because they handle so many transactions, Walmart has been able to transform portions of the financial industry. Because they have so many employees, they are now experimenting with reinventing how health care is managed. Size and clout can be your best asset when it comes to some types of strategies, where power is more important than agility.

In an earlier blog, I discussed the story of Clean Shower. Robert Black invented a product that helped clean the soap scum off shower walls. At first, the big consumer product companies wanted to buy him out, but Black initially refused and decided to run his small business on his own.

Unfortunately, his invention was easily copied by big consumer products companies. The consumer product companies used their superior clout in distribution and marketing to get advantageous product placement in the stores and brand preference with the consumers. Black did not have enough clout or resources to keep up with them. Eventually, Clean Shower ceased to exist. For Black, the better strategy would have been to sell out early to the ones who had the clout needed to succeed.

At one time I was trying to pitch a strategy to revitalize Sears. But that was when Sears still had reasonable clout in the marketplace. That clout has since dissipated quite a bit. Sears’ clout has so weakened that I doubt my strategy would work anymore. So was my strategy good or bad? It depends.

Options

Therefore, you have two options when trying to successfully execute a strategy. Either you:

a)      Start by only considering strategies which have a strong fit with what your company is already good at executing, OR

b)      Look for ways to modify your company so that it can become a better fit with the strategy (like what IBM did for the PC).

Although the first option is probably the safest, it may limit you to only small, incremental improvements. If you want to make larger leaps, you may need the second option.

SUMMARY
You cannot just look at a strategy in a vacuum to determine if it is good or bad. You have to look at in within a context. One element of that context is who is executing the strategy. If the fit between what the company is good at and what is needed to win is right, the strategy can be very good. If the fit is wrong, that same strategy can be very bad. Although many factors affect fit, two important ones are agility and clout. Sometimes smaller, more agile companies are better suited to a strategy. Other times, large companies with a lot of clout have a better chance of success. To ensure fit, you can either: 1) Only look at strategies which fit who you are today; or 2) Modify your company to improve the fit.

FINAL THOUGHTS
Strategies are only good if they work out in the marketplace. Therefore, before embarking on a new strategy, make sure you know what your company is capable of. Do you have what it takes to make it work out in the marketplace?

Strategic Planning Analogy #442: Taking Vs. Receiving

THE STORY
During the 1920s and 1930s, Willie Sutton was one of the most prolific bank robbers in US history. During his lifetime, Willie Sutton robbed over 100 banks and made off with more than $2 million (which would be equivalent to about $30 to $60 million in today’s dollar).

Legend has it that when a reporter asked him why he robbed banks, Sutton replied, “Because that’s where the money is.”

THE ANALOGY
The reporter’s question could be interpreted two ways—Why do you steal or Why do you steal from banks. The reporter meant the first, but Willie Sutton answered the second.

In a sense, the reporter was trying to figure out why Sutton chose a life profession (stealing) which most people found undesirable. Since Sutton had no problems with the profession of stealing, he focused on the most efficient way to do so (go to where the most money is).

This is similar to a strategic question businesses should ask themselves: Why did you choose this path to profitability?

And just as the way Willie Sutton answered his question said a lot about his character, the way you answer this second question may say a lot about the character of your business and its culture.

If your answer focuses primarily on the “path” part of the question, then your culture most likely tends to be focused on building business models that add value to the marketplace. And because you add value to the marketplace, you can extract a profit (a portion of the value added).

However, if your answer focuses primarily on the “profitability” part of the question (saying “because that’s where the money is”), then the character of greed may be starting to overtake your thinking. Rather than thinking about adding value, one is more focused on grabbing as much as possible from where the piles of cash already are. Rather than looking at where to add, you look at where to subtract (what piles to take money away from). It’s starting to slip towards the Willie Sutton mindset.

This is not to say that making a lot of money or profits is bad. But if the money is made in a way that does not add value to the marketplace, then the model is unsustainable over the long run. Just as banks don’t like to be robbed, customers don’t like to be taken advantage of. Willie Sutton spent about half of his adult life in prison and did not get to fully enjoy the fruit of his stealings. Similarly, businesses which do not focus on adding value are punished—taken out of the marketplace so that they can profit no longer.

THE PRINCIPLE
The principle here has to do with the difference between a taking versus a receiving mindset. A “taking” mindset is focused on grabbing money by whatever means possible. A “receiving” mindset is focused on doing something so valuable that customers willingly shower them with money (no need to grab). In the long run, a receiving mindset leads to more enduring strategies.

This principle was brought to mind by the March 14, 2012 editorial in the New York Times by Greg Smith. Smith, an executive in the London office at Goldman Sachs, used the editorial as his resignation letter. In the article, he said he was leaving Goldman Sachs because, to use my terminology, the Goldman Sachs culture had become like Willie Sutton—all about taking rather than receiving. Rather than focusing on adding value to its clients, Smith claimed that Sachs was focused on doing whatever it takes to grab the clients’ money, even if it is not in the best interest of the client.

To quote from the editorial:

“I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them...”

“What are three quick ways to become a leader [at Goldman Sachs]? a) Execute on the firm’s ‘axes,’ which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) ‘Hunt Elephants.’ In English: get your clients—some of whom are sophisticated, and some of whom aren’t—to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym…

“These days, the most common question I get from junior analysts about derivatives is, ‘How much money did we make off the client?’ It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave.”

Smith also claimed that many leaders at Goldman Sachs referred to their clients as “muppets” in their emails. And I’m pretty sure that was not a term of endearment.

So what happens when this culture takes over? Smith got it right when he said “If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.”

A “taking” mindset may work for awhile, but eventually the people being taken figure it out. And they will stop letting you take from them any longer.

So what should you do to keep a Goldman Sachs type of situation from occurring at your business?

1) Be Careful how You Lead
Employees watch how the leaders operate. If the leaders show a “taking” mindset and refer to customers as muppets in emails, then the followers will see this as desirable behavior. The old phrase “do as I say and not as I do” doesn’t cut it. With today’s technology, leaders have nowhere to hide. They will be imitated. So set the right example.

2) Manage the Agenda
How much of your meeting time is spent on the taking agenda versus the receiving agenda? How much time is spent talking about adding value for customers versus taking their money? You have the power to control the agenda. Make sure the receiving agenda gets the proper amount of focus, especially at the point when actual decisions are being made. Make sure it is part of the decision-making equation.

When I was at Supervalu, a wholesaler to independent grocers, we had a saying that our job was to "make the independent grocer as wealthy as possible." This was a true value-added receiver approach, since it assumed we would only be a profitable wholesaler if we first made sure we had profitable retail customers. The problem was that I didn't always hear that phrase at the time when decisions were being made. There was room to improve in getting the phrase onto the agenda.

3) Measure the Pulse of the Organization
Don’t assume that everything is alright. You may have a situation like Goldman Sachs had in London, where the perception of right behavior had gotten out of control. Monitor the mood and culture in your organization on a regular basis. Learn about a drift in the wrong direction early, while there is still the opportunity to rectify the situation.

4) Treat Strategic Planning Seriously
Strategic planning helps focus a company on the bigger, longer term issues. And in the long term, a receiving mindset is almost always the best path. Use strategic planning as an excuse to find ways to add more value to your customers. Use it to build a business where customers want to shower you with money because it is worth it to them in what they get in return. Strategic planning is one of the rare times when you can get people out of their daily rhythm and get them properly focused on the larger goal. Don’t waste that opportunity.

SUMMARY
There are two different mindsets one can bring to the goal of profitability. The “taking” mindset looks for ways to grab money out of people’s hands. The “receiving” mindset realizes that if you focus on building a superior business model for adding value to clients, they will voluntarily give you their money to obtain of that value. In the long run, the receiving approach is preferred, so make a point of proactively enforcing that mindset within the organization.

FINAL THOUGHTS
In the movie “It’s a Wonderful Life,” the George Bailey character runs his savings and loan business with a value-added mindset. His customers are all better off because of doing business with him. In fact, as the movie points out, if George Bailey hadn’t been alive to run that business with a receiver mindset, a lot of those people would have been in a terrible situation. As a result, when George Bailey gets into financial trouble, all his customers come and shower him with money (now that’s being a true receiver). Of course, it doesn’t always work out so dramatically in real life, but I think the title holds true. With a receiver mindset, it is a more wonderful life.

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.

Strategic Planning Analogy #130: Strategy Gifts

THE STORY
There is a story told about boxer Mike Tyson. Mike grew up under less than ideal conditions. He was born into poverty in a bad section of Brooklyn. His father left when Mike was only two years old, leaving his mother to try to find the means to raise the family.

Mike was expelled from junior high school for fighting and spent a number of years in juvenile detention centers. To raise money, Mike got involved in petty crime. By the age of 13, he had been arrested 38 times. Eventually, Mike Tyson ended up being placed in the Tryon School for boys in Catskill, New York.

It was here that his boxing skills were discovered and he was put on a path that would eventually lead him to becoming the world heavyweight boxing champion in 1986. With the fame came money. For the first time, Mike Tyson was not in financial need.

Companies wanted their products associated with a successful boxer like Mike Tyson, so they started showering him with cash or free products to try to get his endorsement. All of this amazed Mike.

He is claimed to have remarked on this strange phenomenon by saying something like the following: “When I was poor, I begged people to help me and nobody would pay attention to me. Now that I am rich and can afford to buy things on my own, people give me stuff for free...even a new free car. Where were all you people when I needed the help?”

THE ANALOGY
There’s an old saying that “The rich get richer and the poor get poorer.” This seemed to be the case for Mike Tyson. When Mike Tyson was poor, there didn’t seem to be any way out of the poverty cycle. Things just seemed to continue to get worse. However, when he got his lucky break of being discovered at the Tryon School, it put him on a path to boxing wealth. That wealth lead to a great number of opportunities to get even wealthier.

Mike Tyson really didn’t have any strategy to get all of those extra sources of income. He just knew how to do one thing well (boxing), and that success created its own opportunities for other successes, all initiated by others.

Similarly, there are businesses that do only one thing well, which place them in a powerful position. Others, who want to take advantage of that success start throwing great business opportunities at them. This creates greater success for the firm. It didn’t come by any pre-planned strategy. The ideas just came unsolicited by people who wanted to use the company for mutual gain.

Sometimes, the only strategy one needs is to create a point of power in the marketplace. Once the power is created, others will supply you with preferential access to all of the future opportunities one needs. Your only strategic responsibility at that point is to determine which of the many opportunities are best for your company.

THE PRINCIPLE
The principle here is “the power of the gatekeeper.” Gatekeepers provide access to something you cannot reach on your own. That could be access to distribution channels, access to customers, access to money or whatever. Mike Tyson was a gatekeeper providing access to a certain type of demographic (his fans) who tend to be difficult to reach with traditional media. As a result, firms were willing to offer a large number of great deals to Mike in the attempt to access that demographic.

If you can create a strategy where you become a powerful gatekeeper, then others will shower you with opportunities as they did for Mike. Look at Oprah Winfrey. She is such a powerful gatekeeper that everyone wants to jump on her bandwagon. If you are an author, Oprah can be a great gatekeeper to readers. Huge numbers of firms want to pay large sums to advertise on her show or in her magazines. The opportunities are unlimited, creating great wealth and making Oprah a billionaire.

The Chicken McNugget was not invented by McDonalds. It was invented by Tyson Foods (not related to Mike Tyson). Tyson Foods believed they had a potential hit on their hands, but they needed a gatekeeper to give them access to the fast food channel. Since McDonald’s was the strongest gatekeeper in the channel, they started there. At first McDonald’s was reluctant to take on the product. It took a lot of time and a lot of coaxing by Tyson Foods to get McDonald’s to try the idea. It eventually became one of their greatest product launches.

There was no strategy here. McDonalds had no desire to get into the chicken business. They had no creativity to invent something like a McNugget. At first they even rejected the idea. It was only through the creativity and persistence of an outsider that they got into the business.

I had a conversation with a former strategy executive at McDonalds. He told me that when he first came to McDonald’s, he expected to find great masterminds at marketing. Instead, he found very little marketing expertise. Either they bought it from an ad agency, or the ideas came to them from outsiders who wanted to tap into their power. He said the only thing they were really great at was running a highly efficient restaurant process. That high level of efficiency, combined with rapid expansion, created the market presence that lead to gatekeeper power with fast food and for families with small children. The rest of the success just sort of fell into their laps.

Whenever a new technology opportunity comes up, there are competing forces trying to determine how it will evolve. The question is which of the competing technology standard will win. For example, which high definition TV technology will win? Which high definition video disk technology will win? And so on. Anyone who wants to set the standards for new technology in their favor knows that their potential for success is much greater if they can get powerful gatekeepers on their side. Best Buy has tremendous gatekeeper power in accessing people interested in leading edge technology. Therefore, firms with new technology do whatever they can to become the preferred technology standard at Best Buy.

Best Buy understands the power it has and has created a strategy around exploiting this gatekeeper power. They often essentially pit one standard against the other and see which one will offer Best Buy the biggest prize. Then they back the one that offers the best results for Best Buy.

The point here is that in some cases, one does not need to fully flesh out all of the strategic detail. All you need is a strategy to create gatekeeper power and a strategy to exploit it. If done properly, this will put your firm in position so powerful that you do not need to be geniuses in creating opportunities. Other firms will do all that for you and shove more opportunities into your face than you can absorb. You just need to be wise in picking amongst all the ripe opportunities put in front of you (and wise in properly negotiating the deals with these people).

Now becoming a strong gatekeeper is not easy. If it were easy, there would be more of them and they would command less power. This alone can be serious, time consuming strategic work. The trick is to pick something that other businesses desire, yet find difficult to access. Then you specialize in finding ways to gain that access and then let others start throwing money at you.

This is a common ploy in the dot com world, where if you can create great access to a desirable group of people, then advertisers will be all over you. For example, Google used technology to allow firms access to people interested in a particular search word. This type of gatekeeper power has proven to be very successful for google.

Go out there and find your gatekeeper opportunity.

SUMMARY
One approach to strategic success is to own the best access to a desirable resource, such as a particular type of customer, technology, distribution channel, raw materials, a particular type of labor force (highly skilled or highly inexpensive), or some other item. Once you have locked up the access to that resource, the firms who want to access that resource will provide you with all kinds of business opportunities. These opportunity “gifts” will supply more than enough ways to increase your wealth.

FINAL THOUGHTS
Of course, if you manage that gatekeeping poorly, it can lead to ruin. Mike Tyson did not continue to perfect his one point of expertise which lead to his gatekeeping power (boxing). This quickly lead to others becoming the heavyweight champion. In addition, he did not do a good job of proactively exploiting the gatekeeper power at the time when he had it. As a result, in 2003 Mike Tyson had to declare bankruptcy.

Do You Do Breakpack?

THE STORY
Back when I worked at the headquarters of a grocery wholesaler, I frequently made trips out to the divisions for meetings. After the meetings were over, I would always ask if someone could give me a tour of the warehouse. The division presidents loved this. They were like proud Papa’s who wanted to show off pictures of their children. They loved their warehouse and enjoyed showing it off.

Now I didn’t ask because I loved to see warehouses. Once you’ve seen a few, you realize they are rather dull. I did it to make the people out in the field feel better. In order to make it look like I was truly interested in what was going on, I had a predetermined set of questions to ask them which I had memorized in advance. It included things like “Do you do breakpack?” and “When was the last time you re-racked the warehouse?” I really wasn’t all that interested in the answers to the questions, but I acted as if I was.

Throughout the tour, I would always praise everyone for the great work they were doing. A little praise went a long way.

As one of the division presidents put it to me, “You’re not like those other guys from headquarters. As soon as the meeting is over, they rush out of here, telling me that they have to hurry to catch a plane. Hell, this is a small town. I know when all of the flights are scheduled to leave, and there is never a flight at that time for them to rush to. They just don’t want to spend time with me.”

THE ANALOGY
For a strategy to succeed it must, at some point, affect the way your front-line employees interact with the customer. It doesn’t matter how clever your strategy is. If it is delivered to the customer by surly, inconsiderate employees, it will have difficulty succeeding.

People still matter. Your strategy must never forget that it is only as good as the way it is delivered out in the field. The front-line employees have the power to make or break the strategy. Therefore, it is important to make sure your front-line employees are properly motivated to make the strategy work.

That is why I always tried to pump up the troops when I went out into the field. I wanted them to feel special…to feel proud. A front-line employee who is proud of what they are doing will do a better job (for more on this, see my blog “Soulless Capitalism”). Customers will recognize this enthusiasm and reward the company with additional business.

If you are a division president and you know that corporate doesn’t want to spend any time with you, and that they’d rather hang out at an airport restaurant than talk to you, then you are less likely to feel loyal to the headquarters. The rest of the people in the division will pick up on that attitude, and before you know it, the front-line troops are not supporting the strategy.

THE PRINCIPLE
The principle here is to make sure that your strategic process incorporates the impact of the frontline troops. These people need to embrace the strategy and feel proud about being a part of it. By doing so, you will better deliver the benefits of the strategy at the point where it matters most—where the company intersects with its customers.

This point was brought to light recently in a survey conducted by Maritz Research. This survey found a linkage between how a manager treats the frontline troops and how the troops interact with the customer. According to the research, “Honest, caring, cheerful, generous and flexible workforce supervisors do the best job of motivating employees to deliver great service and create customer loyalty...Employees who serve under this kind of positive supervisor tend to feel the strongest affinity for customers and also believe that the company does an outstanding job of serving its customers.”

By contrast, the tough, controlling, Machiavellian “win-at-any-cost” supervisors de-motivate the troops. “Not only are these managers poor at motivating their employees, but those who work for this type of supervisor have some of the poorest attitudes towards their company’s customers.”

Which would you rather have: frontline employees with a strong affinity for customers or frontline employees with poor attitudes towards customers? You can help control which of these types of frontline employees you have based on they way you manage them. This could have a greater impact on success than the cleverness of the strategy.

Therefore, the way frontline troops are managed should be addressed as part of your approach to bringing the strategy to life. And, since attitudes tend to trickle down from the top, your key executives need to be practicing the right attitudes as well.


This is well illustrated in a book which was recently published, called “The Education of an Accidental CEO.” This is the story of David Novak, the successful CEO of Yum Brands, owners of the Taco Bell, KFC, Pizza Hut, Long John Silvers and A&W brands.

In the book, Novak credits most of his success to his ability to fire up the troops and get them properly motivated. Novak tries to be positive and enthusiastic, making sure that he treats the troops in a respectful and praiseworthy manner.

To quote Novak, “You can never underestimate the power of telling someone he is dong a good job. The higher up the ladder you are, he more important it is to give credit rather than receive it…Always be on the lookout for reasons to celebrate the achievements of others.”

Novak intuitively understood what Maritz quantified in the survey. If you treat your employees with respect, then they will treat the customers with respect. These customers will then become more loyal and success will follow.

Hence, management style is important and needs to be incorporated as a part of the strategy.

SUMMARY
Strategies need to be more than just ideas or concepts. For them to succeed, they have to impact the interaction between your frontline troops and the customer. Customers typically respond better if they are treated well and believe that the frontline troops care about them. Similarly, frontline troops are more likely to care about the customer if their superiors show that they care about the troops. Therefore, care and consideration should be an integral part of the strategic plan. Don’t always just rush off to the airport at your first opportunity. Take some time to shower the troops with praise.

FINAL THOUGHTS
During the most recent Super Bowl (Super Bowl XLII), much commentary was made about the coaching styles of the head coaches of the two teams. Both Tony Dungy of the Indianapolis Colts and Lovie Smith of the Chicago Bears used a positive coaching style similar to what is advocated in this blog. This is in stark contrast to the typical head coach, who tends to yell a lot and focus on what players are doing wrong. Many believe that this positive approach had a lot to do with the success of these two teams. I think it can also have a positive impact on the success of your team.

Strategic Planning Analogy #264: An Efficient Waste of Time

THE STORY
Stephanie had an overweight dog. She went to the Veterinarian to get some advice on what to do about her dog’s weight problem.

The doctor said that what the dog needed was more exercise. He knew that there was a large park near where Stephanie lived, so he said, “You should take the dog for a few laps around the park every evening.”

Stephanie heeded the veterinarian’s advice and started walking her overweight dog a few laps around the park every evening. After awhile, Stephanie found this task to be very time-consuming and very boring. Stephanie said to herself, “I’m an expert in making things more efficient in the business world. I should be able to find a way to make this task more efficient as well.”

And so she did. To make the trek around the park faster and more efficient, Stephanie decided to put the dog in a car and drive her pet around the park a few times every evening. Not only was this faster, but the dog enjoyed it more. The dog loved sticking its head out the car window much more than walking.

Everything was perfect, except for the fact that the dog did not lose any weight.

THE ANALOGY
Stephanie found a way to make the process of going around the park more efficient. Driving was both faster and more enjoyable than walking. Unfortunately, her efficiency “improvement” totally missed the point. The purpose of the trip around the park was to get her dog to lose weight. By prioritizing “efficiency of task” over “purpose of task” Stephanie failed to achieve the intended goal.

What Stephanie really created was an efficient waste of time. She got around the park faster, but without meaning or purpose…and the dog was still overweight.

As silly as Stephanie’s efficiency solution was, it is not that different from what I have seen in occur in strategic planning. Strategic planning is a process, but it also needs to serve a purpose. If all you see is the process, then you become like Stephanie, who only saw going around the park as a process. As you try to make the process of strategy more efficient, you can lose sight of the intended purpose. The result is a highly efficient strategic planning process—one that is quick and painless—but utterly worthless in moving the company forward.

THE PRINCIPLE
The principle here is that the best strategy rarely comes from an efficient process. Forming strategies is messy work, and the process usually needs to be a bit messy as well. A little sweat and aggravation is needed to get the job done. Just as the dog could not lose weight in an efficient car, but only by slogging it out the slow way in a walk, great strategic solutions cannot be rushed, either. A slick, fast approach to planning can quickly become an efficient waste of time.

There was a discussion on Linked-in recently about all the neat little strategic planning tools one can use in a strategic planning process. Tools are great, but tools can make a royal mess if used improperly. For example, if you see a SWOT analysis (strengths, weaknesses, opportunities, threats) as just a list of blanks to fill in, then you can quickly devise a way to efficiently fill in the blanks. But you may end up with just a bunch of useless platitudes.

In general, top executives don’t like to spend a lot of time on strategy. They would rather dive into the “crisis of the day” and solve an immediate issue. They will encourage strategists to find “efficient” ways to do strategy, so that it takes up less time. You must fight this pressure and temptation.

Here are four reasons why Strategic Planning needs to be a slow and messy process.

1. Planning Needs to Break Down Preconceived Notions
Most great strategies reinvent the rules. They ignore the traditional way things have always been done and try something completely different. Conventional wisdom is thrown away and a new wisdom is invented. Strategist Gary Hamel puts a high priority on the need to break down preconceived notions about how business is supposed to work. You cannot invent the next new thing if your thinking holds too dear to the old rules.

It takes time to break down the old thinking patterns. You might hold so dear to a current business rule that you think it is the only way to get things done. By closing your mind in this way, you prevent yourself from even considering an alternative. For example, you may believe that:

a) All hospitals have to have an emergency room; or
b) Only governments can own and manage highway systems; or
c) Everything on the internet has to be free; or
d) Product development needs to be fully complete before introducing it to the public; or
e) Only a small niche of people are interested in organic.

There are people today who have defied conventional wisdom like this and are making money.

It can be a messy thing to get people to release their grip on tightly held notions. Letting go of the old and embracing the new takes time. If you short-change this process, you can have a company full of doubters who will not fully embrace your strategy. This will internally sabotage your ability to achieve your strategic goal.

2. Strategies Need to Challenge Current Power Bases
Many of the people in your organization have created a strong power base under the old rules of how things were done. Reinventing the rules can weaken or destroy that power base. Naturally, the ones with the power today will tend to resist a new approach which reduces their stature and influence.

Worse yet, if the only opportunity these people have to respond to this change is in a public planning forum, then they may take a strong public position of resistance which will make it difficult to back down later.

In these cases, there often need to be private moments, when challenges can be presented “off-the record” one-on-one to the ones who might be threatened. Negotiations can take place to help them find new bases of power. Extra time can be given to help them see the bigger picture…all away from the public eye, so that they can save face.

I worked with a company that was developing a new vision which threatened the power and influence of the old base business, where over 90% of the employees worked. Because the new vision was thrust at them quickly and publically, they felt trapped. As a result, they used their superiority of numbers of people to essentially do a coup. They took over the company and threw out all of the executives who were threatening the status quo.

If you skip the messy business of delicately transitioning power bases (because it is inefficient), you can end up with a mutiny rather than a strategy.

3. Eureka Moments Need Incubation Time and Diversions
In prior blogs (see Magic Eye and Genius Sleep), we have looked at some of scientific research behind the development of great ideas. In Magic Eye, we saw that eureka moments of great discovery almost never occur inside focused, efficient efforts at idea development. Instead, they tend to occur after laying aside these efficient processes for awhile and spending time at some seemingly worthless (or at least inefficient) diversion.

It could be spending time at some recreational activity (like sports), or entertainment activity (like watching a movie), or something as mundane as taking a shower. Regardless, the brain needs time to back off from heavy, efficient processing and drift a bit into a more daydream-like mode. Science found that the great insights come during this mental relaxation/diversion time after the “efficient” thinking process is done. Skip the relaxation/diversion time and you lose the great eureka moments.

In the Genius Sleep blog we found that the one most common characteristic between geniuses is that they tend to sleep a lot—often taking naps in the middle of the day. How’s that for a seemingly inefficient process?

This combination of alternating between efficient thinking time and random relaxation (or even sleep) time tends to generate the greatest strategic insights. It is a messy and time consuming process which by its very nature cannot be made efficient.

4. Strategies Need to Evolve and Adapt
New revolutionary ideas are rarely perfect right out of the box. They tend to get adapted and modified over time. That’s why so many firms now introduce beta versions to the public to gain more insight before the product is finalized. If the strategic planning process is only at the beginning of this journey, then you are missing the richness of applying a strategic approach to this adaptation. Instead, you may end up with random adaptation which ends up weakening and destroying the revolution rather than strengthening it through strategic coherence.

Since one loses some control over the process once it is released into the public, one needs a messy strategy process to interact with this more uncontrollable adaptation. Changes will be on the schedule of how the public wants to interact, not on some internal strategy calendar. Again, this cannot be rushed for the sake of efficiency.

SUMMARY
The ultimate goal of strategic planning is to find and execute a path to a more prosperous future. Strategic planning can use some tools and processes to help achieve this goal, but one must never lose sight of the ultimate objective. Perfecting the “process” of planning to be as quick and efficient as possible almost always leads to strategic failure—an efficient waste of time. It is the time consuming and messy approach which brings better results.

FINAL THOUGHTS
Disney is known for its creativity. Chris Heatherly, VP of Toys, Disney Consume Products, described their success in creativity this way: “Some people want to cut to the chase. We tried it, and it just doesn't work…You have to have some decompression time to be creative.” How much decompression time is in your planning process?