Strategic Planning Analogy #497: Managing Moments

THE STORY

When I started my first semester at the university, I was surprised how friendly all the students were. I had never seen such friendly people. I thought to myself that this was going to be a great experience. 

However, when I started my second semester as a freshmen, I noticed that the other students in my classes were a lot less friendly.  At first, I thought it was an odd coincidence that I just so happened to get friendly students in all my first semester classes, and unfriendly students in all my second semester classes.

Eventually, I figured out the real cause of the change. In my first semester, I was surrounded by other first semester freshmen.  We were all new to the university. Most of us did not have friends on campus because we didn’t know anyone there yet. Because of the strong desire to have friends, these first semester freshmen were acting aggressively friendly in order to fill that desire.

By the end of the first semester, these freshmen had made a sufficient number of friends.  The need was satisfied. Therefore, they relaxed in the second semester and were not as desperate to aggressively make new friends. Hence, they were not as “friendly” to me.

That is why, when I’m speaking to someone who is going off to the university for the first time, I tell them to be careful in choosing the classes and places where they hang out in that first semester. After all, the people you meet in that first semester are the ones most likely to become your lifelong friends long after university life is over.

THE ANALOGY

When students first go to college, there is a brief window of time when they are aggressively seeking out friends. In a matter of weeks, however, that window gets closed.  Enough friends have been made during the short window of opportunity that afterwards the aggressive behavior goes away.  They are now less likely to work abnormally hard to make more friends.

Windows of opportunity also exist in the marketplace. There are brief moments of time when an individual is more open to creating new purchasing behaviors or preferences. Then the window quickly closes and they become “less friendly” towards changing those behaviors/preferences. Habit and routine takes over; and market share hardens like concrete.

There are many triggers which can cause these windows of opportunity to open. Moving to a new location, like a university campus, is one such trigger. Not only may you need to be more open to finding friends after moving, but you now may have to find a new grocery store to prefer, a new doctor, a new hair stylist, the best place to service your car, and so on. You are much more receptive at that time to consider new alternatives. But soon, you make all of those choices and the window of opportunity closes.

Other triggers which can open us up to abnormally high openness to change in behavior include getting married, having one’s first child, getting a big promotion, buying your first home, a change in a company’s CEO, a drastic change in the economy (up or down), revolutionary new technology which makes the status quo behavior obsolete, and so on.

Most strategic plans include a desire to change marketplace behavior to the benefit of the company/brand. Since triggers can have such a strong impact on susceptibility to changes in behavior, it usually makes sense to consider triggers as part of your strategic plan.

THE PRINCIPLE

The principle here is that windows of opportunity are only open for brief moments. Therefore, finding ways to quickly identify and exploit these windows should be a priority in most strategies. If you wait until the third semester to make friends in college, you will probably end up with fewer friends than if you started in the first semester, when making new friends is easier. Similarly, if you are slow in reacting to triggers in the marketplace, you will miss out on the benefits inherent when windows of opportunity are open.

Here are three suggestions on how to better exploit triggers and windows of opportunity as part of your strategy.

1. Understand the Relationship Between Triggers and Your Business

Not all triggers are equally important to your business or your strategy.  Therefore, if you want to exploit trigger points and their windows of opportunity, you must first understand which ones are most important to your business, and why. It is only through understanding the relationships that you can properly determine which triggers to exploit, and how to exploit them.

For example, I know of a church that wanted to grow. It did research and found that the people most likely to consider seeking out a new church were those who were new to the community. That was their key trigger point.  Additional research showed them that the primary reason why people moved into their community was due to a job transfer. 

Therefore, the church built a strategy around seeking out and appealing to those with job transfers.  They took out ads in the airport (the place where many of these people first experienced the community). They formed close relationships with the companies bringing in the most new employees to the community. As a result of strategic actions such as these, many newcomers ended up choosing their church and it grew very rapidly.

So do your homework to learn which triggers to exploit as well as discover the best way to exploit the window of opportunity while it is open.

2. Prepare in Advance

Because these windows of opportunity may not be open very long, one needs to act quickly—as soon as the window opens.  Otherwise, by the time you figure out what to do, it may be too late. 

In a prior blog, I talked about how Caterpillar did a scenario analysis of what would happen in significant economic downturn. They calmly built what they believed to be the best course of action under such a scenario.  Then, when the great recession began, Caterpillar realized that the significant economic downturn trigger had occurred, so the quickly implemented the plan built for that scenario. 

The plan worked brilliantly because it was not hastily put together during a period of panic. When the trigger came, they pulled out the plan and implemented it immediately with full confidence.

Other companies, like Proctor & Gamble, were criticized for being too slow and indecisive when the great recession came.  And they suffered for it.

In another example, a friend of mine told me a story about beer in Chicago. Budweiser had been a strong competitor in Chicago, but sometime back around the 1970s or so, the Budweiser distributors suffered from a strike.  Old Style beer, a smaller player from out of town, knew a strike at Budweiser in Chicago was a potential trigger point, so they prepared for it. 

When the strike occurred, Old Style immediately flooded the market to fill the void. They positioned themselves as being the one loyal to the citizens of Chicago. They made close ties with the local sports teams.  They advertised aggressively to position themselves as Chicago’s beer. As a result, when the strike came, the former Budweiser drinkers (who now had to find a substitute) chose Old Style and many stayed with Old Style after the strike was over.  Old Style became the strong leader in the Chicago market. It took many decades before Budweiser regained the share lost due to the strike. All because Old Style was prepared in advance for the trigger.

3. Utilize Modern Technology

Thanks to the technological advances in “Big Data” crunching, and the data available due to social media, it has never been easier to find out when individuals have reached a trigger point.  One can now set up massive, yet finely targeted marketing campaigns to reach individuals precisely at the point when the trigger goes off.

I recently attended a big data conference and was amazed by how advanced the tools are becoming (and how the prices to use them are dropping). It would be foolish not to consider them as key tools in your strategic arsenal.

However, given privacy concerns and other such issues, one needs to be careful.  Back in February of 2012, Target stores got into some trouble for being too indiscriminate in the process.  Due to big data analysis, Target determined that if a customer suddenly started buying certain products (out of a list of 29 products), there was an extremely high likelihood that the person was pregnant. So once someone started buying these products, Target immediately went into action with their pregnancy and new baby promotions.

Unfortunately, one of these promotional packages ended up going to a young teenaged girl.  The girl’s father became irate and went to Target to complain.  But then, a few days later, the father apologized to Target because he learned in the interim that his daughter was indeed pregnant. Thanks to big data, Target knew before the girl’s father.

Since then, Target is more subtle in how they exploit the data.

SUMMARY

The best time to convince people to switch allegiance to your brand is when people are most prone to consider making a change. Therefore, effective strategies can be built around finding and then exploiting the triggers which cause people to be more susceptible to changes in behavior. The best way to do this is by:

1.      Understanding the relationship of your brand to various triggers.

2.      Preparing in advance a strategy to exploit that trigger, so you can act upon it immediately.

3.      Carefully using all the modern big data and social media tools which make finding and exploiting trigger points easier.

FINAL THOUGHTS

Another thing I remember from my college days was that at the beginning of each school year, one of the beer companies would sponsor a huge free concert on campus. They understood that those first semester freshmen were not only making new friend choices, but new beer brand choices. Are you the one exploiting these types of windows of opportunity, or are you letting the competition get the upper hand?

Strategic Planning Analogy #489: Feeling the Weather

THE STORY

Weathermen on TV don’t seem to think it is enough to merely give us the outdoor temperature.  They don’t seem to think that ordinary temperatures accurately reflect how we FEEL. So on particularly hot days, they weathercasters talk about the “Heat Index.” The heat index temperature is usually higher than the actual temperature, because it takes into account things like the humidity, which can make it FEEL even hotter.

In a similar fashion, when it gets especially cold, the weathercasters use something call the “Wind Chill Factor” to restate the temperature as colder than the actual temperature. This is because high winds can make cold temperatures FEEL even colder.

Well, my experience is that when it gets especially hot or cold, most people seek shelter indoors where it is more comfortable. People naturally flock to the warmth of indoor heat when it is cold outside or indoor air conditioning when it is hot outside.

So, if the weathercasters are REALLY interested in giving us the temperature we FEEL on these extreme days, they should give us the room temperature…because that is where most people will be found and that will be the temperature most people will be feeling.

THE ANALOGY

Weathermen are correct in noticing that the temperature reported on a thermometer does not always reflect how people feel. But I think they miss the even bigger difference in temperatures between being inside versus outside. That’s where the real difference in feelings occurs.

A similar situation takes place in the business world. Businesses have all kinds of reports and dashboards to report all kind of numbers. These reports and dashboards are like thermometers. They report the “temperature” of what is happening outside in the marketplace where business is taking place.

The problem is too many executives spend too much time indoors, inside the comfort and security of the headquarters building. These executives do not FEEL the realities of what is going on out there “in the real world.” They are protected from the intense competitive climate on the outside.  Things feel a lot better inside the headquarters where bad news is often softened and “Yes Men” make the executives feel like everything is grand.

Yes, the reports and dashboards may reflect real temperatures. But unless one can penetrate the false feelings of headquarters comfort and get the executives to really FEEL how things are going on in the real world, they will not make the right strategic decisions.

THE PRINCIPLE

The principle here is that merely seeing the numbers of business is usually not enough.  You have to get executives to actually “feel” the numbers.

Feelings are Important

Why? First of all, business is very complex. There are so many moving parts that any single number doesn’t tell the full story. And if you have a whole stack of numbers, you are often no further ahead because it can be hard to see how all the individual numbers fit together.  It’s like having all the individual pieces of a jigsaw puzzle, but no idea of what the picture looks like when all the pieces go together. At that point, the puzzle pieces may as well all be colored black for all the insight they provide.

Our modern technology can pump out thousands upon thousands of data points every hour. But that doesn’t mean we are necessarily any smarter about what’s going on. Drowning in “big data” doesn’t make us more intelligent. True knowledge requires more than just piles of numbers. It requires context and insight.

Context and insight help us to see the big picture—to actually feel what is going on, to know what is truly important, and to see into the future—beyond the reach of measurement tools.  Unless you can feel the big picture, you cannot create the big picture strategy or make the right strategy decisions.

The second reason while feelings are important is because people are emotional beings. They make decisions based on both reason and emotion.  Our customers are emotional beings, our employees are emotional beings, our partners are emotional beings, and our competitors are emotional beings. All of their emotional feelings impact what happens outside in the marketplace.  If our leaders do not have a proper feeling for how all those emotions are playing out in the marketplace, they will make the wrong decision.

Our leaders are also emotional beings.  Their feelings affect their decisions.  If their feelings are wrongly biased by spending too much time insulated inside headquarters, their feelings will steer them in the wrong direction.

What Should We Do to Move From Numbers to Feelings

So how do we make sure that our leaders are feeling the big picture in the proper context?  I have five suggestions.

1. Elevate the Art of Interpetation.  The gathering of “big data” numbers is only relevant when those numbers can be interpreted and put into context.  We need to be able to put a heat index or wind chill factor on the numbers to get them to reflect how things really feel. 

Just having a warehouse full of paint will not get you a great painting.  You need to add the artist who can create the picture out of the paint.  Similarly, just having a data warehouse full of numbers will not let you see the big picture of what is going on in the marketplace.  You need to add the analytical “artist” who can convert the data into the beautiful picture of what is going on.

Therefore, we need to elevate the importance of interpretation of data to the same level (if not more) than that of the gathering of the data.  Ask yourself…how much time and money has gone into building you data-gathering activities?  And then compare that to how much time and money is going into the interpretation and conversion of that data into a picture that allows executives to feel the big picture of what is going on.  Is it in balance?  Are you warehousing paint or are you creating paintings?

2. Get the Executives to Go Outside.  If the weathercasters really want us to know what it feels like outside, they should just tell us to go outside and feel it.  There is often no substitute for actual first-hand experience in the elements. If you really want to know how things feel, go feel it yourself.

Have top executives go on sales calls.  Have them go to the store or website and actually have to try to buy your product.  Make them have to actually use your product in real life situations.  Then have them buy and use the competition.  Watch how real customers interact with your product or service out in real-world situations at their homes or place of business.  Eat lunch with regular employees in the regular cafeteria.  I talk more about getting out in the field here.

3. Listen to the Outside Voices.  If all your executives listen to is each other, then they will only feel the temperature inside the corporation. To feel the outside temperature, you have to listen to the people who are living outside in the real world. That includes the employees in the field, customers and other key partners.

Modern technology makes it easy to hear the voice of the field and the voice of the customer.  But how much of these voices are being heard by the top executives?  Just telling an executive sales are down is one thing.  Having them hear the rantings of the dissatisfied customers who stopped purchasing is quite another.  It provides a context for how to fix the situation.

Have executives listen in on the complaint line.  Have them read the comments spoken in twitter and other digital sources.  Have them see survey comments.

4. Tear Down the Insulation.  If you want the temperature inside the headquarters to feel more like the outside temperature, then you need to tear down the insulation which keeps the outside “truth” from reaching executives. Employees need to feel that comfortable in speaking the truth when talking to top executives.  It needs to be okay to speak up when the conventional wisdom inside the headquarters appears to be out of sync with what is happening outside.

5. Make Strategic Planning More About Painting Pictures.  Finally, I am getting more and more concerned about the fact that modern strategic planning departments are turning into data organizers rather than picture painters.  They manage budgets and deviations from plans, but are not providing the types of insights which change how an executive feels about what needs to get done. I see more job specifications in strategic planning asking for CPAs than I see requests for great storytellers.  If your strategists cannot paint pictures with compelling stories, then you are back to merely having piles of data (and wondering why budgets are not being met).

SUMMARY

If executives are insulated from the harsh realities of the marketplace, they will have the wrong impressions of what is going on (and make the wrong decisions). Just giving them piles of data from the outside is not enough.  Strategists need to make sure context is placed around the data so that executives can actually feel what is happening in the real world. It needs to strike a chord deep within their emotions.  To help in this process, combine the context-making with plans to force executives to spend more time interacting with the real word and the people in it.

FINAL THOUGHTS

Maybe the best way to keep executives from hiding in headquarters offices is to eliminate headquarters offices.  There are many companies which do this.

Strategic Planning Analogy #455: Evict the Dentists!

THE STORY
When I took a statistics class in college, the professor told us about the fact that there was a high correlation between the crime rate and the number of dentists in a neighborhood.  When the number of dentists went up, so did the crime rate.  The correlation was a provable fact.

After making this statement, the professor suggested that if you want to reduce crime, all you have to do is evict the dentists from the neighborhood.  Doesn’t that conclusion fit the facts?

Of course, the point the professor was making was that just because one observes a high correlation does not mean that you understand the nature of the relationship.  For example, you may not know which is the cause and which is the effect. 

Or, in this case, the crime and dentists worked together because of a third factor—both criminals and dentists prefer nice neighborhoods.  Dentists like them because they can afford them.  Criminals like them because there is nice stuff to steal.

In other words, there is no direct connection between crime and dentists.  If you eliminate the dentists, you still have nice neighborhoods, so the crime will stay.  So don’t be hasty in your conclusions when you see a correlation.

THE ANALOGY
Strategies are based on assumptions.  The better one’s assumptions about the environment, the more likely one will have created a strategy relevant to the environment.

Today, we live in a world where big data and statistics are becoming a larger part of the decision-making process.  Big computers can crunch all kinds of data and point out all sorts of correlations. 

But just because we can crunch out ever larger lists of correlations does not necessarily mean we understand the environment better than before.  Like in the example in the story, a factual correlation between crime and dentists can be misunderstood and lead to the wrong conclusion.

We can make the wrong assumption about the direction of causality (which is cause and which is effect).  Or we may be missing out on a third factor which connects the other two (like the desirability of nice neighborhoods).

If we do not understand the underlying relationship in the correlation, we will make the wrong assumptions.  And this will lead to having the wrong strategy.

 

THE PRINCIPLE
The principle here is that it is wise to spend time critically examining our assumptions before plunging into strategic solutions.  After all, a “great” strategy based on incorrect assumptions is really in the end a bad strategy, because it is irrelevant to the marketplace in which it will be implemented.

An Example

This point was made clear to me in an article I was recently reading about social media and shopping.  The article talked about a correlation fact: customers who are heavily involved in a retailer’s social media spend a lot more money with that retailer than those who aren’t involved in that company’s social media.  The article then concluded that based on this fact, retailers should put a lot of effort behind getting as many people involved in their social media as possible.

Now what assumption did that author make?  Based on that conclusion, the author apparently assumed that social media activity leads to greater shopping.  But is that really true?

What if the correlation works in the opposite direction?  Doesn’t it make more sense that those who really want to spend a lot of money at a particular store would be the ones most likely to also like their social media?

So does more social media usage create heavier store shopping or does heavy store shopping create more social media usage?  The answer to this question can make a big difference on what strategy one chooses.

If the author is correct, then one should spend all sorts of money to get as many people as possible involved in your social media, regardless of who they are and how you got them there.  After all, the social media usage is supposed to magically convert them into heavy users, so it is worth the effort.

Another fact is that the most effective way to get people involved in social media is via “bribery.”  In other words, if you offer money, prizes, coupons or contests (which are really nothing more than bribes), you will get more people to sign in and “like” you.  So if you have an assumption like that author, you will endorse a strategy including lots of this kind of bribery.

But think about this for a minute.  If the only way you can get someone into your social media is due to bribery, why do you think this will lead to a lot more loyalty and a lot more purchasing?

Now what if the other assumption is true, that heavy spending leads to heavier use of the brand’s social media?  Then, one would look at their social media as targeted tool for communicating with some of their best customers.  In this case, the bulk of the strategy might be pointed at trying to increase the amount of money these already loyal shoppers are spending with you.   So instead of primarily trying to get more people to the site, you primarily try to extract money from those who naturally want to be there.

For example, you might come up with new offers of new products or services that would appeal to heavy users.  Or maybe you offer them a loyalty program which rewards spending even more with your company (which, since they already like you, might be relatively cost effective).

If this second assumption is true, the tactics of the first assumption could be a disaster.  For example, if you clog up the social media with a lot of people who really aren’t that interested in the brand, it might make the social media less inviting to your serious shoppers.  This could chase away your best customers from the site and reduce the ability to have meaningful (and productive) conversations with your best customers. 

Second, if bribery is what got them to the site, then significant levels of additional bribery are probably needed to convert these social visits into shopping.  That could end up being a highly unprofitable loyalty program if you add up the bribes to get them to the site and then additional bribes to convert them into shoppers.  At the very least, it would probably be less effective than a loyalty program only focused on people already favorably pre-disposed to your brand (where the needed bribes could potentially be far smaller, since they already have more loyalty towards you).

So, as you can see, assumptions can really impact strategic effectiveness, both positively and negatively.

So What Should We Do?

This being the case, what should we do?  First, become explicit in outlining your assumptions.  Make sure you get those assumptions out in the open.  Always ask yourself these questions:  What assumption needs to true for this strategy to succeed?  What assumption is embedded in my conclusion?

Second, take the time to really study and test the validity of those assumptions.  Don’t rush to a conclusion merely because you see a correlation.  Make sure that you test the directionality of the relationship or check to see if there is a third variable holding the correlation together.  Do a test before you roll out your plan to see if the assumption holds true.

Third, consider the downside risks if your assumption is wrong.  The greater the potential negative impact to a small error, the more you should study the validity of your assumptions.

Finally, don’t lull yourself into a false sense of confidence just because increased analytics has supplied you with a lot more correlations.  You still have to figure out what it all means.  More data may just lead to more misperceptions and more false assumptions.  More data means more to analyze and study, not an excuse to plunge ahead faster.  

SUMMARY
If you want a strategy ideally suited to your environment, then you’d better have an accurate view of what that environment really is.  Our point of view is based on the assumptions we make about how that environment works.  Therefore, we need to take time to identify and test the assumptions inherent to our conclusions.  Otherwise, our conclusions could be wrong and lead us to the wrong strategy.

FINAL THOUGHTS
Before you go around shouting for eviction of the dentists, think through the logic which lead you to that thought.  Remember, a little time spent up front to fine tune the assumptions can save you a whole lot of grief later on.