Three Signs of a Bad Strategic Plan

Introduction
We’ve spent a lot of time in prior blogs focusing on what good planning is all about. Today we will look at the key characteristics of bad strategic planning. In general, bad strategic plans have one or more of the three following characteristics.

#1) Bad Plans Are Full of Platitudes
One dictionary defines platitude as “a flat, dull, or trite remark, especially one uttered as if it were fresh or profound. Synonyms: Cliché, Truism.” In strategic plans, platitudes can be quite common. At first, the words sound profound, but after you think about it, you realize that it is merely a trite truism—a cliché.

Examples of platitudes would be phrases similar to the following: Our goal is to be a…

a)     …market leader.

b)     …highly profitable company.

c)     …consumer-centric organization.

d)     …good corporate citizen.

e)     …successful leader in our industry.

f)      …company with above average returns on investment.

A good way to tell if you have a platitude is to say the opposite of the statement. If the opposite does not make any sense as a strategy, then the original statement does not make sense as a strategy, either.  For example, does it ever really make sense if you turn to the opposite of the above phrases and say your goal is to be a…

a)     …market loser or also ran.

b)     …highly unprofitable company.

c)     …organization that ignores its customers and treats them poorly.

d)     …bad corporate citizen.

e)     …unsuccessful follower in our industry.

f)      …company with above poor returns on investment.

If the opposite is not a viable option, then your original statement is little more than a fancy way of saying “We want to be good.” And that is no strategy—it is just a wish.

Great strategies are about making tough choices. It is about choosing where to focus and where not to focus. It is about making trade-offs so that you give up in some areas in order to win in others. It is about finding your differential advantage versus competition. You don’t find these in platitudes. Platitudes tell you what is common to all; strategies tell you how you are creating a meaningful difference in the marketplace.

In contrast to the above statements, a great strategy could say something like: Our goal is to win on the basis of superior quality. This works as a strategic statement, because you don’t have to have superior quality to win. You could also win on price, service, speed, originality, etc. So the opposite of “not winning on quality” makes sense. You’ve made a real choice.

This choice provides direction (towards quality). It lets you know the trade-offs (I will invest in extra quality even if it means I cannot have the lowest prices). It lets you know how you will create demand for your offering versus the competition (better quality than them).

Those platitudes cannot do this. Just finding a fancy way to say “I want to be a success” provides no direction on what you will do to achieve that success. Putting the platitude on the wall may warm your heart a little, but it does not help you determine:

a)     Why does my company deserve to win?

b)     What actions are needed to create the win?

c)     Why should customers prefer me over the competition?

d)     What should I focus on?

And if your strategic plan cannot help you answer these questions, then it really doesn’t help you at all.

#2) Bad Plans Focus on the Scoreboard
To solve the problem above, some companies attach a specific number to define their success. The statement may go something like this: In five years, we will have achieved success by attaining:

a)     Sales of “X”

b)     Profits of “Y” percent of sales

c)     An annual growth rate of “Z” percent.

The problem is that putting a specific value on a wish does not change the wish into a strategy. It merely makes the wish more specific. Yes, now there is a quantifiable and measurable goal associated with the statement. But there still is no direction as to how that number is to be achieved. The numeric specifics let us measure how badly we did at the end, but they do not tell us what to do at the beginning.

In the past, I’ve referred to this as focusing on the scoreboard instead of the clipboard. It refers back to a statement Flip Saunders made when he was the coach of the Minnesota Timberwolves basketball team. When a reporter once asked him what it would take to win, his answer was “Unless they’ve changed the rules, we have to score more points than the opposition.” Although that answer is true, it is not a strategy.

The point is that a scoreboard lets you know who is winning the game, but it provides no strategy as to how to win. If Flip Saunders’ only advice to his team was “Go get me more points than the opposition!”, he has not given them a strategy for winning. Yelling at the scoreboard to put up more points doesn’t get you more points, either.

The way you win in basketball is by drawing up good plays on the clipboard and then executing them well. The clipboard is where the strategy is developed, not the scoreboard. If all you do is attach numbers to a platitude, then all you have done is merely told me what you want the scoreboard to look like when the game is over. But that doesn’t mean anything.

True strategies will look more like that clipboard. They will specifically say what everyone’s role is and how they are supposed to work together to increase the odds of scoring more points than the opposition.

And remember, a budget is not a strategy, either. It is just a more elaborate scoreboard.

#3) Bad Plans Focus On Improving the Parts
To avoid the problem of focusing too much on the scoreboard, some companies will work with the individual departments to talk about ways to specifically make improvement. It usually focuses around tactics to either reduce inputs or increase outputs for that area.

Although this is nice, it also falls short of great strategy. The problem is that it focuses on improving each part separately, rather than looking at how all the pieces fit together. It would be like having a separate clipboard for each player on the team telling them their best move in isolation. When all the players go onto the basketball floor together, they will probably fail, because they were not given a plan on how to work together for the good of the whole.

Perfecting the parts individually in isolation assumes that:

a)     You are already doing the right things (you just need to do them better);

b)     You are not missing anything (you have all the parts you need); and

c)     Making each individual part the best is optimal for the whole.

In most cases, these are bad assumptions. Today’s status quo can become obsolete in a short time. This can make what you are doing no longer appropriate, no matter how well you do it. Perfecting the obsolete is a waste of time. Perhaps you need to rethink the entire approach.

Perhaps the best approach is to move into brand new Blue Ocean areas, which require capabilities nowhere found in your organization. Or maybe the great opportunities lie in the white spaces between your departments, and you need to focus on better interaction between departments.

And, depending on what trade-offs you have chosen, it may be wrong to improve every area. For example, if you have chosen to win on quality, perhaps you need to double your efforts on quality initiatives by taking away improvement efforts in areas which will not increase quality.

Great strategies do not just look at improving the individual status-quo parts. Instead, they build integrated business models showing the best way to get all the parts working on behalf of the trade-offs needed to win in the environment of the future.

SUMMARY
Bad business plans tend to have a combination of these attributes:

a)     A Focus on Platitudes;

b)     A Focus on the Scoreboard; and

c)     A Focus on Improving the Parts.

By contrast, great business plans tend to:

a)     Focus on Differentiating Direction;

b)     Focus on the Clipboard; and

c)     Focus on the Integrated Business Model.

FINAL THOUGHTS
A little bit of fluffy platitudes in a plan can make it prettier and easier to sell (like adding dessert to a meal). But if that is all you provide, then you have not given them the most important part of the meal.

Strategic Planning Analogy #500: Be Careful Who You Follow

THE STORY

In the wintertime, Minnesota can have some nasty snowstorms. If they come just before the rush hour commute, they can grind traffic on the highways to a stop for hours. When that would happen to me, I would get off the highway and try to make my way home via the back roads.

With everything covered in white (and even more coming down), it would be hard to see where you were driving. And if the back roads took you into unfamiliar territory, it would be even more difficult to know how to get home. Therefore, when I got onto the back roads under these conditions, I would try to find another driver who appeared to know what they were doing and then follow them.

On one of these evenings, I found a car that really seemed to know all the back road shortcuts, so I started to follow it. Everything was working out quite well until that car I was following suddenly turned up a driveway and went into its garage. It was home. I was not. And I really wasn’t very sure about where I was.

I just kept driving and luckily I soon came to a main road which I recognized. From there, I was able to find my own way home. If I hadn’t come across that familiar road, I might have been wandering aimlessly out in that winter storm for many additional hours.

THE ANALOGY

Following someone can make life a lot easier—so long as the person you are following is going to your destination. But if that person is going somewhere else, they can lead you in the wrong direction.

When that car I was following turned up its driveway, I was in big trouble because he had led me into a neighborhood I did not know and where I did not belong. He had reached his destination. Unfortunately, his destination was nowhere near my destination. I was left in a place where I was lost.

The same thing can happen in the business world. It is usually easier to follow someone else’s strategy than create one of your own. This seems easy to justify, especially if you are following the market leader. After all, that strategy made them a huge success. Won’t it do the same for me?

The problem is that they are the market leader and you are not. They have different capabilities and resources than you do. As a result, the right strategic destination for them is most likely not the right destination for you. Trying to win with a strategy designed to take advantage of someone else’s strengths (not your own) will lead you to a place where you do not belong.

But even if you are roughly similar businesses, it is usually a mistake to blindly follow the leader. After all, each strategic position can only be owned by one firm in the mind of the customer. If the leader already owns that position, then the customers will view you as an inferior version of that position, even if you do essentially the same strategic actions. Instead, it is usually better to find your own unique position (where you can win) than to be seen as an inferior copy of someone else’s position. In other words, you need to find your own home to drive to rather than follow the leader to their home and not be invited in.

A great example is Walmart versus Target. Walmart’s strategic destination was “lowest cost structure/lowest prices.” Target could have tried to follow Walmart with a similar approach, but it probably would have been a failure. Just look at the evidence. There used to be dozens of discount store chains in the US chasing Walmart which have all gone bankrupt. But Target is still going strong because it decided not to follow the Walmart strategy and went to a different destination.

Target’s heritage from its parent company was the more upscale, more fashionable department store business. This was an advantage they could leverage against Walmart. So Target chose the destination of “Cheap Chic,” the more upscale, more fashionable alternative to Walmart.

Being a desirable alternative to Walmart is much better than being an inferior Walmart clone. Both chains now could successfully coexist, because they were winning in their respective, differentiating positions. They had each chosen different strategic “homes” and took different paths to get to their homes.

THE PRINCIPLE

The principle here is that a strategy of following someone else is usually a mistake. Most of the time, it is better to develop a different strategy—one specifically suited to your unique situation (skillsets and market position).

Why Following is Usually a Mistake #1: Differences

We have already discussed many of the reasons why following is usually a mistake. First of all, every company is different. There are differences in capabilities, resources, corporate culture, geography, prior investments, product portfolio, patents, market perceptions, and so on. What works for one firm won’t work for another because of these differences. You need to choose your strategy based on what makes you unique, because it is your uniqueness which provides the competitive edge needed to win.

There is no single best strategy for everyone in an industry. If there were, we’d be in trouble, because then you would only need one company per industry—the one best at executing that single strategy. Fortunately, there are many different ways to win a segment of the industry. You can choose to win on a variety of attributes, like price, service, customization, quality, speed, or specialization to a particular segment (such as a particular customer segment, geographic segment, usage segment, or solution segment). Rather than imitate someone else, find the place among these options which is best for your unique situation.

Throughout history, there have been business leaders who have had a great reputation for success. At one time, it was Jack Welch at GE. More recently, it was Steve Jobs at Apple.  Each time one of these business superstars appears, I’ve seen many leaders trying to implement the identical leadership styles (and strategic approaches) of these superstars in their own businesses. They try to follow these leaders just like I followed that car in the Minnesota winter. And usually, the results are similar to my experience. They end up lost rather than having success similar to these superstars.

Why? Well, the personality style of these superstars may be different than the natural style of those trying to imitate them. That difference makes it hard to be genuine and effective with that unnatural style. In addition, you are placing that leadership style into a different context. That style may not be the best for that context. These differences can make following these superstars a mistake.

Consider the fact that even Steve Jobs was not incredibly successful everywhere he went (think about when he ran NeXT). And many of the people highly trained at GE in the Jack Welch style had unsatisfactory results when they left GE to run companies in a different context. If they couldn’t pull it off when the situation is different, why do you think you can?  Differences matter and can make imitation inappropriate.

Why Following is Usually a Mistake #2: Only One Leader at a Time

Another problem with following has to do with the laws of positioning. As Al Reis and Jack Trout pointed out in their works on positioning, consumers will mentally place only one firm as a leader in a particular position. Everyone else is seen as inferior. And once someone locks into that leadership position, it becomes extremely difficult to unseat them from that top position. As a result, Reis and Trout recommend that if you are not the leader in a particular position, go and find a different, uncontested position where you can win.

This is like when Target did not try to unseat Walmart from its position but found a different place where it could win. Another example would be social networking where anyone essentially trying to copy the success of Facebook (like Google+) is failing. However, Linkedin differentiated by going after a different customer segment (business professionals) and has done well.

There was a time, generations ago, when industries held more financially viable players for a given position. But due to consolidations, the power of networks, price wars, and greater transparency, the number of profitable players in a given position keeps shrinking. Often, only one player per a given position makes a respectable return on investment. If you are not the top player in your position, you will probably be a poor investment. So, instead of copying someone else’s position, find a different place where you can win.

Exceptions to the Rule

Does this mean that following is always a bad idea? No, there are a few situations where following is okay.  One such situation is when critical mass is needed to get an industry started. For example, when the next generation of DVDs was being developed, there were two competing technologies—Blu Ray versus HD-DVD. This created uncertainty in the marketplace. Customers were reluctant to purchase either one for fear that they would choose the wrong format. It wasn’t until the players in the supply chain (movie studios, media player manufacturers, retailers, etc.) started following each other in one direction (Blu Ray) that the critical mass was formed to get customers to buy.

Another example could be electric cars. Until consumers are comfortable that the right technology is found (and the compatible charging infrastructure for it is in place), they will hesitate to buy.  

This is similar to the Blue Ocean strategy which talks about abandoning the status quo to open up entirely new industries. Sometimes you need a critical mass of players following each other into the new blue ocean in order to make to new industry look real and viable.  If the new market is big enough, it may be worth following to get the market jump-started.

Another time to follow is when an industry is still developing and you have special leapfrogging skills. The idea hear is to let others test the waters of innovation and take all the risks of failure. Then, when they hit upon the rare success, be a fast follower and overtake them in the race for leadership. This has been the strategy of Coca Cola for decades. Coke lets other people invent markets (like diet cola, cola in cans, bottled water, sports drinks, energy drinks) and then they use their superior distribution skills to overtake the upstarts and dominate the new business. As long as an industry is still unsettled, the fast follower approach can work if you have the capabilities to outrun the innovator.

However, even in these two cases, the benefits of following are temporary. Eventually, the markets will mature, and following won’t work anymore.

SUMMARY

Although following someone successful may seem like a path to similar success, history would say otherwise. The followers usually lose because either:

a)     They are in a different situation than the leader which makes their strategy not applicable; or

b)     The leadership in that position is already owned by the leader and you cannot take that leadership advantage away from them.

Therefore, rather than follow someone else, find the unique path that is just right for you.  

FINAL THOUGHTS

Eventually, I mapped out my own back roads for when a storm hit in Minnesota. That way, when the storms came, I was following my own path, rather than the path of someone else. That worked out a lot better. You should do the same.

Strategic Planning Analogy #461: Watersheds

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

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

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

So much for my great experiment.

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

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

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

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

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

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

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

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

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

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

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

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

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

2) Manage the Entire Watershed

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

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

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

3) Grow By Exploiting the Flow You Already Control

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

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

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

Example #1:  Wal-Mart

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

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

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

Example #2: Apple

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

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

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

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


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

New Different

REVIEW
In the last blog, we looked at the shortcomings in a strategy approach I call “More Better.”  The idea behind more better is this:  If you take the status quo and incrementally change it by either a) adding MORE features; or b) making the current features perform BETTER, then you will have improved success.

As we saw in that blog, “More Better” does not always improve success, and in many cases makes things a lot worse.  The Problems with More Better are that:

1) It focuses the strategy on what the offering can do rather than on what the customer experiences.  And More Better often makes the consumer experience worse.  Happier consumers beat out fancier products any day.

2) Eventually, performance can get so good across the entire industry that customers needs are well taken care of.  All the effort to improve beyond that point may not be noticed or appreciated.  It may cost more than people are willing to pay for it.

3) Adding more features to the status quo often adds confusion and complexity, which can lessen the consumer experience.  In addition, it is hard to excel in performance in any given area when you are trying to offer everything.  The added features tend to cancel each other out and create an overall mediocre offering.

4) There are barriers to a consumer switching to your offering, such as having to learn a new product, getting rid of replacement parts, forming new supply relationships, having to make new capital investments, having to take a risk on an unfamiliar or less prestigious brand, and so on.  You may not be able to create a large enough improvement to the status quo to overcome these barriers.  As Al Reis and Jack Trout put it, you need to be at least three times better to unseat the market leader.  That is hard to do.

5) As markets consolidate, there are fewer players to take market share from and they are harder to take share from because the remaining firms are all strong.  It they are all playing the More Better game, it will be nearly impossible to reap large gains from merely doing More Better.  

THE ALTERNATIVE
If More Better is a risky strategic approach, can we find a better approach?  Often times, the superior approach is something I call “New Different.”  The idea behind New Different is as follows:

1)  Rather than adding more features to the status quo, consider eliminating status quo features.  Perhaps even eliminate nearly all the ways the status quo performs and create an approach which is totally new.

2) Rather than measure performance the old way, find a solution which works on a different business model.  By focusing on the consumer experience rather than current offerings, you may find a way to please customers in a completely different manner that the status quo.

EXAMPLES
Here are some examples of New Different at work.

1) Apple

One of my favorite strategy stories is the one told by strategy professor Richard Rumelt.  Back in 1998, Rumelt had a chance to speak with Steve Jobs.  When Jobs returned to Apple, the company was in a bit of a mess and was so small that it was on the verge of becoming a totally irrelevant company.  Rumelt was curious as to what strategy Jobs would use to try to grow the company long-term.  So he asks Jobs what the long-term strategy was.  Job’s response?  “I am going to wait for the next big thing.”

The point here is that Jobs refused to fall into the More Better trap.  He was not going to try to win by making the Apple computers do more functions or just make them a little bit better.  No, he was going to do the New Different approach.  Good bye status quo, hello next big thing.

Rather than add new functionality to the Apple computer, he took away nearly all the functions and just focused on music.  And rather than do music the same way it had always been done, he took a radically different approach by making a seamless closed system for buying, storing and playing music.  The result was iPod and iTunes and all the rest of the new business model for music.

And I’m sure that Apple could have never achieved the level of success it had with iPod by merely doing a More Better approach with the Apple computer status quo. 

2) Cirque du Soleil

The circus industry has been on a long, agonizing path to obsolescence. People had used “More Better” to try to resurrect the industry.  Let’s add more acts; let’s make it bigger.  That didn’t work because the competition was not other circuses, but other entertainment.  Even the biggest and the best version of the status quo circus would provide an inferior customer experience when compared to all of the other modern entertainment choices.

Then along came Guy Laliberté.  He wasn’t a circus expert.  Laliberté was a street performer.  And rather than focus on how to improve the circus, he focused on how to improve the consumer’s experience of live performance.  Out of this process came the wildly successful Cirque do Soleil.

Rather than trying to do more, Cirque du Soleil does less.  It eliminated the animals.  It eliminated all the little stories in a circus and replaced it with a single theme for the entire performance.  Then it redid the entire business model, including a new targeted audience, new venues, new marketing, new performances, and changes to everything behind the scenes.  This was not a More Better circus.  It was a New Different entertainment experience.

3) Weight Loss

Over the years, the way to win in the weight loss business is not to try to take the current fad and make it bigger and better.  No, success comes from doing something completely different.  If the current fad is around a particular diet, then replace it with a new exercise.  Then replace the exercise with a medical device or pill.  Then replace the medical device with yet another way to look at food.  Then replace that with a surgical approach, then a way to lose weight while you sleep, and so on.

The idea here is that instead of focusing on the particular offering, focus on the customer problem.  If the customer is frustrated with the current fad (and eventually all lead to frustration), then doing it bigger and better won’t solve the problem.  Instead, try something totally different.

I remember near the end of the high carb diet fad, someone wanted to do the ultimate More Better approach.  They designed an entire grocery store to sell nothing but high carb foods.  Shortly after that, the fad ended and went on to something else, and I’m sure that grocery store soon died.

BLUE OCEAN
In many ways, the New Different approach is similar to the Blue Ocean strategy.  The idea is that if you go into a highly competitive, relatively mature environment, you are in for a blood bath.  The fighting is intense and the profits meager.  The return on More Better is very low.

By contrast, if you seek out new, unclaimed territory, then there is less competition.  You get to set the rules in your favor.  You can become the leader by default and reap the rewards of leadership.

This is accomplished by moving away from seeking incremental improvements and add-ons to the status quo.  Instead, start with the consumer experience and re-engineer the entire business model to create an entirely new approach.

SUMMARY
Given the problems with the More Better approach to strategy, greater emphasis should be given to the New Different approach.   

FINAL THOUGHTS
It takes guts to go against the flow of the status quo and sail out to the Blue Ocean.  But no guts, no glory.

    

Strategic Planning Analogy #443: Panic Attack

THE STORY
I know someone who has a tendency to get panic attacks. She’s not alone, as it is estimated that 18% of adults have this condition. My friend’s problem has to do with crowds. If she is in an enclosed area jam-packed with people, she finds herself in a mild panic.

Her solution? Make a point of avoiding crowds as much as possible. For example, you will never see her Christmas shopping at the stores on Black Friday.

THE ANALOGY
People aren’t the only ones who get panic attacks. So do companies.

Pressures at the company mount. Anxiety rises. The crisis of the day reaches epic proportions. Everyone begins to lose their cool and starts yelling at each other. Each department tries to shift the blame to somebody else. Progress grinds to a halt as the company collectively freezes into a panic attack.

Corporate panic attacks destroy productivity. Great thinking rarely occurs when one is in a panic. Since coping with the immediate is more than one can handle during a panic, long-term concerns fall completely off the agenda. Rather than thinking growth, one is focused on survival.

This is not good for the company. It is even worse for effective strategic planning.

THE PRINCIPLE
The principle here is that even the best approaches to developing strategic plans will fail if a company’s mental state is not ready for it. If a company is in a panic, you are wasting your time. This also applies to strategy implementation. If the company is in a panic, implementation will fail.

So what do you about panic attacks?

1. Getting out of the Panic Becomes the New Strategy
If your company is currently in a panic attack, then traditional approaches to planning will fall on deaf ears. Therefore, the immediate strategy must be to first eliminate the panic.

This is not to say that you need to completely eliminate the source of the panic (like competitive threats or economic conditions). This is also not to say that you need to have a comprehensive solution for the current panic, either. After all, even if you had the solution, it might get trampled on in the crisis of the panic.

No, the task is to eliminate the feeling of panic IN SPITE of what is currently going on. Panic attacks are typically brought on by two feelings:

a) A feeling of being threatened (pressures rising); and
b) A feeling of not having control of the situation (can’t make the pressure disappear).

These feelings do not have to be rational. It doesn’t matter the factual extent to which the threat is real or if the lack of control is real. What matters is the extent to which the BELIEF is real.

Therefore, to quell the panic, you need a strategy which attacks the belief system. Again, your job at this point is not to eliminate threats or create control per se, but to change the beliefs about these areas to the better. THEN, when everything calms down, you can focus on fixing the mess and moving forward.

Attacking the belief systems usually requires a focus on symbolism. In other words, do things which provide a clear sign or signal to the organization that perceptions should change. And symbols tend to need to come from the top of the organization to create the greatest impact.

To quell the feeling of being threatened, one needs symbolic actions which show that the threat is not as threatening as one thinks. The right action depends on the nature of the threat, but some examples could be:

a) A believably optimistic demeanor in the people at the top.
b) A continuation of investment into the company.
c) A pledge that no jobs will be cut.

To quell the feeling of helplessness and having no control make bold moves in areas you control and can take immediate action. To some it extent, it doesn’t matter whether action makes a big difference to the immediate crisis. The point is that you are doing SOMETHING and that proves you are not completely helpless. Examples could be things like:

a) Changing the organization chart or shuffling executives around to new responsibilities.
b) Changing the advertising focus.
c) Forming a special committee.
d) Introducing a new innovation.

A century ago, RCA was shocked when Columbia introduced the 33 1/3 rpm record. It threatened to abolish the entire 78 rpm record business RCA depended on. To stop the panic, RCA needed to do something…anything. As it turns out, RCA had an innovation languishing on the shelf that they had decided not to pursue. They quickly changed their mind and introduced this innovation to the public to show that panic was unwarranted. And that is how the 45 rpm single was introduced.

Scott Adams, the creator of Dilbert has said that it really doesn’t matter what the business does when it changes. The mere fact change is occurring encourages people and stimulates positive action.

Remember the Hawthorne Effect? Back in the 1920s and 1930s, Western Electric tried all sorts of productivity experiments at their Hawthorne facility. No matter what they tried, productivity went up. The conclusion was that the mere fact that management was focusing on the situation and measuring it was enough to get more out of the employees. It wasn’t WHAT was done. It was the fact that SOMETHING was being done. So do something…anything. And show people that it is important by focusing a lot of attention on it.

2. Avoid Future Panics
Once a company is out of the panic and had time to move forward, it is important to try to avoid future panics. Here are two ideas for doing so.

a) Seek Blue Oceans
As my friend in the original story discovered, if crowds create panic then avoid crowds. This is sort of the principle behind the Blue Ocean strategy. The idea behind the blue ocean strategic approach is to try to position your company so that is not operating in a crowded space in the marketplace. In other words, if you go after a new, uncontested position in the marketplace, you will avoid a lot of the forces creating panic.

In a new, uncontested space, there are fewer competitors creating hellish battles over pricing and market share. It’s more monopolistic in nature. You get to make the rules. In other words, there are fewer external pressures bearing down on you and you have a sense of being more in control. That sounds like a good place to minimize panic.

And, by the way, Blue Ocean strategies tend to be desirable from a strategic perspective as well.

b) Trigger Points
One way to avoid walking into panic-inducing situations is to have advance notice. That’s where trigger points and measurement tools come into play. Determine what can trigger panic. It can be external factors and internal factors (like employee attitudes). Measure them on a regular basis. When the results of the measurements are moving in the wrong direction, take action to halt the trend before it reaches panic level.

For example, the Gallop organization has proven that the level of employee engagement has a direct impact on performance. If an employee is not engaged, performance suffers, regardless of the strategy. Panic is an extreme form of disengagement. Gallop has developed a tool to measure engagement so that specific actions can be taken early to avoid the disengagement.

SUMMARY
A panic stricken company is not an environment where good long-term strategic planning can take place. Before one can tackle the strategic concerns, one must first eliminate the panic. This usually involves symbolic actions which show the company that the threat is either not a bad as believed or that the company is more powerful than they believe in being able to tackle the threat. Once the panic is gone, serious planning can take place. In addition efforts at reducing future panics should be part of the plan.

FINAL THOUGHTS
Although planning looks at the long term, panic abatement is more of a one-day-at-a-time approach. That is why it is so hard to do planning when panic sets in.

Strategic Planning Analogy #418: It’s the Same Distance

THE STORY
Back when I lived in urban Minneapolis, I had a commute to work by car of about 14 miles. Although it wasn’t the greatest time of my day (I was in traffic tie-ups every day), I didn’t think a whole lot about it. It was just something I had to do every day.

By contrast, when I was living in Green Bay (a much smaller market), I was considering a job in Appleton. Appleton was one county away. The commute from my house to that new job would have been about the same distance as my commute in Minneapolis (around 15 miles). In fact, because of the nature of the traffic, the time of my commute from Green Bay to Appleton would have been shorter than the commute I had in Minneapolis. Yet, my desire (if I got that job) was to relocate from Green Bay to Appleton in order to shorten the commute.

Why did 14 miles of commuting seem okay in Minneapolis, but not between Green Bay and Appleton? I think it has to do with what I saw outside my car window during the commute. In Minneapolis, the entire drive was through a dense, urban environment. The view really didn’t change during that commute. All I saw was a built-up urban view. It was as if I didn’t go anywhere, because the view didn’t change.

By contrast, to get from Green Bay to Appleton, I would have left the urban view of Green Bay and driven into rural farm country (complete with barns and grazing dairy cows). Then I would have left the rural area to enter the urban area of Appleton. This contrast in views made me feel as if I was going on a very long distance because I was leaving one environment to go through two more visual environments. That made to commute seem so much longer and more dramatic.

Visually, the Minneapolis commute felt like I was staying in the same place. By contrast, the Green Bay to Appleton commute felt like I was leaving one world to go to another. As a result, I was willing to accept the commute in Minneapolis but not the commute in Green Bay, even though the distances were about equal and the travel time in Minneapolis was actually longer.

THE ANALOGY
One of the main purposes of strategic planning is to help get a company from where it is today to a better tomorrow. That journey into the future is a lot like my commute to work.

If the view on that strategic journey stays the same (like my Minneapolis commute), then people are content to stay on that journey. They are content, because it doesn’t feel like much of an effort—everything seems the same.

However, if that strategic journey includes a dramatic change in view (like commuting from Green Bay to Appleton), then it feels like the journey is much longer and much more difficult. There is more resistance to taking the trip.

Yet the reality is that the future comes at the same pace, whether the view changes or not. The working time is the same, regardless of what work is being done. Even though a change in work may make the work seem harder and more time consuming, the reality is that it is merely another way to occupy the same length of time. And, as we shall soon see, it may actually be easier work.

Therefore, if your strategic vision requires significant change for your organization or its position, expect increased resistance due the perception that a change of view makes for a more lengthy and difficult trip. But remind people that this perception is not necessarily reality. Just because the view outside the window changes does not mean that the effort in driving the car is all that different. All you’ve done is just point that effort into a new direction—a better direction.

THE PRINCIPLE
The principle here is that change is often not much more difficult than maintaining the status quo. It only seems that way because it is different. As strategic leaders, we need to help people see that beyond the false perception to the reality of the situation.

Here are three points to consider when persuading people to accept the journey of change.

1) Trying to Maintain Status Quo When It is Out of Sync is Very Difficult
Moving forward doing the status quo sounds easy. After all, it’s what we know and it is what gave us success in the past. But if the environment changes, then the status quo may not be as easy as it used to be. The effort to make the status quo still relevant in a changing environment can become a lot harder than expected.

Consider, for example, a conventional supermarket which suddenly has a big Wal-Mart supercenter built across the street. All of that status quo work which made the conventional supermarket successful in the past now has less of an impact. Doing the same old thing leads to lower sales and lower profits, because the Wal-Mart supercenter has taken away a large chunk of their business. The conventional supermarket has to work a lot harder just to try to lose only a little bit of past glory.

The supercenter has a natural superiority in price and selection. It takes a mammoth effort to try to overcome the resulting natural inferiority at the conventional supermarket. Unless the conventional supermarket changes its strategic approach, it can triple its effort on the status quo and still come up short. So sticking with the status quo may not be as easy as it first appears.

Change in the environment is inevitable. Eventually, the actions of the past will become out of sync with the marketplace. Their effectiveness will go down. Therefore, you will have to double or triple the effort in order to get the same impact as in the past. That doesn’t sound easier to me.

2) Getting in Sync With the Future May be Easier
I was hesitant to take the commute from Green Bay to Appleton because the scenery changed. What I didn’t take into account was the fact that because the commute would take me out of the city, I would be heading away from heavy traffic. The commute is easier in the country, because fewer cars are there. This would have been a much easier commute than the congested one I had in urban Minneapolis.

The same is true in strategy. If you change your strategy and head for a brand new position, you can end up moving in a direction which is far less competitive. There are far fewer cars on the road (competing entities) trying to reach that spot. As a result, this move into new territory is actually easier.

This is the principle behind the Blue Ocean strategy. By moving to uncontested new locations, success is actually easier to obtain.

In the example above, instead of working harder at the status quo, the conventional supermarket could have repositioned itself as the premier store for healthy, fresh, organic and wellness products. Using Whole Foods as an example, this type of concept can peacefully coexist against a Wal-Mart Supercenter and even provide the opportunity to successfully raise prices and margins.

Yes, that would require a change is activity. But it might provide a greater return for the effort than trying to make the status quo still work. And it would probably be even less effort in the long run to make that change than to continue the fight with the ever less effective conventional tools.

3) Changing Early Has its Advantages
There are many advantages to being an early mover when the environment changes. You get to own a position before it is contested (the easiest way to get a position). And it is easier to keep a position already owned than to take a position away from someone who already has it.

First movers get to define the category (and define it in a way most advantageous to themselves). First movers can lock up the supply chain to their advantage. First movers get customers in the habit of choosing them (and habits are hard to break).

All companies get the same amount of time. We all get only 24 hours in a day. If you spend most of your time driving in the status quo, you will be in the wrong location when your time is up. It is the one who redirects the car towards the new view early who gets there first (and gets the advantages of being first).

Trust me, if you wait until the end to realize that you drove in the wrong direction (towards status quo) and then try to catch up to those who took an early route to the future, you have a very difficult task in front of you. You will get to the future late and at a competitive disadvantage. That sounds like an awfully lot more work than just steering your company towards the future early on.

SUMMARY
People tend to resist change because at first it appears to be harder and more time consuming. However, the reality is that early adoption of change can actually be easier and less time consuming than sticking with the status quo. The problem with the status quo is that eventually it will become out of sync with the changing environment. As a result, you have to work ever harder at it while getting ever less benefit. By contrast, early movement into uncontested areas of the future can be easier to attain and easier to defend. As a result, status quo is usually the harder and more time consuming approach.

FINAL THOUGHTS
I knew someone who moved from Chicago to Green Bay. He noticed that most of his co-workers had a home in Green Bay and a cottage further out in the country on a lake. So he did the same. Then he started thinking. He realized that the length of time it took to get from his cottage on the lake to his job in Green Bay was about the same length as the commute he used to have in Chicago. Therefore, he sold his house in Green Bay and lived full time at his cottage on the lake. This made him much happier, because the commute took him to a happier place. If you accept the idea that a changing view is okay, then you can become happier, too.

Strategic Planning Analogy #238: Anchor Your Boat

THE STORY

Every month I have to change a bunch of passwords at work for email, voicemail, access to data, etc., because they expire.  And I can't change them to something easy to remember.  The passwords have to contain letters, numbers and symbols, and I cannot repeat a password I've used in the past year.  It's maddening!

 

Just imagine how much worse it would be if your other forms of identification also expired every month.  What if each month you had to come up with a new first name, last name, home address, email address and phone number?  You'd probably be spending half the month setting up your new residence, getting new government paperwork for your new name, setting up new phone service, and so on.  Then, for the rest of the month, you'd be trying to contact all of your friends to let them know your new name, where you live, and how to contact you. 

 

Of course, if all of your friends are also changing identities every month, you wouldn't know how to contact them to tell them about your new identities. 

 

All of your time would be spent trying to establish your life, leaving no time to live your life.  After awhile, all the names and numbers would blur together in your brain. You wouldn't even remember your own name, because it no longer has any special meaning to you…it's just another in a long line of names.  Here today, gone tomorrow.

 

My parents had it easy.  They lived in the same house together for about 50 years and had the same phone number over that length of time.  Their identities were solid and easy to remember.

 

THE ANALOGY

Stability and continuity in one's personal identity can be a good thing.  First, it is easier to remember (for yourself and for the people you want to stay in contact with).  Second, your identity becomes stronger and more special, because its power hasn't been diluted through constant change.   Third, it allows you to spend less time on creating your identity and more time on living out who you are.

 

Although we can easily see the benefits to keeping our personal identity factors constant, I have seen many companies abandon this idea when it comes to the identity of their brand, company or selling proposition.  On a regular basis, they change their logos, their advertising slogan, their market position, their CEO and all manner of things relevant to their identity.

 

Maybe it's due to boredom.  Maybe it is out of the desperate hope that a change in identity can be a catalyst for improved performance.  Regardless of the reason, the result of constant change in business tends to be disappointing.  People get confused (both inside and outside the company), the power of the brand is diluted, and corporate resources are diverted to identity change rather than serving the customer.

 

THE PRINCIPLE

The principle here is about strategic anchoring.  If you do not anchor a boat it will drift away and you will lose it.  However, if you anchor your boat in a known location, you can find it when you need it.  Just as boats need anchoring, so do strategies, or you company will drift away.

 

It's hard to get people's attention.  And when you do get it, you only get enough time for a soundbite or a Twitter "tweet."  Complex or subtle message find it hard to get through.  This applies not only to your customers, but to your employees. 

 

Therefore, when trying to communicate strategy, don't keep changing the context or the jargon.  Anchor it to something already embedded in the brain.  Look at the Balanced Scorecard.  Robert Kaplan and David Norton came up with the concept back in 1992.  Over time, Kaplan and Norton have come up with lots of new ideas and concepts for business beyond the original Balanced Scorecard idea.  Yet, they have not abandoned the identity they gained with the Balanced Scorecard. 

 

All of their new ideas are put inside the context of the Balanced Scorecard.  Why?  It is the identity already embedded in the mind of their audience.  It is a reference point understood by the audience.  It makes it easier to get their new concepts across in soundbites.

 

It looks like a similar situation is occurring with the Blue Ocean strategy.  W. Chan Kim and Renee Mauborgne came up with this concept back in 2004, but they are not letting it die a quick death.  They now have the Blue Ocean Institute.  All their current ideas and writings are put into the Blue Ocean context.  It is becoming the solid identity foundation to build upon.  It is their version of a Balanced Scorecard.

 

If Kaplan and Norton kept redefining their jargon and context every time they had a new idea, they'd be like the person in the story who keeps changing his location and name.  You'd be spending so much time just trying to connect to your audience, that you will not have time to persuade.

 

Worse yet, abandoning the old jargon gives the impression that the old ideas and concepts should be abandoned.  And if the author is abandoning the ideas, why should I pay attention to them?  Won't those new concepts be eventually abandoned just like the old?  If the ideas become obsolete quickly, then why pay such close attention to them?   Your audience will start saying, "These, too, will pass soon, so I can get away with ignoring this latest management fad."

 

 

Don't marginalize your ideas by turning them into the "fad of the month."  Make a stand.  Keep the identity solid over a long period of time…long enough that people no longer feel they can ignore it.

 

Just because your company has strategic planning meetings every year does not mean that your strategy should change every year.  A good strategy should last quite a long time with only minor modifications.  Continuity is a good thing.

 

The same applies to the jargon and concepts used to describe the strategy.  Continuity of terminology reinforces the position in the mind of the audience.  Employees are more willing to go out on a limb and fight for your strategy if they know it is going to be around for a long time.

 

Now this does not mean that strategies are cast in concrete, never to change.  Tweaks and modifications are part of the game.  But just because one has to adapt their identity does not mean you throw the old identity away.  Rather than moving to a new house every month, like in the story, just redecorate the familiar old house.  If you look at the Balanced Scorecard "house" today, it has been vastly redecorated from what it looked like back in the early 1990s.  But it is the same, familiar house.  The boat is still well anchored.

 

Sure, the professional strategist can easily get bored with the old languages and concepts.  To spice things up and look like you are contributing, a strategist can get excited by using the latest jargon and newest tools at each strategy session.  Just remember, you audience doesn't think about this stuff as much as you do.  At the point where you are getting bored with it all, it may just be sinking in and getting comfortable with them.  And they will not spend as much time as you do keeping up with all these new approaches.  You can easily lose them in the churn of changing approaches.

 

Now, in this blog I have done just the opposite.  Rather than pound on the same analogy, week after week, month after month, year after year, I've done a new analogy with every blog entry.  This blog is analogy #238.  That's a lot of change.

 

I recently tried to remember all of those analogies and I couldn't do it.  They all started to blur.  If I, the author, cannot remember them, then the audience hasn't a chance.  If I wanted to make a big splash, perhaps I should have stayed with my favorite analogy—Strategic Planning is Like Barbecue Sauce—and just kept pounding on it week after week, like my version of the Blue Ocean.

 

One analogy can be an important metaphor for use in planning.  But 238 analogies are more than anyone can fully absorb into their daily living.  Perhaps it is time for a new approach.

 

SUMMARY

Anchoring your strategy around a continuity of terminology has advantages.  It makes it easier to get your ideas across (common language).  It also keeps your ideas from being ignored as just a passing fad.  And besides, a good long term strategy shouldn't be changing all that often, anyway.  So why keep changing the jargon which talks about it?

 

FINAL THOUGHTS

Joseph Stalin used to say, "One death is a tragedy; one million is a statistic."  Even something as monumentally tragic as death becomes just a meaningless number when it occurs countless times.  If you want to have a monumental impact on your people, don't change your strategic language countless times.  That degrades it to a mere statistic.