Strategic Planning Analogy #495: The 3 Keys to Success (Part 2)

THE STORY

I was excited the first time I was to visit the Museum of Modern Art in New York.  The museum is full of famous works of art.  I had read about or seen pictures of this art in books, but now I was going to get a close up look at the original paintings. I imagined that it would be a very inspiring visit.

Instead, it turned out to be a very disappointing visit.  As it turned out, not only do you see the greatness of the paintings when you see them up close.  You also see all the imperfections.  In particular, I remember looking at some very famous Picasso paintings.  When you studied them up close, you could see the rough pencil sketch underneath the paint.  They looked a lot sloppier than the little photographic reproductions I had seen of them earlier in art books.  After awhile, I became so fixated on the imperfections that I couldn’t enjoy the paintings.

I kept thinking to myself that I could probably find many artists who would be able to reproduce all of these paintings and have fewer imperfections. But in later reflection, I realized that I was missing the point.  No matter how much more “perfect” these reproductions would be, they would never be more valuable than the original.

THE ANALOGY

Copying is a lot easier than creating something entirely new. Imitators may even be able to make small improvements over the original.  But in the world of art, the value belongs with the original, no matter how flawed it might be. 

A similar situation exists in the business world.  The ones who create, get known for and exploit exciting new business models first usually create more value than the later imitators.

Therefore, you’d think that there would be more business people striving to be the next Picasso—creating something new, exciting and very valuable. Yet, when I look around, it seems that the business world is more often filled with imitators and copiers. The idea seems to be that “People like that original over there, so if I make something just like it, they will like mine just as well.”

But as we all know, a “just like Picasso” is never as valuable as a real Picasso.  Why should we expect the rules to be all that different in business?

THE PRINCIPLE

We are currently on the second blog in a series on the three characteristics which tend to determine whether a business is a great, lasting winner, or a long-term loser. In the first blog, we looked at “Passion” and saw that the winners have a passion for the business and the intricacies of the business model which makes it work in the marketplace.  The losers focus their passion on the money that comes out of the business and are only tangentially concerned about the details in how it is made.

In this blog we will look at “Direction.”  Winners tend to move in new and different directions, like Picasso.  Losers direct themselves to follow what is already working (the imitators).

The Problems With Following

There are many reasons why the followers rarely become the great companies. It doesn’t matter if you are following the standard rules of convention for your industry or following the innovation of the leaders.  You are still following.  And followers rarely reap great rewards.

There are three problems with focusing on following the conventional rules for how your industry works.  First, if everybody is doing the same things in the same way, then you tend to have parity of offerings amongst the competition.  How do you win over the competition if you are all perceived as being the same?  This tends to lead to price wars (“everything is the same, but we cost less”), and we all know that price wars are not the path to creating above average prosperity.

Second, even if you can execute within the conventional rules a little bit better than everyone else, it is usually only a temporary advantage. In an earlier blog, we looked at the battle between Fuji and Kodak in conventional analog photographic film.  Sometimes Fuji would have a slight advantage; then Kodak would get a slight edge—back and forth it went with no clear winner.  The real winners were the innovators who abandoned the conventional rules of photography and brought digital imaging to the masses.

Third, there are limits to how much better one can become by playing by the same rules. The law of diminishing returns tells us that ever increasing improvements tend to lead to ever smaller perceived benefits.  For example, I could make an ever more perfect nail, but at some point, the guy hammering that nail into a board won’t be able to see how those perfections improve his hammering.  In other words, superior executions of the status quo often do not create enough of a differentiating benefit to shift habitual shopping patterns for the customers.

So what about following the innovators?  Well, you’re still a follower.  The last time I checked, followers never win races.  Just as Picasso gets superior credibility for pursuing a new path, business innovators get superior credibility over their followers.  The innovator becomes synonymous with the innovation.  The rest are seen as mere copiers. 

For example, Google means search.  Even though the follower Bing claims a slight superiority in blind tests, Google still wins the war for market share in search.  Why?  We are not brand blind.  The emotional bonds associated with the leader brand overcome the slight differences.  The same thing happened when follower Pepsi claimed superior taste in blind taste tests over Coke.  Coke still won the war.

Finally, the follower usually is one step behind the innovator.  By the time the follower catches up to where the leader was, the leader has moved on to the next innovation. That is why hockey great Wayne Gretzky attributed his success to ignoring where the puck currently is and instead going to where the puck is going to be.  Rather than following the puck, he got in front of it. 

There are only two ways to win by following.  First, you can win by having your competitors make colossal mistakes. Their failure becomes an opening for your gain.  But a strategy that depends on others to make mistakes is not much of a strategy.  In addition, if you are a follower, you will probably follow them into similar mistakes.  For example, the financial collapse which triggered the great recession was caused by colossal mistakes in the banking industry.  But because most of the big banks tended to be following each other and playing by the same flawed rules, most of them fell victim to the flaw and could not gain meaningful advantage.

The second way to win playing by conventional rules is if you are substantially larger than everyone else and can leverage your size to your advantage.  However, this begs the question of how one gets to be so much larger than the others in the first place.  Usually the bigger players got to be so much bigger because they were the innovative leaders which rewrote the old conventional rules into what became today’s conventional rules. It was their leadership which made them big, not any form of followership.

The Value of Being Different

There are two ways to be different.  First, you can create a new business model which is inherently superior to the status quo model at delivering value.  For example, Southwest Airlines has been a consistent success competing against other airlines who struggle to survive.  Why?  Southwest Airlines played by a different business model, focused on point-to-point (among other things).  It’s unique business model allowed it to provide superior value that those playing by conventional rules could not imitate.  Even the best player by conventional rules could not exceed the value offered by Southwest’s different approach to the business.

Another example would be Salesforce.com.  While others were playing by the old rules of installing and supporting software scattered everywhere, Salesforce.com eliminated the software paradigm and was a leader in putting everything up in the cloud.  That change in business model gave Salesforce.com inherent advantages that the conventional operators couldn’t match if they stayed in the old paradigm, no matter how well they executed it.

This helps reinforce the first differentiation we talked about in the prior blog—where winners focus on business models.  You won’t find the success of a Southwest Airlines of Salesforce.com unless you spend time focused on business models. 

The second way to win in difference is by creating a new value proposition which did not exist before.  Apple has been a winner by creating wholly new types of value expectations.  The iPod, iPhone, and iPad changed the whole way people thought about how to live and enjoy their lives.  They created new values in new places.

The “Fast Fashion” operators, like H&M, Zara and Forever 21, helped change the definition of what to value in fashion for a significant segment.  Instead of defining fashion by Exclusive Labels, High Prices, High Quality and Fashion Seasons, they made fashion more disposable, where frequent change/variety combined with low prices (and lower quality) was a new winning formula.

If you look across the spectrum of business, you will find that nearly every great company at some point took one of these different directions.  They either came up with a new business model which had inherent advantages over the old model in the conventional industry, or they invented whole new industries by redefining or creating new value formulas.

SUMMARY

One of the key differences between business winners and losers is the direction the leaders take the company.  The losers tend to move in a following direction—either following the conventional rules or following the innovators.  By contrast, the winners tend to move in a new direction, either by finding new ways to better satisfy old values or by creating new values through new industries.

FINAL THOUGHTS

Artists create; craftsmen copy.  Are you an artist or a craftsman?

Bad Strategic Planning Doesn’t Always Work

ARTICLE IN WSJ
Today’s Wall Street Journal (Jan. 25, 2010) ran an article entitled “Strategic Plans Lose Favor.” In the opening paragraph, the authors claimed that “executives discovered that strategic planning doesn’t always work.” The article then goes on to explain some of the “strategic planning” that didn’t work. After reading the article, I would like to rephrase that quote to read “executives discovered that bad strategic planning doesn’t always work.”

Strategic Planning has an image problem. If I understand this article correctly, many executives have a vision of strategic planning as being like a rigid straightjacket—something that cannot be taken off or readjusted for one to five years. The straightjacket tends to consist primarily of a set of financial assumptions and other numeric data which get frozen in time and only get reassessed at on an annual basis.

The article uses words like “distant calendars,” “rigid forecasts”, “inflexible method,” and “static five-year strategic plans.”

Naturally, if this is one’s view of strategic planning, then I can understand why you might say that strategic planning did not work during the recession. Who wants to be strapped into a straightjacket when they are drowning in the depths of a recession? Even Houdini knew that if you want to escape the drowning, you have to get out of the straightjacket.

As long as strategic planning is viewed as a straightjacket, executives will be weary of putting it on. That image needs to be changed. Instead, we need to portray strategic planning as being more like putting on running shoes that help us outrun the competition in the race to the future.

The emphasis has to shift from focusing on numbers, books and annual meetings. This is an obsolete mindset. Instead, the focus needs to be on positions, paths, points on a compass, and points of inflection.

1. Position
Just because a straightjacket is too confining does not mean that we should abandon all restrictions on movement. Random motion never leads to forward progress. Moving in all directions at once is about the same as moving in no direction at all.

Therefore, one needs to choose a basic direction for the company—which I call a position. A position explains why your business has a right to exist in the marketplace and why a certain customer segment would prefer it. It is the place where you win.

It may be a position based in price, or service, or quality, or durability, or fun, or rebellion, or convenience, or variety, or personalization, or taste, or status, or coolness, or whatever. The point is that trying to be all things to all people at all times will fail. You need to find your position in the world and make the proper trade-offs so that you can be the best and win there.

Sure, the environment ebbs and flows over time. But unless you anchor yourself to a position, that ebb and flow will toss you about until you are totally adrift and lost at sea (or at least your consumers will be lost regarding what you stand for). If you are a status brand like Gucci, you cannot suddenly become a leading low price bargain brand in the recession and then try to regain the status image again when the recession is over. Sure, you may bob a bit and adjust to more of the starting price points in your mix during a recession, but a luxury status brand needs to stay true to its position or it will destroy its reason for existence.

Positioning not only tells you who you are, but who you are not. This narrowing of options allows you to be faster and more adaptive to a changing environment, because you do not have to totally reinvent the wheel with every decision. It becomes your running shoes, helping you to move faster, because the decision-making becomes more obvious—go in the direction which is consistent with your position.

Strategic planning’s new role is to help get everyone on board as to what your position is (or should become) and what it means for everyday decision-making. It needs to be there at the decision making table every day—not just once a year—so that the tyranny of the immediate crisis does not lead to random decisions which set a company adrift.

If you want to learn more on positioning, I’ve written quite a few blogs on the topic. Just search the blog for positioning, or click on “positioning” on the topic list to the right of my blog.

2. Points on a Compass
If you want to win a race, it helps to know where the finish line is. Your position will help determine where your finish line should be (not all companies have the same finish line as we discussed in an earlier blog). For example, if your position is based on superior innovation, then your finish line is in the direction of creativity, R&D and any other way to accelerate innovation. That is the direction on the compass you follow. You would not follow the direction of excessive cost-cutting and imitating the competition. That is a totally different compass point that will probably destroy your position.

So strategic planning helps you find your direction on the compass—“Go West!”—where the direction is defined as the path that gets you more strongly positioned to win.

Now in the past, strategic plans may have tried to dictate the exact route of that path, with minute detail on precisely what gets done at what time (that straightjacket idea). However, the new approach is to focus on the general direction on the compass (go West) rather than the exact path.

This new approach improves your speed and agility. For example, if the path you are on runs into an obstacle, like a tree or a mountain, the old approach might have been to stop and cut down the tree or dig a tunnel through the mountain (got to stay true to the path of master plan, even if the tree wasn’t in the plan). However, under the new approach, the idea is to just push west. If a tree or a mountain is in your way, look for an easy way around it. As long as you are generally still moving west, you are okay.

Therefore, the role of strategic planning is to be there for everyday decisions to ensure that these little detours due to the obstacles in the current environment don’t derail the strategy and that they are generally still pointing the company in the right compass direction (or to get it back on track after the detour).

3. Points of Inflection
Every once in awhile, the environment changes so dramatically that “all bets are off” on the old strategy. For example, the rise of the internet and firms like Expedia and Orbitz necessitated new strategies for travel agents. The move from analog to digital made many strategies for analog companies obsolete. The big recession has made some lasting changes in attitude for some people and how the buy.

These mammoth changes to the status quo are called inflection points. An inflection point is when a curved line changes its trajectory. “Destiny” has taken a new direction, and it is highly likely that your strategy needs a new direction as well.

These typically don’t happen all that frequently. However, when they happen, you need to be prepared to act quickly to take advantage of the change (rather than be defeated by it).

One of the key roles of strategic planning is to monitor trends to find those early warning signs (trigger points) that an inflection point is near. In addition, strategic planning has a role in preparing the company for the change, so they can act quickly and decisively when the time is right. Again, this process helps the company move faster when times change, like putting on those running shoes.

For more information on inflection points, see my earlier blog.

SUMMARY
If you think of strategic planning as a rigid straightjacket, then you have an outdated and not very useful tool. However, if you think of it more like running shoes, then it will be a very relevant and useful tool. Running shoes focus on positioning, compass direction, and inflection points.

FINAL THOUGHTS
The race is not always won by the fastest runner, but the runner who knows the fastest path to the finish line. Don’t abandon all planning to run wildly in all directions. Take a little planning time first to orient yourself towards the finish line.

Strategic Planning Analogy #133: Don't Abandon the Maps

THE STORY
There’s a reason why Las Vegas is one of markets hardest hit by the recent housing crunch. For the longest time, it used to be one of the hottest housing markets. I guess what goes up, must come down.

I have a friend whose job was to find real estate for a retail company. He was looking for retail sites in Las Vegas at the height of its house construction boom. New sub-divisions were spouting up all over Las Vegas at a rapid rate.

When my friend would get to Las Vegas, he would buy the most up-to-date road map he could find. However, even the most recent maps could not keep up with the growth of the area. A large number of streets would be completely missing from the map.

Since he wanted to build stores in the areas of growth, he would always be driving around these new areas of Las Vegas that were not on his map. As a result, he would often get hopelessly lost. The maps were of no use to him.

THE ANALOGY
Strategic plans are often like maps. They help companies find their way to the desired future. As we saw in the story above, when the environment is rapidly changing, maps can quickly become out-of-date. At that point, they have lost much of their usefulness.

In much of the business world, the environment appears to be changing at a rapid rate. Using the analogy of maps, many would say that the strategic planning maps can no longer keep up with the fast pace of change. They become out-of-date too quickly. New strategic alternatives, like the new sub-divisions of Las Vegas, aren’t even on the map. Therefore, these people suggest that the idea of strategic planning is no longer very useful and should be abandoned.

I heartily disagree with this conclusion. I believe that in rapidly changing, turbulent times, strategic planning becomes more valuable, not less. In this blog I will try to explain why.

THE PRINCIPLE
There are several reasons why strategic planning is even more valuable in times of rapid change:

1) It reduces distractions
2) It helps speed decision-making
3) It helps strengthen one’s position
4) It provides a competitive advantage

These are briefly discussed below.

1) Strategic Planning Reduces Distractions
When things are changing rapidly, it is easy to get distracted by all of the activity going on. One can get so immersed in the details of the change that you can lose sight of the big picture.

Each little change can lure you in. You can fall victim to the latest fads, which provide no lasting value or competitive advantage. You can end up like a pinball, bouncing all over the place from fad to fad without making any forward progress.

In times of rapid change, one cannot afford to waste time bouncing around from distraction to distraction. To continue the analogy, sure there may be some new streets in Las Vegas, but don’t let them distract you. Your goal is to get from Salt Lake City to Los Angeles. All you need to do is get through Las Vegas on the way to Los Angeles. You need a “big picture” map of the entire trip. With the big picture strategic map, you can continue the quest to Los Angeles without getting bogged down in all of the change in Las Vegas.

2) Strategic Planning Speeds Decision-Making
Strategic planning helps you focus in on the ultimate destination for where you want to take your business. When you have a firm focus on the end point, it is easier to understand how to react when confronted with rapid change.

Using our example, if you know that your strategic destination is Los Angeles, it is easier to deal with the changes in Las Vegas. There may be many new roads, construction on old roads, and numerous detours confronting you when you get to Las Vegas. If you have no idea where you are going, all of that change can become very confusing and slow you down.

However, if you know that the end goal is to get to Los Angeles, the process is easier and faster. All you have to do is ask a local which it the best way to get through Las Vegas in the direction that leads to Los Vegas.

This is also true with strategy. If you know your goal of what strategic position you want to own or strengthen, then you can quickly deal with rapid change. As each change confronts you, all you need to do is ask yourself how that change impacts your goal and choose the answer which exploits the change in a way which gets you the closest to your goal.

There is no need to reinvent your strategy for every little change. Just stay the course. However, if you have abandoned strategic planning and thrown away your map, then you have no guide to help you navigate the change. Every little change can slow you down, because you have no reference point.

With no ultimate destination in mind, every little change can open up all kinds of possibilities and you can become paralyzed by not having any idea which possibility to pursue. When you don’t know where you are going, every road can become a temptation. Change creates more strategic roads to bog you down in decision-making, unless you can quickly assess them in reference to a larger strategic goal.

3) Strategic Planning Helps Strengthen Ones Position
When large organizations are confronted with change and there is no unified ultimate strategic goal, you can have factions of the company each choosing a different path. This would be like having everyone in your company choosing a different road in Las Vegas.

Your efforts are now diluted into many directions. Portions of your organization will be moving in opposite directions, canceling out the benefits of each other’s effort. Worse yet, your consumers will become confused. They will not understand what you stand for in the marketplace. Without a strong position and a unified effort to excel in that position, your firm will lose the battle.

Even if all of your people move in the same direction, if change causes the direction to appear random, it does not help strengthen your position either. Strong positions come from getting everyone to move in a direction which reinforces that position. If strategic planning is abandoned, there is no focus on where to win, so your efforts will be less fruitful. Instead of getting closer to the goal of Los Angeles, you will end up wandering aimlessly through the Nevada desert.

4) Strategic Planning Provides a Competitive Advantage
If your competition has abandoned strategic planning, then they will fall victim to the problems mentioned in points 1 through 3. They will become distracted, have their decision-making slowed down, and weaken their position. By contrast, if you continue to employ strategic planning, then you will avoid these pitfalls. Relatively speaking, you will become stronger in the marketplace while they become weaker.

Sure, it may be a little more difficult to do strategic planning in a world of constant change than in a static environment. However, if you take the extra effort to do so when your competition does not, then you are that much further ahead.

SUMMARY
Many people have justified abandoning the process of strategic planning because they do not see its relevancy in times of rapid change. In my opinion, strategic planning is even more important in times of change, because it improves your focus, so that change does not distract you and throw you off course.

FINAL THOUGHTS
Certainly, over longer periods of time, if there is enough change in the marketplace one may need to reassess one’s strategic goals. Eventually all strategies become obsolete, and rapid change accelerates this phenomenon. But this is no reason to abandon strategic planning. Instead, one needs the process in order to periodically reassess one’s goals, to determine when it is the right time to make modifications.

Rich Soil

THE STORY
Many years ago, my wife thought I needed a hobby, so she chose one for me—gardening. At the time, I was living in the perfect place for a garden.

1) The home was originally built prior to indoor plumbing, so the area where the outhouse used to be was very fertile.

2) There was a large aquifer of water just under the surface. It was so close to the surface that the house couldn’t have a basement. When a truck drove in front of the house, you could hear the echo through the hollowness above the aquifer.

3) The garden had a nice sunny southern exposure.

4) At the time, my children were small and we had a kiddie pool for them. When the water got a little slimy, I would put a submersible pump in the pool and use the water to keep the garden moist.

The garden was very successful. The tomato plants grew over 6 feet tall and were full of tomatoes the size of softballs. All the other produce was equally as plentiful.

When I moved to a new location and tried gardening again, I had different results. This new house was built on a drained lake bed. The ground was virtually solid hard clay. There were so many trees that the garden got little sunlight. The area was full of rabbits who would eat the young sprouts when they came out of the ground. The growing season was so short that by the time I replanted the seeds after the rabbits got the first batch, frost would come before the produce was ready to pick.

The results of this second garden were so bad that I quickly gave up gardening as a hobby. So now, about the only thing I am good at growing is my waistline, eating food from the supermarket.

THE ANALOGY
Businesses want to grow and be very productive, producing abundance like my first garden. However, the results that businesses have can often be closer to my paltry experiences with the second garden.

In both gardens, I was using similar seeds and plants, purchased at similar types of stores. But even though I was starting with the same “beginnings,” I was having different “endings.” Why? The different results were due to the fact that I was planting my seeds into different environments. One environment was far more conducive to growth than the other.

Seeds are like strategies. One can have great strategies, just as one can have great seeds. But if you plant those strategic seeds into a bad corporate environment, one can end up with awful results.

The strategic process should not end with the creation of great strategies. This is only half the battle. The other half of the battle is making sure that you have created the proper environment for those strategies to grow in.

Sometimes a strategy which is great for another company may be bad for your company because of a difference in the corporate environment. For example, one time I tried to grow okra in my second garden. Okra thrives in long, hot, sunny summer environments. I planted them in cold, shady short-summer Minnesota. It was an utter disaster because the plant was inappropriate for the environment (which makes me wonder why someone would sell okra seeds in Minnesota).

Not only does the strategy need to be appropriate for the strengths and weaknesses of the firm, but the strategy must include a clear path for how to make it succeed within he unique culture of the organization. Perhaps the strategy will even need to include steps on how to change the culture.

Successful implementation is not automatic just because the strategy is “great.” The implementation path needs to be strategized as well. Otherwise, your great strategic seeds will lead to nothing but frustration.

THE PRINCIPLE
The principle here is that a good strategic process must plan for the entire process, including the building of the proper internal implementation environment. The McKinsey organization recently conducted a survey with over 100,000 business people to try to determine which soil is best for planting strategic seeds. What they discovered was the following:

1) There is not one factor which creates a successful environment. One cannot rely on a single “trick” to turns a company into a strategic powerhouse.

2) Instead, companies need to be performing fairly well across a number of factors. This is like my first garden, which had many different good attributes going for it.

3) Once gaining competency across many basic management skills, the highest likelihood for success came from companies which excelled in three areas:

a) Accountability—People knew exactly who was responsible for accomplishing each aspect of the strategy. Clear roles make it easier to accomplish great things.

b) Direction—People had a good sense about the big picture of what was trying to be accomplished. Giving direction is not the same as giving orders. People were given freedom in making choices of how to get the work done. But there was no confusion about ultimate goals and objectives. There was a greater context surrounding all the activities.

c) Performance Culture—The winning organizations had found a way to break down silos and work as a team. There was openness and trust, which made cooperation much easier to accomplish.

So here is the question strategists must wrestle with…

When designing strategy, are you stopping at the point of the “great idea” or are you helping create the right soil for the strategy by focusing on ways create greater accountability, greater direction, and a trusting performance culture?

Strategy without such a context is like a seed planted in a dried lake bed made of hard clay. It will not be successful. I have personally experienced trying to create strategy in an environment like this—little to no accountability, vague direction, and lack of trust. It is a difficult struggle…not very fruitful.

The handoff from idea to implementation is a tricky task. Unless the soil is properly prepared, the handoff will most likely be disappointing. Just as it took years of outhouse usage to create my great garden soil, it may take considerable time to create an environment conducive to accountability, direction and trust. Time spent by leaders going to the field organizations to explain the context around the direction is important. Time spent linking strategy to tactics to the proper individuals via clear accountability is time well spent. Time spent building trust will pay back large dividends.

Don’t assume that implementation will magically occur. Make implementation as important as ideation.

SUMMARY
If you want your strategy to produce great results, it is essential to design it in conjunction with designing an organizational environment capable of putting the ideas into practice. Although many elements are necessary to create this environment, three of the most important are Accountability (knowing who’s responsible for what), Direction (understanding the big picture and how you fit in), and Performance Culture (an environment of trust and openness, where people can cross-functionally work together).

Without this environment, your ideas will most likely wither away.

FINAL THOUGHTS
It is interesting to me that the same chemicals used to make fertilizer can also be used to make bombs. They can either help produce life or destroy life. Be careful how you fertilize your strategy. If you use the concepts mentioned above, you will create life and growth. However, if you fertilize your implementation with mindless platitudes and “happy talk” B.S., then you will most likely bomb.

Play it Backwards

THE STORY
Back in 1969, the world went wild trying to unravel one of the biggest hoaxes in pop culture history. A number of people started playing the music of the Beatles backwards. They also started looking at the Beatles album covers backwards in the mirror. When they did so, there appeared to be clues indicating that bass player Paul McCartney was dead.

Many of these hidden messages in the music and hidden symbols on the album covers could only be detected if you looked at them backwards. Although the Beatles deny the existence of such a hoax, there seemed to be far too many clues to make this completely random.

THE ANALOGY
Strategies are based upon choosing a position in the marketplace. The position stands as a guidepost, pointing the direction in which the company is to move. It should describe the manner in which the company is going to win in the marketplace, and why certain consumer segments should prefer it.

When choosing a position, it should not only be able to tell you the right things to do. It should also tell you what are the wrong things to do, things which are inconsistent with your strategy.

Unfortunately, many companies develop mission statements and other such strategic documents that are nothing more than platitudes. They talk of noble goals, such as making money, or being a leader, or of enriching lives, but they are worthless at providing any sort of strategic direction.

One way to tell if your positioning is truly strategic or merely a platitude is to play it backwards, similar to what people did to the Beatles music. For example, if your statement says that your mission is to make money, play it backwards and the reverse would say that your mission is to lose money. Since people rarely go into business to lose money, this is not really a viable option. Therefore, if the opposite is not viable, then the original is just a platitude.

The same could be said about mission statements around “being a leader” or “enriching lives.” Playing it backwards, it does not seem to be viable to have a position of “being a loser” or “hurting lives.” Thus, these are platitudes as well.

If all you hear when you play your statement backwards are non-viable options, then your mission is just a meaningless platitude. And if that is the case, then maybe there is a hidden message in your statement about your pending death as well.

THE PRINCIPLE
The principle here revolves around making choices and trade-offs. Rarely is a company strong enough to be all things to all people. And even if you were strong enough to be all things to all people, the consumers may still reject you because they favor being served by specialists, rather than generalists.

Therefore, companies need to make trade-offs—emphasizing certain benefits while deemphasizing others. For example, Wal-Mart has a position which revolves around providing the lowest prices. To succeed in providing the lowest possible prices, Wal-Mart has to make some trade offs. For example, Wal-Mart is not known for its service. If Wal-Mart added too much service, it could no longer afford to provide its low prices.

Harvard Professor and strategic expert Michael Porter says that one of the most important tasks of strategy is to determine which trade-offs you are going to make so that you can stand out and win in a particular direction.

If your position is based on a clear understanding of your trade-offs, then it will provide clear direction on what you are to do. When you play it backwards, you can tell that it is not just a platitude. For example, if you play backwards the Wal-Mart strategy, it would say that you are not going to win based on low prices. Is that a viable strategy? Of course it is. There are many companies that succeed by making a different set of trade-offs in order to win based on service, or convenience, or quality, etc.

Unfortunately, the trap of thinking in terms of platitudes rather than trade-offs is very common. So common, in fact, that it is often made fun of in Dilbert cartoons. In his book, The Dilbert Principle, Scott Adams defines the mission statement as “a long, awkward sentence that demonstrates management’s inability to think clearly.” Two of his parodies showing how useless a platitude-rich vision statement can be are as follows:

• “We enhance stockholder value through strategic business initiatives by empowered employees working in new team paradigms.”

• “We will produce the highest quality products, using empowered team dynamics in a new Total Quality paradigm until we become the industry leader.”

After reading those statements, could you tell anyone…
…What field of business the firm is operating in?
…What solution is being provided?
…How that solution is superior to other alternatives
and why some people would prefer it?
…What trade-offs are being made to win with this solution?

You cannot be motivated to act in a certain manner unless you first understand what you are supposed to be doing (and via trade-offs, know what you aren’t supposed to be emphasizing).

Fortune magazine once did a parody of bad vision statements by providing a universal multiple choice vision statement. It went as follows:

“OUR VISION:
TO BE A…
a)Premier; leading; preeminent; world class; growing
COMPANY THAT PROVIDES…
b)Innovative; cost-effective; focused; diversified; high quality
c)Products; services; products and services
TO…
d)Serve the global marketplace; create shareholder value; fulfill our covenants with our stakeholder; delight our customers
IN THE RAPIDLY CHANGING…
e)Information solutions; business solutions; consumer-solutions; financial-solutions
INDUSTRIES.”

Platitudes do not provide direction. They say you want to lead, but they don’t show the way. Platitudes do not inspire. Platitudes don’t tell people how to make trade-offs. Platitudes do not tell you how to differentiate yourself from other firms who have the same platitudes.

A better fill-in-the-blanks option would be as follows:

When it comes to solving the problem of ____________, I will win by owning the solution which places the highest priority on _______________, and I will make the appropriate trade-offs to remain a leader in this direction in the mind of the consumer who wants to make similar trade-offs to solve this problem.

A couple of retail examples could be as follows:

When it comes to the problem of feeding my family, I will win by owning the solution which places the highest priority on fresh, organic and healthy foods, and I will make the appropriate trade-offs to remain a leader in this direction in the mind of the consumer who wants to make similar trade-offs to solve this problem. (Could this describe someone like Whole Foods?)

When it comes to solving the problem of being appropriately dressed for work, I will win by owning the solution which places the highest priority on quality classic tailoring which lasts beyond one fashion season, and I will make the appropriate trade-offs to remain a leader in this direction in the mind of the consumer who wants to make similar trade-offs to solve this problem. (Could this describe a portion of what Talbots is trying to do?)

When it comes to solving the problem of providing my family with the everyday necessities of life, I will win by owning the solution which places the highest priority on paying the lowest prices in a one-stop shopping environment, and I will make the appropriate trade-offs to remain a leader in this direction in the mind of the consumer who wants to make similar trade-offs to solve this problem. (Could this describe a Wal-Mart Supercenter?)

Now aren’t these statements more practical than a set of platititudes?

SUMMARY
For a strategy to be useful, it must provide direction. Platitudes do not provide direction. The way to tell if you have a platitude is to play it backwards. If it doesn’t make sense in reverse, then it is a platitude. Good strategies show the trade-offs one is willing to make in order to win in a particular direction. When you play that backwards, what you see are other ways to make a different set of trade-offs.

FINAL THOUGHTS
Not everyone wants to make the same set of trade-offs to solve a problem. Therefore, when you are choosing the trade-offs for your firm, you are not only making choices about what you are providing, but also who you are providing them to. When making trade-offs, you are going to make some people unhappy with what you are doing. But as long as there are enough people who want to make the same trade-offs as you do, that’s okay.