Strategic Planning Analogy #515: Follow the Recipe

THE STORY
The nice thing about a “To-Do” list is that you can pretty much do anything on the list in any order you want. The individual items on the To-Do list are independent of each other. If I choose to clean the garage first and mow the lawn second, that’s okay. Or if I choose to mow the yard first and clean the garage second, that’s okay, too. Or if I can get a friend to help me and do both at the same time, that’s also okay. All that matters is getting the stuff on the list done.

A recipe doesn’t work that way. Things need to be done in a particular order. You have to measure the ingredients BEFORE you mix them together. You have to mix the ingredients BEFORE you bake them. If you bake before mixing or mix before measuring, you will have a mess on your hands. The recipe will not turn out as desired. Unlike a To-Do list, a recipe needs to be done in the proper order.

This is especially true if you expect me to eat what you make.

THE ANALOGY
There is a long list of activities associated with strategic planning, like coming up with Visions or Mission statements, analyzing the environment, formulating a budget, creating a position, designing KPIs, assigning implementation tasks, and so on. To get it all done in a timely fashion, there is the temptation to treat it all like a To-Do list. Just get every activity assigned to somebody and let them work at—all at the same time.

That may sound efficient at first. But strategic planning is more like a recipe than a To-Do list. Connections and dependencies exist between the tasks. There tends to be a need to do things in a general order. Otherwise, you end up with a mess.

Unfortunately, I see companies skipping steps or doing them in the wrong order. That’s like mixing before measuring and skipping the baking. I wouldn’t accept that in the kitchen, and I won’t accept it in the world of planning.

THE PRINCIPLE

The principle here is that before embarking on strategic planning, get a good recipe and do the tasks in the proper order. In this blog, I will offer such a recipe. Since most recipe books come with pictures of the recipe, I have one, too—as you can see in Figure 1. Click on it to see a larger version.

Learning

I have summarized everything into three major tasks—learning, deciding and doing. These are the planning equivalents of measuring, mixing and baking. The first task is learning—getting smart about understanding the current state and expected future state. This applies to the state of your internal company/brand and the state of the external marketplace where you will compete.

To learn about the external environment, you need to study the consumers, the competition, regulations and other external factors which can impact your success. To learn about your internal environment, you need to look at your strengths and weaknesses and how you get things done.

This learning is a lot like the measuring in a recipe. You are measuring four things—current state, direction, magnitude and speed. This applies to measuring customer segments, competitive positions, technological advancements and internal issues. The four measurements work like this:

1. Current State: What do things look like today (market share, number of people, size of industry, attitudes, threat of Porter’s Five Forces, internal competitive advantages, etc.)? This is a sort of good or bad measurement.
2. Direction: In the future, how will the current state measurement change in size? Will it go up or down?
3. Magnitude: In the future, how massive will those changes in direction be? Will the changes (up or down) be huge or small?
4. Speed: How fast will the future changes occur? Will it happen almost immediately or will it take some time (fast or slow)?

This is not about making precise measurements. Measuring the future is not that easy and precision takes too long (you have to wait until the future gets here before you can precisely measure it and then it is too late to be useful in planning). For planning purposes, it is usually enough to know good or bad, up or down, huge or small, and fast or slow. I talk about this in more detail here.

Deciding

Once you become smart via learning, you are ready for step two in the recipe—to make some key decisions about how you want to play the strategic game. This is where you put together your unique mix of attributes and processes that you will stand for and win with.

Without gathering the knowledge first, your decisions for this mix will be little more than guesses, hopes, or wishes. Yet, I often see organizations start with some decision activities as their first act. They want to dive in and create visions and missions from the start. They want to decisions about what they want to be begin the planning process. It’s like mixing before measuring.

The problem is that is somewhat irrelevant what we initially want our mix to be. That’s because we do not operate in a vacuum. We operate in the context of the environment and time. The idea is not to pick a place that is pretty and desirable. The idea is to pick a place where we can succeed. And the best place to succeed depends on everything else going on in the marketplace relative to our strengths. And we won’t know that unless we do the learning first.

I remember going to a franchising seminar and hearing a lecture from a successful franchisee. He said that some of the most successful franchisees ignore the glamorous businesses and enter businesses which are dirty, ugly and risky. Why? Big corporations tend to avoid the dirty, ugly and risky. This makes them more profitable for the little franchisee. The idea here is that analysis and learning may point you to away from your first choice (the glamorous option) and put you somewhere else which will make you far more successful. Remember, nearly everyone in the smartphone business is losing money. It may be glamorous, but not a place where everyone can succeed.

In making decisions for your strategy, keep in mind the context of yourself within the environment. Make sure the position you choose is seen by the marketplace as desirable, sizable, ownable, preferable, achievable, believable, understandable, and profitable. I talk more about these concepts here. And then, once you have made your choice about what you want to be, translate it into an external message (position statement) and an internal business model (how I must operate to make the position a deliverable reality).

Doing

The third step is doing—the hard work of making your decisions come to life. This is where you “bake” the strategy. This, by necessity, has to come last. Until you make your decisions, how will you know which actions are the right ones to take? Until you know your way to win, you cannot know which are the winnable actions for your business. 

For example, Aldi and Whole Foods are both grocery retailers. Yet they have decided on radically different positions. Aldi aims for the lowest possible price while Whole Foods aims at health, nutrition, and natural/organic. The right actions for success at Aldi are almost the opposite of the right actions for Whole Foods, and vice versa.

It’s not that some actions are always good and others are always bad. Good and bad is determined by the position. A good action for Aldi can be bad for Whole Foods, and vice versa. So how do you know what the right actions are prior to deciding the position?

Yet, I often see businesses rushing to do the actions first. They claim there is no time to learn (or the future is unlearnable) and that consumers make all the decisions. Therefore all we can do is act quickly and learn from our mistakes. I don’t think it’s quite that simple. I don’t want to stick random ingredients in the oven and then taste them afterwards to learn if it is good. Random actions are not as efficient as making the right action tradeoffs based on a chosen position.

The “doing” actions you choose to prioritize need to address both internal and external challenges. Externally, one needs to convince the customers and the supply chain that you own our position and that it is in their best interests to prefer us. Internally, we need to be sure we have a model capable of delivering the position.

Cycles

Those who want the “doing” to come first aren’t entirely wrong. There are some things which are best

learned via doing and experimenting. But that doesn’t mean that you skip the traditional learning and deciding steps. It means you use the “doing” actions of your current planning cycle to begin the learning of the next cycle.

You can see this in Figure 2. Planning is a continuous series of cycles. Just as you don’t just eat once and quit eating ever again, you don’t just plan once and quit. The planning process never really stops. When you get to the end of one cycle, you use what you learned to influence the next cycle.

SUMMARY
Strategic planning is more like a recipe than a To-Do list. Good planning tends to do things in a particular order, without skipping steps. First you learn by measuring what’s going on (and expected to happen) in the internal and external environments. Then you decide how you want to mix together attributes and processes in order to create a position and business model which optimizes your chances for success in that environment. Third, you “bake” your strategy by doing the implementation actions which make your mix decisions a reality. Finally, you use what you learn from those three steps to do an even better job in your next planning cycle.

FINAL THOUGHTS
This recipe for planning isn’t 100% etched in stone. There is room to experiment with this recipe. But don’t throw it away.

Analogy #196: Just-In-Time Learning

THE STORY:
I had a boss one time who would often come back from top executive meetings with a particular look in his eyes. When we saw that look, we knew exactly what it meant. Right away, we’d ask him, “Okay, what did you just promise to the CEO that we would do, which right now we have no idea how to do?”

You see, this boss had a knack for promising to deliver a result, long before he even had a clue on how to deliver it. What he promised would often require expertise in an area where we had no prior experience. My boss just assumed that the team was smart enough to figure it out in time. And you know what, he was right. We always found a way to deliver. Sometimes, however, it required learning a lot in a short period of time.

This reminds me of someone I knew in the consulting business. He used to get called in to consult with businesses on topics he knew nothing about. As a result, the night before the meeting he would be furiously tapping into whatever resources he could find so that he could at least stay one step ahead of the client. He referred to this practice as “Just-in-time Learning.”

THE ANALOGY:
In today’s dynamic environment, future success often requires doing something new and different from the past. That is why innovation is often the key to making great, long-term strategic gains. By definition, innovation requires venturing into unfamiliar territory.

Therefore, if we remain only within our comfort zone, we will never transform into what is necessary for the future. We will stay stuck in the past—becoming “experts in the obsolete.”

Every large and exciting business sector in existence today at one time did not exist. Somebody, somewhere had to take a risk and create that business opportunity…long before there were any experts in that sector. After all, how could there be experienced experts in an area before it is created?

As my old boss and consultant friend knew, sometimes we need to stretch ourselves and venture into areas beyond our expertise. We need to commit ourselves to accomplishing things before we have a clue on how to deliver them. We need to become comfortable implementing strategies which require working with the unknown. In other words, we need to embrace “Just-in-time Learning.”

THE PRINCIPLE:
To succeed in such an environment, one needs to find that balance between embracing the unknown and minimizing the risks and dangers inherent in the unknown. Either extreme tends to lead to trouble.

For example, the only way to totally eliminate the risks and dangers of the unknown is to wait until everything is known. Of course, by then you have an industry which is totally mature. That is typically a time for consolidation (and people leaving the industry), not typically a time to enter a business. Plus, if everything is known, then it is more difficult to achieve a proprietary competitive advantage. The rules and standards are already set, the leaders are well entrenched, and much of the profitability has already been squeezed out of the business.

Finally, with mature environments, you run the risk that some new innovation is just around the corner, which will make all that “known” knowledge obsolete and require another venture into the unknown.

Conversely, a blind leap into complete darkness is also rarely a wise idea. That leap may be a leap off a tall cliff leading to nowhere but destruction. Not all new trails lead to the Promised Land. Some are just dead ends. In fact, most are dead ends. Back during the original dotcom bubble, a lot of people ran blindly into the unknown—with horrible results. There is not enough time and money available to afford running down every path into the unknown.

As a result, one needs that balance—a way to gain insight about the unknown, yet not have to wait until early mover advantage is gone. We’re calling this just-in-time knowledge.

Here are some tips for Just-In-Time Learning:

1. Look for Parallels
Although every new industry will evolve in its own unique way, there is often a parallel industry which has already taken a similar path. If you study the parallel industry, you can gain quick insights into what may occur in the new industry.

For example, the revolution in consumer-driven health care, such as in-store clinics and consumer-driven web resources, may look foreign and unknown to those schooled in the ways of traditional health care. However, it may look fairly familiar to people from other consumer-driven or information-driven fields, such as retailing or mass media. By tapping into these parallel industries, one can gain some quick just-in-time knowledge to help understand this new field.

Dr. Leonard Berry has for decades been one of the leading academic professors in the field of retailing. From 1982 to 2000, he was the director of the Center for Retail Studies at Texas A&M University. However, he has now turned his attention to applying that knowledge to other service industries which are entering areas that are unknown to them, but familiar to someone with a retail background. In particular, he has been focused on the health care industry, but has also looked into areas like banking. These are the types of people who can help with just-in-time learning.

2. Focus on Superior Solutions
Sometimes, we can get all caught up in the new technology or new technology applications and forget about serving the customer. Yes, new technology can often open up all sorts of new business opportunities. They can also lead to all sorts of business failures. Success or failure is typically not the fault of the new technology. It is how the technology is applied.

Take Twitter, for example. Twitter is a social networking, mini-blog type of instant alert. Many people are trying to find ways to build new business models around the Twitter technology. I suspect most of the ideas will eventually fail.

The way to increase your odds of succeeding is to step back away from the technology and look at customer solutions. People have all types of problems. They currently have ways to cope with these problems. If you want people to switch to your new business model, you need to provide a far superior way to cope with at least one of these problems. If this superior solution uses new technology like Twitter, great! If not, that’s great, too!

The problems of life are all pretty well known. The ways people cope with them today are pretty well known as well. Just-in-time learning will take these “knowns” and apply them to the unknown space to see if it provides a superior solution to what is already known.

Looking for cool ways to apply new technology tends not to be as fruitful as looking for better solutions to known problems (which may or may not use any or all emerging technologies). In fact, by focusing on the problem, you may end up having to create a technology which did not before exist. How cool is that!

3. Embrace Flexible Experimentation
Sometimes, the best way to learn about something is to perform an experiment out in the real world. Build some prototypes, open up the business on a small scale on a web page, or try out the business in a limited geographic area. There’s nothing like real world activity for learning.

The keys to experimentation in unknown areas are as follows:

a. Keep the Scale Small—you can be faster, waste less money…and if you make a mistake, the whole world doesn’t see it.

b. Be Flexible—Don’t assume that you have a perfect business model from the start. Be willing to try different variations of the business model to see which resonates more in the marketplace.

c. Be Authentic—The experiment has to be run like a real, for-profit business. At best, the customer should not even know it’s an experiment, but think it is the real thing. A little test with a few college students in a business school classroom is not a true experiment of the business model. Too many of the variables have been compromised.

4. Minimize Opinion Research
Some at this point would also advocate opinion research…or even do opinion research prior to or instead of experimentation. I disagree. You are working in an area which is unknown. Not only is it unknown to you, but it is unknown to your potential customers. It is probably even more unknown to the customers, because they haven’t been thinking about it as much as you have.

Asking people opinions about business models for which they have no experience is not very insightful. Sure, they’ll give you an opinion, but it is a guess. And often their guesses are way off course.

Trust me. I’ve done lots of consumer research over the years. Much of it is very useful. However, opinion research into new areas where the customer has had no personal experience is usually a waste of time. Asking consumers about their personal experience with your experiment, however, would have value, because we’ve moved from opinions to experience.

SUMMARY
Successful strategies usually take businesses from their current area of comfort into evolving business models which are not yet fully known. To do this properly, one cannot afford to wait until all the knowledge is known. Yet it is also risky to jump in without any knowledge. This is when Just-in-time learning is needed.

FINAL THOUGHTS
I once worked with a President of a retail brand which was going through some tough times. I suggested some changes, but he resisted them. He told me that he had been in this industry for decades and knew how things were supposed to be done. He said if you change the rules, customers would be unhappy. All I could think of was the fact that another retail brand owned by the same firm was far more successful than his because it totally rewrote the way things were be done.

Sometimes you have to go out on a limb and rewrite those rules.