The Fall of Strategic Planning

THE STORY
I was recently reading a posting on the Strategic Planning Society group’s site on Linkedin. It was titled “Forget strategy, innovation has replaced it!” The point Bernhard Schmidt was making was that strategy has lost its relevance in business and has been replaced by innovation.

This is a good issue to bring up. However, I think that point of view just touches the surface of the problem. I wanted to reply with a longer, more nuanced answer to why strategic planning has gone out of favor, but my response was too long to fit into the comments section. Therefore, I am putting my response here.

THE RESPONSE
This is what I tried to put into the comments section:

Here’s my brief take on the decline of Strategic Planning:

1) When strategic planning was at its peak, companies saw many options for their firms and they wanted to learn which option was the best for the company’s long term future in terms of profits, market share and stability. As a result, strategic planning tended to focus on marketing (i.e., positioning) and business models. This was highly valued, so strategic planning was held in high esteem.

2) Then the CMO (Chief Marketing Officer) position was created. This robbed the strategist of one of their most powerful tools—strategic positioning—because that function was given to the CMO. Unfortunately, most CMOs were so preoccupied with near-term advertising that positioning rarely got the attention it deserved from CMOs. As a result, the idea of strategic positioning faded away.

3) Without the marketing foundation, strategic planning became principally a financial function—a bunch of scorekeepers (did you make your numbers). Since there was little foundation behind the numbers (why the numbers should be hit), the scorekeepers turned into complainers (you didn’t hit your number). Who needs that?

4) Worst of all, the objectives of business changed. First, modern companies don’t care so much about traditional measures of success. Business model profitability and customer satisfaction became optional or of far less importance. After all, nearly all of a modern company’s value comes at two points in time—when it gets initial investment money and when it cashes in (goes public or sells out). This limits strategy to how to:

a)     Make the best investment pitches to VCs; and

b)     How to cash out.

So strategy looks more like an episode of Flip This House. You don’t need fancy strategic planners for that.

5) This leads to the second change in objectives. Almost nobody seems to care about the long term as much as in earlier days. Why worry about the long term when you are going to flip the company near term? And since few people stay at a company over 2 years, the employees have no vested interest in long-term health. The founders get their wealth up front when the firm cashes out, so the outer years are less meaningful to them. Few shareholders care about long term either. Without a concern for the long-term, there is little regard for long-term strategy experts.

6) So it gets down to innovation. I interviewed for a strategy position at one firm that planned to go public soon. They said that they would get a higher IPO price if they could show innovative new ideas in the pipeline, so they were looking for someone to help fill the pipeline with a little innovation. This would make great copy to put into the S-1 document filed with the SEC when going public. Hence, innovation was more about boosting the near-term cash out value than the long-term viability of the firm. So in this case, strategy was reduced to little more than a public relations function.

THE IMPLICATIONS
So the issue is a lot bigger than just strategy losing out to innovation. Strategic Planners have been robbed of some of their most powerful tools (like strategic marketing) and companies no longer seem to want to buy what strategic planners used to sell (long term profitability and stability).

So what can marketers do? There are two approaches.

First, strategists can reassert themselves by re-introducing companies to the value that traditional strategic planning can provide. This starts with getting management to see the value in what strategic planning offers. The most compelling argument is that current valuations are based on future expectations. So if you want a high value today, you need a plan which shows a better future tomorrow.

The next step is to grab back your power base. Seize back the strategic positioning role. Downplay the scorekeeper role. Get involved in business model discussions. Put companies on the right path. Place yourself in the middle of company decisions where there are long-term implications. Be the “strategy whisperer” who never lets the CEO forget about the strategic implications embedded in day-to-day decisions.

The second approach would be to adapt strategic planning to be vital to the new reality. This would include things like:

a)     Make scorekeeping a more valuable function by doing a better job of linking numbers to strategic initiatives and helping teams make their numbers.

b)     Do a better job of helping companies get VC funding and to cash in.

c)     Become a public relations expert. Show you can master the strategic language that gets more money from VCs and when cashing in.

d)     Show that you can be fast and provide insights today rather than waiting for a year-long planning cycle to occur.

e)     Show that there can be a more strategic approach to innovation than just “trying a bunch of stuff hoping something will work.” I looked at this in more detail in my prior blog.

Finally, show everyone how including a consideration of long-term implications when making short-term decisions leads to better short-term decisions. This gets at the heart of the issue facing most leaders.

SUMMARY
It is true that traditional strategic planning has gone out of favor and that innovation is the “flavor of the day.” To regain relevancy, strategic planners need to either:

a)     Re-educate management as to the value traditional planning can bring; or

b)     Adapt strategic planning to be a more vital element in the new management priorities.

The proper approach depends on your current situation, although a blend of both is probably required.

FINAL THOUGHTS
There is no value in being “the strategy person” if nobody is looking for a strategy person. So job #1 is to come up with a strategy to make being the strategy person a valuable title to have.

Strategic Planning Analogy #556: Position Vs. Proof

THE STORY
Imagine this conversation with an entertainment promoter. We’ll call him Bob.

Bob: I’m so excited! I just booked a night to use the stage at Carnegie Hall. This is such a great venue to perform in. Some of the greatest performers in the world have had some of their greatest performances at Carnegie Hall. This is the place where winners perform. Success is mine.

Me: So who will you have performing at Carnegie Hall? What will they perform?

Bob: I have no idea. That’s just a minor detail. The important thing is that whatever it is, it will be on that successful stage.

Me: If you don’t know what the act is, how do you plan to sell tickets?

Bob: I’ll just say that great stuff happens at Carnegie Hall. Come see the greatness.

Somehow, I don’t think Bob has this thing fully figured out.

 

THE ANALOGY
In my long line of strategy blogs, one of my favorite topics to talk about is positioning. Dozens of times, I have talked about the necessity for businesses to choose a position if they want to succeed. They need to find a place where they can win.

Perhaps I have focused so much on the importance of positioning that people think that strategy is little more than choosing a position. But strategy is far more than just finding a position in the marketplace. In fact, if all you have is a position, you are likely to fail.

Consider the story above. Bob the promoter found the ideal position—a place where he could win. That place was Carnegie Hall. A lot of performers have won at that position.

But just because Bob had found the ideal place to play does not mean he would automatically succeed. To succeed, he needs to sell tickets. And to do that, Bob needs to figure out what to perform and how to convince people to pay to see it. Owning an empty stage will not draw crowds. Just saying “come see the greatness” won’t work.

In the same way, businesses only succeed if they convert their positioning into preference—a proposition that causes consumers to actually give their money to you (rather than someone else). Being on the right stage only matters if people pay to see it. Therefore, strategy needs to not only find they place where you can win, but a reason for customers to choose to support it.

  

THE PRINCIPLE
The principle here is that positioning is mostly an internal strategy. It tells a company where to play. It talks about the solution it will own and how to structure the company to achieve it. A second strategy, which we will call “the compelling reason”, is needed to get customers as excited about the position as the company is—enough to spend their money with the company. That is the external strategy. Both are needed to win, just as Bob needed both the stage (the position of Carnegie Hall) and the compelling performance for that stage (a reason to come to Carnegie Hall).
   

It is easy to get confused and think that the position and the compelling reason are the same. After all, a position must be desirable to a consumer if it is to be successful, right? Yes, but in reality, what it takes to win internally is not the same as what it takes to win externally.

Trust Issue

Positions tend to rest on owning some idealized superiority, such as highest quality, most luxurious, easiest to use, coolest, cheapest, “ultimate driving machine”, and so on. This type of positioning is what Les Wexner of LBrands refers to as answering the question “What are you Best At?”

Yes, customers like things that are the best. The problem is that customers are jaded. They’ve been hearing claims of superiority their whole lives. After all, how many brands try to claim a position of mediocrity? No, everyone shouts about their superiority. They can’t all be best. Hence, there is a trust issue. You cannot just claim a position of superiority. Nobody will believe it merely because you claim it. No, you have to prove it in order to overcome their lack of trust.

There’s a reason why user and expert opinions/ratings are so sought after on the internet. It’s because consumers don’t blindly trust claims made by the brand. They want them verified by others. They want proof.

So “positioning” determines the claim to be made (what am I best at) and “the compelling reason” determines how to prove to the customer that the claim is true. The two are not the same.

Two Components of Proof

There are two components to the compelling reason. Without them, there is not enough proof to make the claim of the position believable.

The first component is difference. You have to prove that you are different from the alternatives. The logic is simple: If are seen as doing the same thing as others, then you cannot be seen as superior…only the same. You must do something different in order to be perceive as different from the others.

And to make the difference believable, it needs to be easily understood and verifiable.

The second component to the compelling reason is linkage. You need a way to link the difference to the position of superiority. Just saying we’re different because we wear green shirts won’t work, because there is no linkage between wearing green shirts and producing a superior product. The difference needs a direct link to the superiority—proof that the difference causes the superiority.

For example, Dove soap has the position of being “the best beauty soap.” Their point of difference is in saying that their soap is one-fourth moisturizing lotion (and the others aren’t). The linkage is that moisturizing lotion is associated with beauty, so soap with moisturizing lotion can be the superior beauty soap.

Back when Oxydol was the #1 laundry detergent, the position claimed was superiority in cleaning. The difference was putting little green crystals inside the detergent (which others didn’t do). The linkage was that the little green crystals supposedly added bleach to the detergent. And customers could believe that combining bleach to detergent would cause superior cleaning.   

Linkedin’s position is to be the best place for professionals to connect. The difference is that they have far more active professional people in their network than anyone else. The linkage is that you are more likely to make the professional connections you need in the place where the most connections with professionals are possible.

Uber’s position is to provide transportation as reliable as running water, everywhere for everyone. Their point of difference is that their business model abandons all of the conventions of taxis and public transportation. All the rules have been reinvented, including the mobile interface. The linkage is that these changes have dramatically increased the numbers of people providing transportation and improved the interaction with them, making transportation more reliable and more everywhere.

Two Messages

So, as you can see, the positioning message and the compelling reason messages are not the same. In fact, they move in different directions. The positioning message moves towards the broader, more generalized, more universal concepts and solutions. The compelling reason is more specific to a particular company and the “unique ingredients” in its offering.

The position lets you know if the company is relevant to your needs. The compelling reason lets you know if this particular brand is the best alternative in that space (compared to others claiming the same relevancy).

Positioning is about ideals. The compelling reason is about proof.

Both messages are essential. Both need to be a part of the strategy process.

SUMMARY
Although positioning is a key component of strategy, it is not the only key component of strategy. Another key component is the compelling reason. A position is merely a claim that is made concerning where you have chosen to play to win. A compelling reason is the proof as to why customers should believe your claim. Although they are similar concepts, they are not identical. Therefore, if you have only created the position, you are not yet finished with the strategy process.

FINAL THOUGHTS
The problem with claiming a stage like Carnegie Hall is that it is not the only stage. Consumers have other alternatives. So even if Carnegie Hall is the best stage, consumers will go to another stage it they think they will enjoy a better performance. Therefore, you need to work on two fronts: finding your platform/stage AND making sure you are perceived as having the preferred performance.

Strategic Planning Analogy #540: Three Novelists

THE STORY
Consider three types of novelists.

The first author wrote a great novel once. He liked the book so much that he would rewrite the same book every year. A few parts might be added and subtracted each year and maybe a couple of sections would be updated. But essentially it was the same story. He is currently working on the tenth edition of this book, ten years after the first edition. He is so busy with these updates that he hasn’t had time to ever write a second novel.

The second novelist was all over the map. Each new novel went in an entirely new direction with entirely new characters and subject matters. The writing styles and topics would vary so much between novels that there was no guarantee that if you liked one book that you would like another. And it was difficult to get used to all the new characters all the time.

The third novelist wrote a mystery series. The lead character detective was the same in all the books, surrounded by a familiar cast of characters. Although the style was familiar in each book, the plots in each book in the series had enough novelty to keep them unique and interesting. Over time, the lead detective came to be thought of like a familiar old friend to the readers, who anxiously waited to hear about his next adventure.

So which author do you think sold the most books?

THE ANALOGY
Strategists are a lot like novelists, except instead of writing novels, we write strategic plans. And I have seen all three of the types of authors mentioned above in strategic plan writing.

The first type of author is often found in companies with a rigid, but unimaginative annual planning process. Every year, they go through the same boring process. Each business unit submits what they want to do, which is essentially the status quo. Then all the “same as ususal” business unit plans are rolled up together, creating a broad affirmation of the status quo.  Although it may appear as if the annual process is creating a new plan every year, it is really just slightly re-editing the same plan, year after year after year. We’ll call this the “One Book” approach to strategy.

The second type of author is like companies who switch their strategic planning personnel a lot or use a lot of different strategy consultants. As each new author of the strategy walks into the role, they try to put their unique stamp on the process to prove their worth. As a result, each new strategic plan is a radically different approach, totally unconnected to the plans of the past. The company’s role in each plan is so different, that it is hard to imagine that it is the same character. We’ll call this the “Annual Reinvention” approach.

The third type of strategy author (who is like the one who wrote the mystery series) falls somewhere in between the first two. Unlike the Annual Reinvention approach, there is the continuity between each successive plan. It builds on the character’s past and works with its habitual strengths and weaknesses. Yet, unlike the One Book approach, each plan is a new story for the new reality being confronted. We’ll call this the “Series” approach.

And just as novelists who write series tend to sell the most books, strategists who take a “Series” approach tend to have the most successful strategies.

THE PRINCIPLE
The principle here is that an individual annual plan is not an isolated event, but one book within a series. Or, to use another metaphor, it is like a single screen shot from the middle of a movie. If you keep repeating the same screen shot for the entire movie, you have a lousy movie (like the “One Book” approach). Similarly, if you radically change the plot of the movie for each successive screen shot, you have a lousy movie (like the “Annual Reinvention” approach). Great movie scenes build from what came before and point to the changes ahead (like the “Series” approach). So when writing your individual plans, think like a series writer.

The Problems with the One Book Approach

The biggest problem with the one book approach is that it assumes a static environment—no changes. If you assume the future will be just like the past, then what worked in the past will also work in the future. Therefore, continuation of the status quo makes sense; reissuing the same basic plan every year makes sense.

However, we all know that the future will not be identical to the past. There are too many elements of change to allow history to continue as before. Change can come from a multitude of sources, from inside the business to inside the industry to outside the industry. Changing government administrations, changing technologies, changing competitive landscapes, changing economic conditions, changing customer moods, and a host of other areas all serve to alter the marketplace in which you compete.

Therefore, the same strategy book from 10 years ago will not work today, even if you update it a bit each year. A continuation of the status quo will lead to ruin.

The role of the strategist has to be more than just a scribe who takes the status quo words from each business unit and just writes them down verbatim into the annual plan. No, the strategist needs to add value to the process by:

1. Helping the business units see how the future is going to be different from the past.
2. Helping the business units discover the best ways to adapt to the new future.
3. Helping the corporation see big picture of how all the individual business units line up against the changing future, creating a need to alter the business unit portfolio. In a changing future, the best role for a particular business unit may be to shut it down (no longer relevant), and that type of advice will rarely come from the business unit itself when submitting its plan.

The Problems with the Annual Reinvention Approach

The opposite approach from one book—the total strategic reinvention—isn’t much better. It creates a whole lot of action, but it never leads to very much benefit, because the direction of the action changes every year.

A key part of strategy is positioning. To win in the marketplace, you have to stand for something—your position. Winning such a position takes time and consistency. If you keep changing your position each year to something radically different, then you really end up standing for nothing.

When you change who you want to be all the time, your employees get confused about what you stand for, so they don’t know what to do. Worse yet, your employees may take the attitude that “this too shall pass” so they will ignore the latest strategic initiative. After all, why work hard on implementing something if you know that next year the company will want to implement something else? Neither confusion nor apathy in the employee ranks creates an effective strategy implementation program.

And then there are the customers. If your customers get confused about what you stand for, they will never know if you are the right solution for their problem. It is like the author who radically changes her style from book to book. You never know if the next book will fit your preferences.

It takes time to build the competencies and capabilities necessary to pull off a strategy. If you keep changing the strategy, your competencies and capabilities will never be at optimal levels for the strategy of the moment. By contrast, if you keep a relatively consistent direction over many years, you can develop competencies and capabilities which will make you best at delivering your position and blow away the competition.

The Benefits of the Series Approach

The series approach takes the best from each extreme while eliminating the worst. First, it understands that a company has a heritage, a past, a preconceived reputation in the marketplace. You are not working from a blank slate each year. You are building on what came before. This has an impact on what the best future path should be. Like the mystery series of novels, you have the same lead detective in each book, and the prior novels in the series impact what you can effectively do with the character in future novels. Yes, the character can change and grow up, but too many radical changes from book to book ruin the series.

So continuity is important. Build from past strengths. Ignoring your strategic heritage while looking forward is a dangerous path.

On the other hand, the series approach doesn’t re-write the same plot each year. It understands that the marketplace is continually changing, so you need a new story line to adapt to the change. It is the idea of being able to adapt what already makes you great to the new realities of the future.

Just as each murder in the mystery series requires a different solution, each year has its own strategic problems to solve. The variety in plots keeps the individual story in each book in the series fresh and relevant. Yet each solution relies on the historic strengths of the recurring detective. The same should be true of your strategic plans.

SUMMARY
Strategic plans are like novels. And the best strategic plans tend to be like individual novels within a series. First, they provide continuity between the stories in order to take advantage of the past and build competencies and capabilities for the future. Second, each novel’s story is different, because times change.

FINAL THOUGHTS
I’m currently helping a company with its new five-year strategic plan, and the starting off point is its prior five-year plan. You have to look backwards before you can look forwards.

Strategic Planning Analogy #528: Business Without Brains

THE STORY
Imagine a game in which you are in your backyard and your goal is to shoot ping pong balls at targets in your neighbor’s back yard. The only problem is that there is a high wall between the two backyards so that you cannot see the targets…and, in addition, the targets are constantly moving. Since you cannot see anything, the only way you know you have hit a target is when you hear the ping pong ball bounce off the target.

Therefore, to win the game, you shoot as many ping pong balls in as many directions as possible. When you hear a ping pong ball hit a target, you start shooting even more in that direction until the target moves away. Then you start randomly shooting everywhere again.

THE ANALOGY
That sounds like a relatively stupid game to me. There’s no intellectual challenge. There’s no strategy. It’s just random shooting, hoping to get lucky. You could train a monkey to do that…or program a machine to do it.

Yet this is what modern marketing consists of at many companies. The company sets up its digital business on a web site. Then the company tries a constant stream of experiments with the site to see what works. Colors are randomly changed, the size and placement of boxes changes, prices and offerings randomly change. Text randomly changes. They try everything, everywhere.

With all of this “experimentation” going on, the company “listens” to see if they got any “hits” on the website. If so, they start doing more of what random thing seemed to cause the hit. Eventually the customer moves away from that approach, so the company randomly starts firing experiments in all directions again hoping for the next hit.

You can give this approach all sorts of fancy names like “big data” or “agile” or “digital marketing” or “listening to the customer.” But the reality is that it is little more than that silly game with the ping pong balls. No need to think; no need for strategy. Just program a machine to try a lot of things and listen for hits. It sounds like a rather stupid game to me.

THE PRINCIPLE
The principle here is that although the digital age has had a profound impact on marketing, most of the foundational principles of marketing have not been repealed. They are still valid. And if you ignore these principles, you are doing little more than shooting ping pong balls over the wall. Sure, with today’s technology, you can be more efficient with your randomness (and hear the hits better), but it still is little more than random luck. You may as well quit marketing and put all your money into lottery tickets. It takes about the same level of brainpower and strategy (virtually none) yet is a lot easier.

The only problem is that you can get VC money to make a business out of random experiments, but you cannot get VC money just to play the lottery. Perhaps venture capitalists would have higher success rates if they put their money into lottery tickets. Or MAYBE they should invest in people who still operate by the fundamentals or marketing.

Marketing Principle #1: Successful Companies Have a Reason for Being

Successful companies do not merely exist to make their owners wealthy. They succeed because there is a reason for them to succeed in the marketplace. They are fulfilling a consumer need better than anyone else. By fulfilling an unmet need, they have a reason to exist—a relevancy when it is time for customers to spend their money.

Before starting down the path of a new business venture, smart marketers will ask a series of relevancy questions. If the business idea is not sufficiently relevant, then they do not pursue the venture, for it is most likely destined for failure—because it does not have a reason for being.

Examples of relevancy questions include:

1.     Why would a consumer naturally prefer my product over the alternatives?

2.     What benefits do I provide better than anyone else?

3.     Do customers truly have a need for what I am offering?

4.     For what problem am I offering a superior solution?

5.     Is my solution valuable enough to the consumer to get them to pay me an amount that would provide a proper return on investment?

6.     If I didn’t exist, would I be missed in the marketplace?

Google initially succeeded because they offered a superior way to search the internet. It was different. It was better. Consumers could see the superiority. It was a better solution. In other words, it had a reason to exist—a reason to be successful—a reason to be preferred.

Compare that to a lot of other digital businesses trying to make it in the world today. Thousands upon thousands of these ideas are dreamed up in dorm rooms or on a sofa at Starbucks. They all look about the same and act about the same. There is no talk about superiority, because there is none. It’s still in beta and bull of bugs and won’t be great until version 4.0.  

There’s rarely talk of real benefits or meeting needs in a way people are willing to pay for. And there is rarely talk about why this version would be naturally preferred over the thousands of similar pitches being made in the same space.

Instead they talk about how fast they will be at adjusting and adapting. It sounds to me like they are just shooting ping pong balls over the wall and they think they will win because they can shoot more ping pong balls more often.  

Marketing Principle #2: Successful Companies Own a Position

But even if these people bothered to develop a great solution for an important problem, it is not enough. Others may have as good (or better) a solution for that same problem. In addition to having a solution for a problem, you have to OWN that solution in the mind of the customer. The solution has to belong to you. When the customer encounters the problem, your brand needs to be the one which comes to mind.

Google took its initial superiority in search engines and built a brand which “owned” search in the minds of most customers. By owning search, it became nearly impossible for anyone to take it away.

When I look at a lot of the proposed digital ideas today, I see people going after spaces already owned by someone else. They want to be the next “Facebook” or the next “Apple.” Well we already have Facebook and Apple. As long as they do their job, we won’t need another one.

Don’t attack a space already owned by someone else. That battle rarely leads to victory. Build a position that is different—one that you can own. Imitation may be the most sincere form of flattery, but it is a lousy way to try to win. Followers are never in the front.

How many different games do we need on our smartphones? They all seem to be minor variations on a small handful of themes. Your odds of being the next Angry Birds or Candy Crush are probably worse than if you put your money into lottery tickets.

If you cannot own a position, then you cannot achieve a winning position in the consumer’s mind for that space. And without a position, you have no reason to exist. Owning a position usually requires being early in the game, bringing something meaningful to the game, and out-executing the competition. A lot of companies are competing in the smartphone business, but only Apple and Samsung make any real money at it. Everyone else is a loser in that space because they do not own it.

Marketing Principle #3: Successful Companies Know Why they are Successful

Some of the literature on the “new” way of marketing say it is a waste of time to try to figure out why a particular experiment works. If a blue website sells more than a green one, just accept it and move on.

I’m okay with some of that as it relates to minor tactics. But at some point, one should understand why they are in business and why a customer should prefer them. You cannot strengthen or broaden a position if you don’t understand why it works.

If your only success is due to discovering the advantages of a blue website first, your advantage disappears as soon as everyone else makes their website blue. The advantage is not sustainable.

However, if you deeply understand the “why” of your success, you can use that knowledge to build barriers of sustainability. Apple understands why it is successful. It creates a consumer advantage through “coolness” and a competitive advantage through closed systems. It keeps replicating this over and over again to make Apple ever stronger. And if the superiority in coolness and closed systems lies outside of Apple, as in the case of Beats, they acquire it.

The new marketers praise the value of ignorance—just go with what works and don’t ask why. I beg to disagree.

SUMMARY
Much of what is proposed as “New Marketing” is really “No Marketing.” It is a brainless, strategy-less approach depending upon quickness and luck. The basic laws of marketing still exist. Sure, the execution will need to adapt to the digital age, but the fundamental principles still apply. Successful businesses today still need to worry today about:

a)     Having a reason to exist in the marketplace (superior solution);

b)     Owning their position in the marketplace (differentiation);

c)     Knowing what is the reason for their success (understanding why).

Even in the new digital economy, these are the characteristics of the sustainable winners.

FINAL THOUGHTS
In that ping pong game, the successful “real” marketer would put a door in that wall and design compelling reasons why the targets would be prefer to come into my backyard and/or let me walk into their backyard. This proactive, strategic approach is superior to shooting ping pong balls and hoping for the best.

Strategic Planning Analogy #518: Deadly Serious

THE STORY
I recently saw the movie “Inside Llewyn Davis.” It’s the fictional story of a folk singer back in the early 1960s. I also recently pulled out and listened to some old vinyl records of folk singer Bob Dylan from the early 1960s.

A common element about much of the folk music scene in the early 1960s was a sense of utter seriousness about the music. I could feel it in both the movie and the Bob Dylan records.

Many of the songs spoke about big, serious issues, like Peace & War, Love & Hate, Life & Death, and Social Injustice. The audiences at performances were quiet and serious. They focused on the words as if they were oracles from God. The mood was a bit like going to a (godless) church. And the backs of the albums were full of long liner notes from reputable reporters and serious music critics. They wrote about the music as if they were critiquing the works of the greatest masters of art and literature. Many of the folk artists were willing to almost starve to get the message out.

That’s quite a bit different from the music scene of today. Today’s popular music has been downgraded to little more than a background beat—a soundtrack to a video where someone wearing little clothing prances about. The suggestive video gets the emphasis and the background music feels like an afterthought. The audience is loud and rowdy—more like a party than a church. Nobody takes the “artists” like Miley Cyrus or Justin Bieber seriously. And you can tell they are in it for the money, not the message.

Things have certainly changed.

THE ANALOGY
I think a similar change has taken place in strategic planning. If you go back in time—to perhaps roughly around the 1980s—strategic planning was taken very seriously. Like the folk music of the early 1960s, the strategy topics covered in the past were large and deep—of life and death importance to the company or brand. Positioning, competencies, structure, differentiation—a search for a sort of “eternal purpose”, a reason for a brand to exist, a reason to keep the company from dying.

People with the word “strategy” in their title back then were treated with respect. The most respected consulting firms, who hired the best and the brightest, specialized in strategy. People listened attentively when they spoke on the subject, like hearing a sermon in church.

And like the long liner notes on the back of the folk records, there were lots of people writing serious books on the topic of strategy.

Now, it seems that strategic planning has, like today’s music, fallen out of seriousness. Strategic planners today are often relegated to merely creating the background beat—the monthly rhythm of KPI (Key Performance Indicator) reports, plan vs. actuals reports, and other such monthly scorecard updates. The real focus has moved elsewhere. Strategy work is seen as merely a temporary stopping point for high potential employees or those seeking to become something else, like a CFO—it is not a serious career destination. Even the big consulting firms rarely do strategy work anymore.

There aren’t many forums left where the big “life and death” issues of the corporation get serious discussion. Some of the newer social media firms take strategy work about as seriously as one would a Miley Cyrus video.

Things have certainly changed.

THE PRINCIPLE
The principal here is that long-term success requires making the right choices on some major, serious topics. Make the right decisions on these major topics and your company lives. If you ignore them, or guess wrongly, your company will die. They are, quite literally, life and death decisions.

When strategic planning is relegated to being just the rhythm section (only producing the monthly reports), companies lose an important focal point for dealing with these larger, serious issues. And that makes survival a lot riskier.

I will bundle these serious issues into two categories—“Reason To Live” questions and “Reason Not to Die” questions.

1. Reason to Live

If you want your company or offering to live, then you need a reason for why customers would want it to live. Otherwise, your company will die.

There is too much competition; too many alternatives. With all of those choices, a consumer is not forced into choosing your offering. They can choose something else, and unless you give them a reason to prefer your offering, they will choose something else. That is why I have said many times that the most important question in strategy is: What is it about your strategy which will cause customers to prefer you over the alternatives?

Preference is caused by offering a differential advantage over the alternatives. There are many ways to create this edge: by being faster, lower cost, higher quality, better service, more features, more specialization, higher convenience, and so on.

The important point here is that differential advantages rarely come about by accident. If all you do is the same thing everyone else is doing in your space, you end up just like everyone else in your space. There is no difference. There is no advantage. There is no real preference. At best, you gain customers randomly.

No, if you want to be preferred you have to be different; you have to choose a different strategic path than your competition. You have to choose where to build an inherent advantage. And then you have to design and build a different business model in order to profitably deliver your different results.

All of that requires serious discussions. The answers won’t turn up in a monthly update report. You need serious time devoted to the issue.

It bothers me that so many people just look to where the hot business space is and then rush in to fill the demand—just like thousands of other companies. Yes, there can be big winners like Apple, Google and Facebook. But the vast majority of the ones jumping into hot spaces fail.

They are lured into the hot space just like people are lured by the hot singer prancing about in the music videos. It looks so inviting. But because there is no substance built behind the scenes, it fades away.

Before jumping into the hot space, ask yourself some serious questions. What would give me an inherent edge over everyone else jumping into this space? What would I need to do differently in order to create that edge? How do I build a business model that excels in delivering that edge? Where do I get the competencies and capacities to pull it off? How do I build a superior advantage over others who may want to create the same advantage?

Without these serious discussions, you are not designing a reason for living. You are merely playing the lottery and hoping to get lucky. And we all know that nearly everyone who plays the lottery loses.

2. Reason to Not Die

Just because a company is successful today does not mean that it will continue to succeed. Many one-time great and successful companies have died or nearly died. Just think of Kodak, Lehman Brothers, Tribune Co., Global Crossing, Woolworth’s (US), and Sears.

The problem is that the environment changes. What succeeds in one environment may fail when that environment changes. Past success is no guarantee that success will continue into that changing world. Instead, one needs to be examining the environment and asking the tough, serious questions about whether your business is falling out of favor with change and on a path to death. And, if the current path is death, what big changes need to be made to avoid death.

The companies above either ignored the changes or made bad choices about how to deal with the change. Kodak bungled the transition from analog film to digital imaging. Tribune Co. bungled the transition from newspapers to digital media. Lehman Brothers misread the future of mortgages. Global Crossing misread the evolution of communications. Woolworth’s and Sears stayed in the middle while retail bifurcated into high-end and discount.

If all you do is measure success over the past month, you will miss the bigger picture. Not only can it make you blind to the larger changes, it can actually make the transition even harder. For example, sometimes the path from the old strategic vision to the new requires taking a temporary dip in earnings, as investments are shifted from the old to the new. The only way to preserve the near-term results may be to delay or ignore investments into the new. As a result, you miss the transition to the new and you die like the examples.

Take time to stand back and seriously assess the bigger, longer term picture. That way, you can get in front of the change and successfully transition into the new environment. If you don’t, you will probably die.

SUMMARY
Companies fail all the time. Usually, they fail because they did not properly address the big, serious issues of life and death. Companies live/thrive if they provide a differential advantage by choosing the right way to be different. Companies avoid death if they adapt to the changing environment. Unless you devote significant time to seriously discuss these issues, you will not ultimately survive. That is why I am in favor of strong strategic planning disciplines which tackle these tough issues.

FINAL THOUGHTS
Just because serious strategic planning may appear to be out of fashion does not mean that many of its critical functions are no longer necessary.

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.

Strategic Planning Analogy #514: Working the Wrong Mine

THE STORY
Let’s assume there are two miners, named Bob and Jason. Bob is a big believer in analytics and measurement. Bob has KPIs (Key Performance Indicators) for every part of his mining operation and measures them often. Bob receives spreadsheets every day, showing in precise detail exactly how everything is going in the mines. Using that data, Bob can make minor adjustments to improve productivity on an ongoing basis. Everyone in Bob’s mining business is trained in how to improve their KPIs.

Sure, all that time, money and effort into analytics leaves little left for anything else, but Bob is happy. After all, he attributes his devotion to analytics with allowing him to eke out a small profit from a poor mine. Bob believes that without that devotion, he would lose money at that low-yield mine.

Jason, on the other hand, takes a different approach to mining. Rather than fretting about having the latest mining equipment filled with gadgets to measure productivity, Jason just carries a simple pick axe to his mine.

And every day, Jason extracts trainloads of valuable ore from his mine. Jason is making a large fortune on his mining business.

And why is Jason doing so much better than Bob? Well, while Bob was focused on incremental improvements via analytics, Jason was devoting his time, money and effort on locating the best place to do mining. And, as it turns out, great productivity at a poor mine is less profitable than average productivity at a high-yield mine which is bursting with pure ore.

THE ANALOGY
It’s common sense that—all other things being equal—a mine full of high quality ore will be more profitable to operate than a mine with very little (and low quality) ore. Yet Bob was so fixated on improving operations at his current low-yield mine site that he never stopped to consider that maybe he’d be better off looking for a better place to mine. His head was down looking at spreadsheets rather than up and scanning the geography for better sites.

Jason, on the other hand, realized that the highest determination of mining profits was in the quality of the mining location. Therefore Jason spent his effort on what was the high determination factor. Jason first searched for a superior place to mine and was rewarded handsomely.

As obvious as this common sense may appear, it seems that there are a lot more people like Bob in the business world today than Jason. Look at all the current buzz in strategic planning. It’s about big data, analytics, and KPIs. Job descriptions for strategic planners today talk more about statistical analytic prowess than big picture positioning. I recently saw where a company was placing strategy in its M&E department (Measure & Evaluate).

Now I’m not against measurement or productivity efforts. But that’s not the major source of growth and profitability. As we will see later in this blog, positioning yourself in the right place is a greater determinant of success. Therefore, positioning should be of higher importance, since decisions there will have greater impact. We need to be more like Jason and less like Bob.  

THE PRINCIPLE
The principle here is that leaders need to focus their time and energy on activities which produce the highest impact. Positioning is one of those high impact areas. Therefore, positioning should be a high priority of leaders and their strategy group…higher than low impact issues such as analytics.

The facts back this up. The latest came this week in an interview on McKinsey.com.  McKinsey’s Chris Bradley and Angus Dawson were talking about the Art of Strategy and what we’ve learned over the last 15-20 years about the topic. In the interview, Chris Bradley said research shows that “80 percent of growth is explained by decisions about where to compete or by market selection.”

Based on this research, if 80% of growth is determined by position—where to compete, who to target, winning position—then that leaves only 20% for everything else, including analysis, productivity initiatives, market share wars, and KPI monitoring. Shouldn’t we be focusing on the 80% rather than the 20%? In other words, wouldn’t we be better off spending time finding the right place to mine rather than getting more productive in the wrong place to mine?

Chris Bradley went on to say that:

“Companies should be just as focused about positional improvement as they are on performance improvement. [The research] reveals the importance of strategy in that light, not as a method of how we gain market share or decide what our edge is going be in the next quarter, but as a way to fundamentally position the company against the right trends, catch the right waves, and put our bets on the right markets.”

As Chris implies, positioning is where strategy adds the most value, so all those other strategic tasks (like productivity, market share, or near-term KPI targets) should not be sucking up all of one’s focus.

Example

I can illustrate this principle using a company I worked with. This company had a portfolio of retail brands. One of the brands was doing poorly, so I helped investigate the cause of the problems and potential solutions.

One of the things we learned was that there were a lot of areas where productivity could be improved. This included areas such as labor, inventory, distribution, marketing and merchandising. We investigated what it would take to improve these areas of inefficiency (time, effort, money) and what the impact might be if efficiency was improved.

But we did not stop there. We also spent significant time looking at the big picture position of this retail brand. What we learned was that the position of this retail brand was a lot like Bob’s mine—a poor, low yield position. In particular:

1. The sites of the stores were inferior to competition.
2. Nearly every store was in an economically depressed market with declining population.
3. Past actions had so confused the customer that one would essentially have to start over in building a compelling reason for customers to prefer the brand.

Because of the enormity of these positioning negatives, the productivity initiatives would have only a limited ability to improve the business. Even a highly efficient store will struggle if it is in a bad location in a declining market with a confused customer. It would have been like Bob’s effort to improve his poor mine—much work with little benefit—because productivity focuses on the 20% factor rather than the 80% factor.

The only way to create the big leap in improvement would have been to fix the position (the 80% factor) by relocating the chain to better sites in growing markets with a dedicated effort to rebuild loyalty. The cost and risk on that was very high.

Therefore, rather than put in all the time, effort and money needed to incrementally improve the productivity of that retail brand, the company sold the brand and put all that time, effort and money into a different brand which had a much better position (more like Jason’s high-yield mine).

That was the right move, because it focused first on positioning (the 80% factor) before determining decisions on where to create incremental improvements (the 20% factor). By putting the effort behind the brand with a better position, it improved the return on that effort.

SUMMARY
Incremental improvements via analytics, statistics, KPIs, Six Sigma, Lean and other such productivity tools has its place. But it is not the place of prominence. The big rewards come from getting the overall position right. Positioning needs the place of prominence in the strategic planning process. This is because if the position is wrong, then all those other efforts are constrained by the lack of potential within the poor position. You can only get so much ore out of a bad mine, no matter how productive you are. Better to focus on getting the position right, so that subsequent efforts are focused on place where the potential rewards are high.

FINAL THOUGHTS
Now some of you may be thinking that you can afford to focus almost exclusively on productivity issues now, because you already have a great, winning position. The problem is that environments change. The great positions of today may become lousy positions tomorrow. Decades ago, that poor retail chain I talked about had a great position (before the cities went into decline and the consumer position was compromised). So one can never ignore the positioning issue. It needs to be consistently monitored to ensure that it remains in tune with the marketplace and relevant with the customer.

Strategic Planning Analogy #512: Working on the House

THE STORY
I was recently eating at a Taco Bell restaurant where the inside temperature was only 63 degrees Fahrenheit (about 16 degrees Celsius). It was so cold, I had to eat lunch with my coat on (and it is only October). This got me to thinking…

Imagine that you have a home-based business and that your home is extremely cold. The extreme cold in your house causes your typical day to have problems like these:

1. Much of your day is spent trying to create warmth, doing things like:
1. Chopping wood for the fireplace.
2. Doing exercises to warm up.
3. Checking the thermostat.
4. Heating pots of water on the stove. 

2. Working on your laptop, smartphone and tablet is difficult because you are bundled up in bulky clothes and wearing mittens on your hands. 

3. Lots of money is wasted on utility costs in a futile attempt to warm the place. 

4. Because of the pre-occupation with the cold, you find it hard to concentrate on anything else (like your home-based business).

If you had to deal with problems like that day after day after day, I suspect that your home-based business would be a disaster.

Now let’s suppose that instead of focusing on trying to do work IN the house, you tried to do work ON the house. You go around inspecting the house. What you find is that there are several big holes in your wall exposing you to the cold outside environment. In addition, you find that the insulation in the walls is missing.

After spending a little time working ON the house (fixing walls and insulation), you quickly notice that it becomes a lot easier to do your business IN the house, because now it is comfortably warm all day.

1. You gain back all that time wasted on trying to heat the house.
2. It is easier to work on your devices when not wearing mittens.
3. Your utility bills go way down.
4. It is easier to concentrate on the business now that the distraction of being cold is gone.

And now the home-based business is a lot more successful.

THE ANALOGY
In the world of business, you have two choices on how to spend your time. You can spend your time either:

1. Working IN the business (doing the daily stuff which keeps the process in operation); or
2. Working ON the business (doing the big-picture stuff which improves the structure of the business and its ability to win in the marketplace).

Both are important; both need attention. But for leaders, more time needs to be spent working ON the business rather than IN the business.

I believe that leadership in most businesses under-allocates time working ON the business. It’s easy to understand why. Fixing the crisis of the day (IN the business) sucks up time leaving little left for the examining the big structure (ON the business). But, as we can see in the story, that approach is very unproductive.

The crisis of the day in the story was the cold temperature. Extensive time and money were wasted trying to find ways to get the work done in this environment. Dealing with trying to work through the crisis was crippling the business (working IN the business wasn’t working).

However, by taking time to step away from the day to day and look at the big picture, one could easily see that the overall structure of the house was inadequate. After fixing the structure (the holes and the insulation), the crisis went away. Productivity skyrocketed. By spending time ON the business, the work being done IN the business got a whole lot more productive—more productive than what could be achieved by merely working in the business.

THE PRINCIPLE
The principle here is that structure matters. How you structure the business can have a big impact on how effective the work is inside the business. Even if your employees are hardworking and want to succeed, if the structure is wrong, that effort will be as effective as trying to use devices with your mittens on.

Structural Questions

Structural issues would include questions like these:

1.     Do you have a winning position in the marketplace (a reason for customers to prefer you)? If you have no reason to win, then you will lose, even if you work hard. Working hard at mediocrity or in offering the same as everyone else will not get people to prefer you. The winning position is the foundation of your structure. Without a solid foundation, the structure will fall and crush your operations. Everyone gets all excited about the smartphone business, but keep in mind that only Apple and Samsung are making a profit in this segment. The others are working very hard IN the business of smartphones, but they are losing because they have not developed sustainable positions which create a natural reason to prefer them. Unless they first address this issue (working ON the position), their efforts IN the smartphone business will be wasted. You can read more about this concept here.

2.     Do you have a business model which is designed to give you an edge in achieving your position? Why should you expect to win if you do not have a structure designed to increase your odds of achieving superiority at your point of differentiation/winning? Just working harder in the business is usually not enough. Think about hard discount retailers like Aldi. They create a preference based on a low price position. These low prices are not achieved by merely working harder IN the grocery business. No, they are achieved by working ON a structure which makes low prices easier to obtain:

a.      Very Limited Assortments

b.     Virtually all Private Label Store Brands

c.      No Service

d.     Selling from pallets of open boxes rather than placing individual items on the shelf.

This structure gives an edge in achieving the low price position which businesses under a more conventional structure cannot touch.

3.     Have you supplied the business with adequate levels of capacity and competency? Working hard IN the business will not lead to success if your structure is missing the capacity and competency needed to win. Without an adequate supply chain (access to enough raw materials, manufacturing capacity, distribution capacity, etc.), your work IN the business will not be able to deliver on the promises. Similarly, without the needed knowledge, skills, and tools, harder work will be wasted work. The lack of capacity and competency is like the lack of insulation in that house. It prevents the work inside the house from being productive. In the modern economy of tech firms like Google, Yahoo, Facebook, Apple, and other social media firms, there is an understanding that if you cannot get an adequate capacity of engineering competency, you cannot deliver the winning position. Therefore, the winners design structures which create an edge in attracting and keeping this component.   

Role of Leaders

Answering these three questions is the role of leadership. They are the ones who need to step away from the day to day to think about the structure. Thinking back to the story, they need to ask: Where are the holes in the house? Where do I need more insulation? Do I need to build an addition to the house? Do I need to totally remodel the house?

If the leaders do not proactively make the time to step away from being IN the business to work ON the business, it will not get done. The crisis of the day will naturally choke it out. Like the story, you will spend so much time and effort dealing with the cold that there is little left for focusing on winning in the marketplace.

The lower levels are too closely tied to the day-to-day or their little area of specialty. They cannot see the whole structure. Only the leaders can wrap their arms around the bigger picture. And when you do, the improvements can be amazing.

And the fancy word we give to all this attention to structure is STRATEGY.

SUMMARY
Hard work is nice, but it can be a lot of wasted effort if the business structure is wrong. When all of your time is focused on finding ways to do more work IN the business rather than first working ON the business to make sure it is set up to win, you are merely creating action, not results. A good business structure has a winning position, a business model which supports the position, and enough capacity and competency to deliver on the promise of the position. If you do not work ON the business to build this kind of structure, your work IN the business is going to go nowhere.

FINAL THOUGHTS
The key here is delegation. Leaders need to delegate more of the day-to-day so that they can spend increased time on the bigger picture.