Emergent Vs. Positioning (Part 2)

 

INTRODUCTION
In the last blog, we looked at a comparison between the Emergent view of strategy and the Positioning view.  I explained why I prefer the positioning view.  In today’s blog (part 2), I will explain why I think the emergent point of view also makes some good points and how to incorporate them into a positioning framework to get the best of both worlds.

 

POINT #1: SUSTAINABLE COMPETITIVE ADVANTAGE

The Issue

The emergent position brings up two good issues.  The first has to do with sustainable competitive advantage.  The positioning school tries to find positions which provide sustainable competitive advantages.  The emergents respond that sustainable competitive advantages are becoming increasingly more difficult to create, so finding those types of positions can be a more futile undertaking.

First is the “sustainability” part of the phrase.  In a seemingly ever faster changing environment, very little appears sustainable.  So if change is constant, why seek sustainability? 

Then there is the “competitive advantage” portion of the phrase.  With rapid change comes frequent upgrades and frequent obsolescence.  It makes any advantage very temporary.  It is like a ping pong game, where the ball keeps bouncing from one side to the next—first side A has the advantage and then side B has the advantage, then side A regains the advantage, and so on.  So instead of trying to achieve lasting advantage, emergents just try to stay in the game by responding with their ping pong paddle in a way to keep the game alive.

The Solution

Is this phenomenon a concern?  Yes.  Is the problem as dire as the emergents believe?  I don’t think so.  First of all, this is not the first time rapid change has occurred in business.  We’ve gone through the industrial revolution, the widespread adoption of electricity, the movement to a knowledge-based economy, and so on.  Yes, there is some turmoil during the transition, but companies with a good strategy find a way to make it through the transition.

The solution is to change the focus of where one looks for advantage.  Even when many things are changing, many others stay the same.  In particular, when products and technologies are changing rapidly, basic human needs and desires still stay the same.   There is always a segment wanting low prices.  There is always a segment wanting status.  There is always a segment wanting convenience.  There is always a need to feel loved or appreciated.

Now the means by which these constants are achieved may change.  The core solutions do not.  So the solution is to find positions which are not tied to particular products, but to enduring solutions.  For example, Wal-Mart positioned itself around the enduring solution of offering low prices.  Now the way it has done this has changed.  It started as a discount store.  When it looked like wholesale clubs could provide lower prices, they opened up Sam’s Club.  When it looked like supercenters could provide lower prices, they aggressively replaced discount stores with supercenters.  When it appeared that building a more sustainable and eco-friendly supply chain could lower costs and prices, Walmart aggressively went in that direction. 

The point is that Walmart’s low price position gave them an anchor.  As the world was changing around them, they did not panic.  They just kept migrating to wherever that position could be best met.  And through that singular focus, they were able to reinforce that position with the customers and become continually stronger.

Bausch & Lomb was in the lens business, but they focused their position on the end solution—better sight.  As a result, they migrated in to contacts, eye surgery equipment and eye enhancing vitamins.  Yes, the product changed radically, but because of their focus, they knew what had to be done to stay relevant.  They found a place where they could differentiate and win.

Apple keeps changing their offering, but each offering is true to their position of selling cool, easy to use interfaces between people and their data.

Without these positioning anchors, the myriad of strategic choices would overwhelm a company.  You cannot do it all.  You have to focus.  You have to make trade-offs.  And these enduring positions help light a path within the confusion of change.  In fact, they can help you better anticipate where to go, due to that focus.  Without it, you are always trying to catch-up to whatever looks hot today.  And by the time you match it, the world has moved on to the next hot item.  You never get ahead that way.

Another positioning approach to take is to create a position around speed and flexibility.  The emergent view is to always be racing to keep pace with change.  If speed and flexibility are so important in a rapidly changing environment, wouldn’t building excellence around speed and flexibility be a great position?   Build your positioning trade-offs around speed and flexibility, so that you become faster and more flexible than those who do not make those trade-offs.  This position actually makes rapid change an advantage for your position.

 

POINT #2: LOSS OF CONTROL

The Issue

The second key point emergents make is that businesses are losing control of the interaction with their customers.  The power is shifting to the consumer.  Social media and web 2.0 have given the consumer more of a voice.  They are having a greater say in how products are designed and marketed. 

If consumers are gaining a greater control over the conversation, then emergents would say that consumers are gaining greater control over a company’s position.  If that is the case, then a company can no longer rely on managing its business by managing its position.  Instead, a company needs to chase where the consumer conversation is going and whatever emerges from that is the strategy.

The Solution

Well, this is true to a point.   And that point ends when you shift from incremental strategy to transformational strategy.  Consumers can be great critics of the status quo.  They can tell you what is wrong with a product and how to incrementally make it better.   However, they tend to be quite bad at voicing opinions about transformational issues which go beyond what the consumer has experienced. 

This is because a) most consumers are too busy living their current lives to spend time dreaming up all the particulars around the business model for the next big thing; and b) if they have no experience to relate to, then they have trouble getting their arms around it and give an accurate assessment.

That is why Henry Ford supposedly said, “If I’d asked my customers what they wanted they would have asked for a faster horse.”

That is why Steve Jobs supposedly said, “You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new.”  And when commenting on what kind of consumer research Apple did for the iPad, Jobs said, “None. It is not the consumers’ job to know what they want.”

So if you want to remain in an approach to strategy which is only incremental, then perhaps the idea of following the customer makes sense.  But if you want to transform the world like Henry Ford or Steve Jobs, it would seem that following the customer is a poor choice.  Instead, you still need to lead the customer and be pro-active in what you do.  And if the world is moving as fast and creating as much obsolescence as the emergents proclaim, then I think the transformation approach is even more important.  And that means that significant control is still in the hands of the successful companies.

 

SUMMARY

The emergents make some good points, but not enough to get me to abandon the positioning perspective.  Instead, I just altered the positioning perspective slightly to accommodate the concerns.  You can see them in the chart nearby.  For the concern of the world changing too quickly, I suggest either shifting positions to timeless solutions or to speed & flexibility solutions.  For the concern of losing control, I suggest focusing more on transformations, where control is still strong.

 

FINAL THOUGHTS
Although there is good and bad in both points of view, that does not give an excuse to abandon all approaches to strategy.  It is still worth doing.

Emergent Vs. Positioning (Part 1)

INTRODUCTION
With today’s blog, we will begin a two-part look at a comparison between the Emergent view of strategy and the Positioning view.  In this first part, I will explain why I prefer the positioning view.  In the next blog (part 2), I will explain why I think the emergent point of view also makes some good points and how to incorporate them into a positioning framework to get the best of both worlds.

 

EXPLAINING THE TWO POINTS OF VIEW
In strategic planning, there are two dominant philosophies, commonly referred to as the Emergent and the Positioning philosophies.  They are based on different assumptions and result in different strategic activity.

The Emergent view is that the world is in constant change, so if you want your company to be relevant, you have to keep changing to find your place of relevance within that changing world. In the emergent point of view, building a strategy is not a goal but an outcome from your series of actions taken in order to fit into the marketplace of the moment.  Over time, if you focus on the right series of moves on a near-term basis, you will end up with long-term relevancy (and that result becomes your strategy).  In other words, the strategy emerges out of the focus on actions.

With the emergent point of view, the key role of a strategist is to understand how the market is shifting and to identify the evolving “sweet spot” within it.  Then the strategic path is to try to get to the sweet spot faster and better than the competition.

The Positioning view is that winning long term comes from superior differentiation.  The only way to achieve superior differentiation is by making tough choices about trade-offs.  In other words, the only way to get a sustainable edge is by freeing up resources due to minimizing the factors one trades away in order to double-down with the higher level of resources needed to create superiority at point of differentiation.  And the only way to know which trade-offs are the right ones to make is by predetermining the position one wants to own—where the superior differentiation is to occur.

With the positioning point of view, the key role of the strategist is to help determine which position provides the best chance for success for your particular company/brand and then help the company make the right trade-offs on a near-term basis in order to achieve and reinforce that position.

 

WHY I PREFER THE POSITIONING VIEW
I lean more towards the positioning point of view, and here is why:

1) Getting the Customer’s Attention is Tough

The world is cluttered with information and distractions.  It is hard to compete with all of that to get the customer’s attention.  By emphasizing a position over the long-run, I believe you not only have a better shot at getting the customer’s attention, but getting the customer’s business. 

When you own a position, a consumer knows where to slot you in their mind.  They associate your brand with a word, like “energetic”, “trendy”, “durable”, “easy-to-use”, “long-lasting”, etc.  This makes your brand easier to remember and easier to understand.  There’s too much clutter and demand on people’s time to expect them to figure it all out if it isn’t easy.  They have more important concerns.

Positions can also give your brand a personality.  And this is important, because people tend to purchase the brands which have a personality most similar to their own (or the one they aspire to). 

If you ignore positioning and just move around from sweet spot to sweet spot, you confuse the customer.  They are not sure what you stand for or why they should prefer you over the alternatives.  And when customers get confused, they tend to forget you.  That is not the way to build a strong and loyal following.

2) It’s Easier to Win in Uncontested Space

If you are are chasing after the sweet spot in the marketplace, there is a good chance that a great many others will also be chasing after that same sweet spot.  It becomes quite a competitive battleground.  And as we all know, markets eventually consolidate to only a small handful of winners.  Most of the challengers become short-lived failures.  Why pursue an approach where the odds of success are so small?

By contrast, positioning looks for ways to differentiate.    Rather than chasing the same spot as everyone else, it sets itself apart.  As I say in my book Eight Questions, a good position is desirable, sizeable, ownable, preferable, achievable, believable, understandable, and profitable.  One of the keys is ownability—a position which nobody else owns.  It belongs to you.  It is your word or personality.

When you own a unique position, it is like competing in uncontested space.  Everything is easier.  You can focus on making money instead of fighting hoards of competitors.  Long-term ownership of a position requires that focus on trade-offs that comes from a positioning perspective.

Why battle everyone else for the same sweet spot when there is the uncontested alternative?

3) It’s Difficult to Win a Battle When You Bring No Advantage

Because the emergent view downplays creating unique advantages via focused trade-offs, it doesn’t bring much to the battle.  All you can hope for is to be a little faster and a little better than all the others trying to do the same thing.  And even if you can attain this, it tends to be a very fleeting and short-lived phenomenon.  Someone else will likely be a little faster or a little better with the next iteration.   As a result, the emergent approach tends to put you in one of the most competitive places while providing very little reason for why you should have an advantage over any of those competitors.  Just trying to work harder than everyone else is not a very bankable strategy for the long haul.

By contrast, positioning tends to put you in a less competitive spot with more tools for winning the battle.  Trade-offs create business models with inherent advantages at the point of differentiation.  This makes it harder for others (without that same model) to match you at that point of differentiation.  This increases your chances of winning.

4) Profits Come From Efficiency, Not Bribery

If you have no inherent advantages to bring to the battle, then you have to resort to what I refer to as “bribery.”  My definition of bribery is creating inducements to get customers to prefer you when you have no natural advantage.  This would be things like significant price cuts or adding extra goodies to sweeten the deal.

There are two main problems with this type of bribery.  First, it is easily copied.  The advantage is fleeting because the copiers negate the advantage.  You end up in a price war.  This leads to the second problem—bribery significantly reduces profitability.  It transfers the advantage to the buyer rather than the seller.

By contrast, positioning gets a company focused on perfecting numerous trade-offs moving in a similar direction within a business model.  This consistency improves the efficiency of the business model.  And as the model becomes more efficient, two things happen.  First, you get even stronger at your point of differentiation, so you have a greater natural advantage.  Hence, there is less need to resort to bribery.  Second, the efficiency and the trade-offs provide more cash to apply to any price war.  However, if your position is strong enough, you can probably get way with having a small price premium (people will pay more is the preference is strong enough).

Example:  Microsoft Vs. Apple

Although you can find good and bad examples for each approach, I am going to use Microsoft and Apple to illustrate why I prefer the positioning approach.

Microsoft has used more of an emergent approach over the years.  When they see a particular space get “hot,” they jump to try to become a part of it.  Examples:  When AOL and Netscape were hot, Microsoft jumped in with MSN.  When game players were hot, they jumped in with the X Box.  When iPod-like devices were hot, they jumped in with Zune.  They’ve dabbled in all sorts of other non-computer computing devices over the years.  When search got hot, they invented Bing.  And now that the cloud is hot, they are putting their effort there.

In the process, Microsoft hasn’t built up any strong position.  They haven’t created much of any natural advantages.  They haven’t made consistent trade-offs.  And for the most part, they haven’t created many winners.  About the only advantage they brought to the game was deeper pockets, due to their cash flow from Windows and their business-oriented software.

The sad part is that while they were chasing sweet spots, Microsoft did not meaningfully enhance their original strengths in business software.  With the cloud, that business could be at serious risk, as people stop buying software and use competing cloud services. 

 
By contrast, Apple stayed on a narrower path, thanks to positioning.  They knew what position they wanted to hold—cool, elegent devices combined with proprietary software and services which were easy to use and worked seamlessly.  Apple made the necessary trade-offs in their culture and investments and business model to accentuate this position.   This gave Apple a natural advantage and customer loyalty strong enough to allow them to charge premium prices and still win.

Microsoft has lost market value while Apple has soared to become the highest valued public company.

 

SUMMARY
The strategic planning discipline has developed two different schools of thought on what strategy should be.  These are the positioning school and the emergent school.  I prefer the positioning school, because:

1)      Getting the Customer’s Attention is Tough Without A Position

2)      It’s Easier to Win in Uncontested Space (Which is more likely to occur with a good position).

3)      It’s Difficult to Win a Battle When You Bring No Meaningful Advantage (Which often happens with an emergent approach).

4)      Profits Come From Efficiency, Not Bribery (Positions tend to lead to efficiency, emergent tends to lead to bribes).

 

FINAL THOUGHTS
Although I prefer the positioning point of view, the emergent perspective is not without some merit.  It makes many good points.  In the next blog, I will talk about how to incorporate some of the emergent contributions into a positioning framework.

Strategic Planning Analogy #413: Should Strategists be Certified?

THE STORY
What if someone in the Middle Ages had decided that, henceforth, all artists would have to be certified? Under this scenario, only certified artists would be allowed to create art, and the art must be produced exactly in accordance with the accepted style and process found in the Middle Ages.

If this had happened, there would have been no artistic reformation and no modern art. In painting, there would be no Degas, no Monet, no Chagall, no Picasso, and so on. New media and new styles would have been banned—no photographic or digital art. The only music would be traditional classical music. No Rock and Roll, not even creative “classical” works by the likes of Stravinsky. Books would have to be hand written. There wouldn’t be much use for all those cool Apple products, because there couldn’t be much of any digital content. Not allowed, because it wasn’t certified.

Under this certification scenario, there would be a lot less artistic chaos…and a lot fewer artistic experiments gone bad. But think of all the great creativity which would be lost. It’s not a very good trade off.

THE ANALOGY
Certification may be a good thing for accountants, but it’s not a very good idea for artists. And I don’t think it’s a very good idea for strategists, either.

From time to time, someone comes up with the idea of trying to certify strategic planning. I understand the motivation of wanting to eliminate bad strategic planning through certification. But certification implies that it is easy to identify what good strategic planning looks like and to codify a single way to do it for all situations.

That’s like saying that it is easy to identify what good art looks like and codify it, and freeze it for all situations. The quality of art is not based on a particular certifiable technique that can be codified. No, the quality of art is based on how the work of art impacts the emotions of the audience (something that cannot be codified). Similarly, the quality of a good strategic plan is not based on the technique, but how well the strategy is received in the marketplace.

THE PRINCIPLE
There are three reasons why I believe that certification of strategic planning is a bad idea.

Reason #1: There is No Agreement on the Proper Approach to Strategic Planning
There are many different schools of thought on how to do strategy. In the book Strategy Safari by Mintzberg,Ahlstrand, and Lampel, the authors list 10 distinctively different schools of thought on strategy. These are not just small variations on a common theme. No, some of these approaches tend towards being exact opposites of each other. The approaches come from such wildly different perspectives that it sounds like they are all living on different planets.

For example, there are those in the positioning/deterministic camp which is very much a top-down approach. The idea is to first choose a position and then let the tactics follow by default. On the other extreme is the emergent approach where you look for tactical openings which then boil up into a position by default. This is a bottom’s up approach. I talked more about these approaches in an earlier blog. These approaches are so radically opposite that it would be difficult to certify both as correct, for to do one approach is to violate the principles of the other.

Depending on who is doing the certification, there will probably be a bias towards a small subset of the ten approaches (and a discounting of the rest). Otherwise, there would be no guiding principles to certify against. But which ones would you choose?

Strategic Safari also shows that each school of thought on its own has weaknesses. There is no one single best way. Good strategic planning should borrow from them all. This is starting to sound more like an art than a science. Artists are okay with lots of schools of thought. They see no reason to narrow the field to one way of doing things. And that’s why you cannot certify artists.

Can you imagine if accounting had all of these major variations in thought? How would you certify someone as a CPA if the profession had no agreed upon philosophy or approach? No, the CPA works, because there is enough unity in the profession to point to an agreed upon way to get things done. That does not exist in strategic planning, so you cannot apply what works in accounting to strategic planning.

The book Strategic Safari is dedicated to those "who are more interested in open fields than closed cages." Certification tends to close the cage, which is a mistake.

Reason #2: The Best Approach Varies Based on Circumstances
Another problem with certification is the tendency to standardize approaches—a sort of one-size-fits-all prescription. My experience, however, has taught me that different companies can have extremely different strategic needs. As a result, they require extremely different approaches.

For example, let’s consider two different firms. One is in a mature, capital intensive industry with high barriers to entry and exit. The other is a start-up in a rapidly growing new field without barriers to entry or exit. The situations are so different that the strategic concerns would be very different. Therefore, the optimal approach would probably be very different (I spoke about this in more detail in an earlier blog).

For example, the mature company should probably be most concerned with two strategic issues: optimizing the productivity of the core business and watching for activities on the fringe which would threaten the entire core industry. By contrast, the start-up should probably be most concerned with establishing a position, finding funding, and figuring out how to survive the oncoming industry consolidation.

The strategic planning process for the first firm would likely be more regimented and financially oriented. The process for the second firm would be more free flowing and perhaps more marketing oriented.

This isn’t a case of one approach being right and one being wrong. It is a case of which approach is more appropriate for the situation at hand.

There’s a reason why there is a different certification for doctors of humans and doctors of animals. Their patients are too different to make one process apply to both. We have a similar level of differences in the variety of business patients.

Reason #3: Strategic Success is Based on Differentiation, Not Conformity
One of the goals in certification is to create greater conformity in the practice of the profession. Normally, conformity for a profession sounds pretty good. After all, rogue accountants can get you into a lot of trouble. However, we have already seen that strategists cannot agree on what to conform to. Worse yet, conformity itself might be a disadvantage for strategists.

Think about those artists again. If I create one unique painting, it may be highly valuable. However, if you have a thousand artists are all forced to make copies of that painting, you render all those paintings as practically worthless. A great deal of the value in art is the very fact that each piece is unique. Mass production diminishes the value. Therefore, making all artists conform to painting the same item the same way destroys value rather than creating it.

A similar situation occurs in strategy. If you find a unique, differentiated approach to the market, you may create a lot of value. However, if thousands of others identically copy your position and approach to the market, the value of being in that position plummets.

Strategy thrives on differentiation, not conformity. It is difficult for each company to find its unique position if they are all using an identical approach to strategic planning. Conformity in approach tends to limit outcomes, not increase them.

Strategists like Gary Hamel look for strategic success by destroying conventional wisdom rather than by conforming to it. Almost every great leap forward in business has come by those who rewrite the rules. I suppose you could write rules to standardize an approach for how to destroy standardized approaches so that you can re-write the rules, but I think it sort of misses the point of where one should focus their energies.

SUMMARY
Although those who want create a certification process for strategic planning have good intentions, I don’t think certification of strategists is a good idea. The problems with certification of strategists are that:

a. There is no agreement in the industry as to what is the right way to do strategy.
b. The right strategic approach varies significantly between companies.
c. Conformity tends to hurt, rather than improve, strategic outcomes.

FINAL THOUGHTS
Even if it is impossible to certify a strategic planning process, could one perhaps certify a toolkit of strategic planning tools? Maybe, but consider this…great art depends more on the caliber of the artist holding the tool than on the quality of the tool itself. Willam McKnight, former head of 3M used to say, “Hire good people and them leave them alone.” To paraphrase this quote, perhaps we could say, “Hire good strategists and let them use their own approach to strategy.”

Strategic Planning Analogy #309: In the Middle

THE STORY
Once upon a time, two families were planning their vacations. The Smith family really got into the vacation planning mode. They planned out all of their vacations for the next 10 years at the same time. They planned out, down to the minute, where they would be and what they would be doing for the entirety of all of those vacations. Then they started making the arrangements so that they would be prepared to do everything on that 10 year vacation list.

The Jones family took a less aggressive approach to planning their vacation. They knew they wanted to spend time on a warm beach this year, so they decided to just start wandering south. They figured that if you keep heading south, eventually you will find a warm beach.

Well, even though the Smith family put a lot of time into planning their vacations, they turned out to be a disaster. Over the course of 10 years, a lot of things happened that disrupted those carefully crafted vacations. First, Mr. Smith was not always able to get away from work every year precisely when the vacation was planned. Second, many of the amusements and attractions they wanted to see were no longer in existence years later when they planned to see them. Finally, some of the hotels they had arranged to stay at had been sold to other firms who did not recognized their reservations from so many years earlier. Because they had not kept up on adapting to these details, the vacations were awful.

The Jones family had a disastrous time as well. It turns out that it took a lot longer to find that warm beach than they thought. All that wandering wasted most of the vacation days. Second, once they got to the beach, they found out that all of the lodging had already been reserved. There was no place to stay at the beach. They had to stay many miles away from the beach in an ugly, dirty part of the city. And because so much time had been wasted wandering, they had to go home almost as soon as they had arrived. If only they had picked a particular destination in advance so they could have locked it up while there were still vacancies.

THE ANALOGY
In the field of strategic planning there tend to be two major schools of thought. One is the “positionist” school (as championed by people like Michael Porter) and the other is the “emergent” school (more in line with the thoughts of Henry Mintzberg).

Since we don’t have space to fully expound on the nuances of each position, I will briefly summarized the two schools using quotes from Walter Kiechel III from the Spring 2010 issue of Strategy+Business.

“A positionist…believes that you should conduct a rational analysis, decide on the competitive position you wish to occupy, develop a strategy to get there, then execute.”

“Fat chance, counter those of the emergent persuasion…You begin with the hand you’ve been dealt. You go from there…setting off in a general direction. You run into reality…, learn from your mistakes, make corrections and ‘execute like hell.’…In the process, your strategy emerges.”

In other words, positionists tend to believe that if you get the big picture right, the little details will take care of themselves. By contrast, the emergents believe that if you get the little details right, the big picture will take care of itself.

In our story about vacation planning, the Smith family were positionists and the Jones family were emergents. And in the end, both approaches lead to disaster.

The Smith family, as good positionists, found great destinations (i.e., positions) for their vacations. Unfortunately, they did not have as much control over the details as they had hoped, so the vacations did not turn out as planned.

The Jones family, as good emergents, chose a good general direction (towards warmth) and made the right adjustments to get in the direction of a warm beach. But because they did not plan out the big picture very well, by the time they reached the destination, all of the key spots had already been staked out by others (no rooms were available).

THE PRINCIPLE
The principle here is that either planning philosophy, when taken to an extreme, is not optimal. Strategic Planning should not be a battle between the extreme of Positionists versus the extreme of Emergents. Both extremes lead to disaster. The best path is somewhere in-between.

1. The Overall Flaw
The big problem with either extreme is that it assumes something will take care of itself. Positionist extremists assume the little things will take care of themselves (if you get the big picture right). Emergent extremists assume the big things will take care of themselves (if you are vigorous enough in executing the details of the moment). In reality, nothing takes care of itself. You have to worry about both the big picture and the small details. That is why the Smiths and the Joneses had lousy vacations.

2. The Emergent Extreme Flaws
In particular, the emergent extreme has two critical flaws. I call the first one “The Mosaic Flaw.” Imagine that you are building a giant mosaic—too big to see in its entirety while up-close working on it. As you are choosing each individual little tile to put into the mosaic, you choose the color and shape base on what looks right to you in that immediate area. Each little area looks beautiful to you. However, when you are done and are able to stand back far enough to see the entire design, you realize that the total picture is an entire mess. It doesn’t look like anything in particular. It has no intrinsic beauty as a whole. It must be thrown away.

This is what happens when emergent extremism takes place. The big picture does not magically come together. A pile of pretty tiles do not automatically make a pretty mosaic. The only way to create a beautiful large mosaic is to: a) first have a general master design and b) stand back every once in awhile to get an idea as to the major ramifications of your immediate efforts.

The second major flaw with the emergent mindset is what I call “The Leap Flaw.” All strategies and business models eventually fail. For example, analog strategies and business models have been replaced by digital strategies and models. Business models dependent on tight control of information (like traditional travel agents and newspapers) are having their business models replaced by more open, consumer driven internet models (like Expedia.com or Craigslist). If you stick with a particular strategy/business model long enough, you will eventually become obsolete.

Emergents tend to focus on making adjustments to the current model, to make it better, stronger, and more appropriate to the moment. This approach rarely leads to the great leaps necessary to jump from one model to an entirely different model. A better, but obsolete model is still obsolete. And that is where emergent extremism will lead you in the long run.

3. The Positionist Extreme Flaws
Positionists avoid the flaws of emergents. They keep track of the big mosaic picture and prepare for leaps to radically new models. However, their method in the extreme also has flaws. The first is what I call the “Ivory Tower Flaw.” This is the idea that strategy is mostly an academic exercise which can be played out in a tower far removed from where the daily decisions are being made. Emergents will be the first to tell you that if strategy is divorced from where the work gets done, then it won’t have any impact on how work gets done—so the strategy never happens.

The second flaw of position extremism is what I call “The Funding Flaw.” It takes a lot of time to get to the glorious long-term nirvana envisioned by the positionists. It usually takes a lot of early investment to get there as well. If you only focus on the glorious nirvana, you may not have in place enough near-term activities to fund the transition from here to there. You may go bankrupt before you have a chance to reach that huge pot of gold at the end of the rainbow.

4. Where Should I Be On the Continuum Between the Two Extremes
So, if both extremes are dangerous, where should I be on the continuum between the two? That depends upon your current situation. In particular, it depends on Industry Barriers and Life Cycle Stage.

Some industries have high barriers to entry and high barriers to exit. This tends to create relative stability to the big picture. Once you make it in, you are relatively protected. Therefore, you can worry less about the positioning and focus more in the direction of the emergents. GE has traditionally focused mostly on these types of industries, which helps explain why their planning approach appears to lean more towards emergence.

By contrast, industries with low barriers to entry and exit are more in flux. To survive the turmoil it is ever more important to stake out a strong position which stands out over the fray. Here, I believe the approach needs to drift closer to positionists. I think that one of the reasons Bob Nardelli failed when moving from GE to Home Depot was because he went from a more emergent environment at GE (just execute lots of cost cuts right now) to more of a positionist environment at Home Depot (invest in a position which wins with the customer). By being too emergent in the new environment, he was out of step in what was needed at Home Depot.

Life Cycle stage also impacts which approach to use. In the early incubation stage of an industry, nobody knows how the industry will evolve. Here, leaning more towards the emergent side of the continuum may be more valuable.

The rapid growth phase is probably most suitable for positionist leanings. This is when the race is being won to see who will be the leader when maturity comes. It is important at this point to stake out your leadership position and win the race to own it. No time to waste meandering and hoping for something to emerge.

Once maturity is met, the big picture becomes more stable. As we saw earlier, stability tends to favor a leaning towards emergence.

When an industry is entering decline, it is time to look for a leap to a new model. As we saw earlier, positionist leanings work best when it is time to make a leap.

SUMMARY
Since successful strategic planning needs to manage both the big picture and the small details, one should avoid the extremism leanings of positionists or emergents. The best place to locate on the continuum between the two can vary depending on things like industry barriers and lifestage. In other words, although we know the extremes are always wrong, there is no other place that is always right. You have to plan your planning approach, too.

FINAL THOUGHTS
Don’t try to keep up with the Joneses…or the Smiths. Both of these extremists will lead you astray.