Strategic Planning Analogy #517: Dirty Rice

THE STORY
Today I made myself a batch of Dirty Rice for lunch. As I was eating it, I pondered the irony of it all. Dirty Rice was originally developed in New Orleans as a way for impoverished people and struggling restaurants to stretch their food. The idea was to take the scrapings of leftover bits from the pots and pans of the prior meals and stir it into rice. Suddenly you had a meal made out of food scraps that would have normally been thrown away.

Yet I made my Dirty Rice out of fresh ingredients. Rather than being made out of leftovers, my fresh dirty rice created leftovers.

This seems to happen a lot in cooking. Foods originally created to help struggling people survive somehow eventually become gourmet food for the rich.

For example, the French are known for their gourmet cooking using great sauces. The origin, however, came out of poverty. At one time, there were large shortages of food in France. To make the meager portions stretch to feed an entire family, they were covered in sauces. The sauces made a little food look like a lot of food. Now, people who can afford as much food as they want pay premium prices at French restaurants to get food based on sauces designed to stretch food for the poor.

In many warm climates, the gourmet food tends to be rather spicy. This was because poor people in hot climates had a difficult time preserving their foods. The heat would make the food start to smell rancid. So to cover up the bad smell, they would cover the food with hot spices. Today, one of the top gourmet choices in the UK is spicy food from India. The climate and food preservation in the UK certainly does not require the spicy cover-up, but they love it nevertheless.

I suppose that someday in the future the microwave will be made obsolete by newer technology. Yet, I’ll bet there will be gourmet restaurants in the future specializing in the obsolete art of microwave cooking. Upscale microwave restaurants will be seen as reviving a lost art in gourmet cooking.

THE ANALOGY
There is usually a reason why certain products, traditions and processes exist. Dirty Rice comes out of a tradition of stretching kitchen scraps. French sauces come out a tradition of making meager portions large enough to feed a family. Spicy foods come out of a tradition of covering up rancid smells and tastes.

Over time, many of those reasons for existence go away. Improved economies, food production, food preservation and other factors have made the original need for dirty rice, French sauces and spicy foods no longer as necessary. Yet the traditions live on. Ironically, the original need for these products (poverty) is not the driving force anymore. They became gourmet products for the rich of the world.

Similarly, businesses are filled with lots of products, processes and traditions which are no longer essential. Sure, there were good reasons for these products, processes and traditions when they were first initiated. But times change. The reasons for continuing down these traditional paths may no longer exist.

Just as silly as it was for me to use expensive fresh ingredients to make a recipe designed to use up cheap table scraps, it is silly for companies to continue old so-called “cost-cutting” practices which over time have become inefficient and expensive. It’s time to re-think those traditions.

THE PRINCIPLE
The principle here is that change impacts relevancy. Products and processes which were highly relevant and useful at one point in time usually become obsolete as times change. We may continue the practices of the past with no understanding of what caused those practices. They become part of the fabric of “how things get done” without being questioned.

Yet, if we questioned these practices, we might discover that change has rendered them to be counterproductive to success. New and superior approaches may now exist. Just because something was the right thing to do in the past does not mean it should be done today. One of the keys to strategic success is knowing when to abandon the past to embrace the future. This includes a look at internal processes and structures.

Different Economy

Consider the fact that the world has largely moved from a production-based economy to a knowledge-based economy. Yet many knowledge-based companies are still using internal processes and structures designed during the production era.

Are those processes still relevant? Are there new processes and structures more suitable to a knowledge-based business? To use the analogy, are we trying to serve the rich with food originally designed for the poor? When is the last time you challenged the way things get done to see if they are best suited for a knowledge-based era?

For example, production-based businesses tend to centralize more power at the top, whereas knowledge-based businesses have often found value in pushing power far lower in the organization. This is just one of many assumptions to look at in how things get done.

Different Technology

Back when data was scarce and communication difficult, companies developed large infrastructures of middle-management. Their primary role was to gather information and communicate it to the proper people. At the time, middle-management was the most efficient way to do this.

Now, we have amazing new technologies to gather data and communicate it. Smartphones and tablets are more efficient ways to do what middle management used to do. Is middle management even relevant anymore? Are traditional in-person meetings still relevant? Are traditional offices still relevant? When is the last time you challenged tradition to see if new technology has rendered that process obsolete?

New Visionaries

Fortunately, there are people out their helping us answer these questions. One that comes to mind is Gary Hamel. He is part of an organization called The MIX, which stands for Management Innovation eXchange. This organization tries to tap into the business world’s knowledge base to find out what internal processes and structures are best for the changing business environment.

And then there are programs like six-sigma, lean, and a host of innovation tools to help companies get rid of obsolete processes and become more relevant for the times.

There are also plenty of leading-edge companies out there trying unconventional approaches. They are worthy of examination for ideas.

SUMMARY
One of the major roles of strategic planning is to help companies become relevant in an ever-changing world. Often, that focus is primarily external—deciding who are the relevant consumers to target and what innovative, new product/service should be offered. Yet, the external adaption to change is only part of the battle. There are also internal considerations. We need to make should that our internal processes and structures are also relevant in the changing world. Do we have the right organizational structure? Do we have the right internal work rules? Is power located in the right places? Is modern technology being optimized? How should people be compensated?

Getting the internals right may give you more of a competitive edge than getting the externals right. They are worthy of serious concern as part of your strategic planning process.

FINAL THOUGHTS
Next time you eat in a fancy gourmet restaurant, remember the irony that the food eaten by the rich often was designed by those in poverty. Use it as a reminder to look at your internal processes, to see if they are equally out of touch with their original intent. Then change your processes to get them relevant to the future.

Strategic Planning Analogy #376: Dry Wells

THE STORY
Imagine two people digging water wells. Bob takes a very sophisticated approach to the problem. First, Bob brings together a team of experts in the latest advances in drilling. They design an elaborate, but efficient drilling methodology with all sorts of high-tech tools. While the well is being dug, Bob calls in a team of experts in water pumping. They design an elaborate, but efficient system of pumps using the latest in pumping technology. Finally, Bob and his team design a complex, but efficient series of pipes in order to get the water to its intended destination. It took a lot of planning, but in the end, Bob was convinced that this was the best water delivery system in the country.

Sanjay took a different approach to the problem. Sanjay dug his well with nothing more than a little back-hoe and a simple shovel. He got the water out of the well using a bucket tied to a rope. Sanjay got the water to the customers by pouring the water out of the bucket into a small tank truck, which would drive the water to the final destination.

So who was more successful with their well?

It seems that Bob was so busy planning his water distribution system that he didn’t have time to properly locate his well. All those pipes, all those pumps, and all that fancy digging lead to a dry hole. There was no water anywhere near Bob’s well. It was a worthless enterprise.

Sanjay, on the other hand, made sure that he did his simple digging over a large body of fresh, clean water. That was where he focused his effort. Sanjay may not have had the most sophisticated system to get that water distributed, but at least he had water to offer his customers. Since he was the only one around who had discovered the water, Sanjay had a thriving business.

THE ANALOGY
Bob was great at process. He had a great process for planning his water distribution system. He built a great process for delivering water. Unfortunately, Bob didn’t have any water to distribute. It was all for nothing.

Sanjay, on the other hand, was less concerned with having the right process. Instead, his focus was on being in the right place (on top of the only source of water). As a result, Sanjay was able to satisfy the needs of his thirsty customers, even if his process was less than ideal.

Every day, businesses need to make trade-offs on how they balance their time between a focus on process and a focus on place (also known as position). As we can see from the story, great process is worthless if the process is being built around a worthless place. Conversely, if your company is positioned in the right place (on top of what is desired), you can do well even if your process is less than ideal.

Therefore, as strategists, we need to make sure that sufficient focus is placed on being in the right place. Otherwise, we could be wasting a lot of time.

THE PRINCIPLE
The principle here has to do with the primacy of position. In prior blogs, I have talked about the three main components of great strategy:

1. A Great Position – A Place Where You Can Win.

2. An Energetic Pursuit – Winning the Race to Own that Great Position and Defend it from Competition. (I speak more about pursuit in the second chapter of my new book “8 Questions,” as well as here.)

3. An Eye on Productivity – Optimizing the Wealth Available due to Owning a Great Position.

All three—positioning, pursuit and productivity—are vital elements to success. None can be ignored. However, of the three, positioning is the most important.

In the story, Bob had great pursuit. He quickly amassed great resources to create a great water distribution system. Unfortunately, he was pursuing a dry hole, so the pursuit was worthless. Bob also used experts to ensure that his system was highly efficient—a focus on productivity. However, even the most productive water system is worthless if there is no water for the system.

Sanjay started by making sure he got the position right (digging the well where the water was). That made all the difference.

Pursuit and Productivity are “Dependent” factors. Their success is highly dependent upon the desirability of the position being pursued and being made more productive. Therefore, the best way to optimize all three factors is to give the search for the right position primacy.

Statistical Support
This principle is supported by an article in the January 2011 edition of the McKinsey Quarterly. The article, entitled “Have You Tested Your Strategy Lately?,” brings up many ideas, but I want to focus on one particular point in the article. Referencing a book called “The Granularity of Growth,” by Baghai, Smit and Viguerie, the article states:

“80 percent of the variance in revenue growth is explained by choices about where to compete, according to research summarized in The Granularity of Growth, leaving only 20 percent explained by choices about how to compete. Unfortunately, this is the exact opposite of the allocation of time and effort in a typical strategy-development process. Companies should be shifting their attention greatly toward the “where” and should strive to outposition competitors by regularly reallocating resources as opportunities shift within and between segments.”

In other words, 80% of success (at least for revenue growth) comes from getting the position right. Only 20% is explained by pursuit and productivity. That is why Sanjay succeeded and Bob did not. Sanjay focused on the 80%; Bob did not.

If this is true, then our strategic planning should take this into account. Positioning needs to be more important than process. I mean this in two ways:

1) Strategic Planning Outcomes Are More Important Than Our Strategic Planning Processes.
It is easy to fall into the trap of trying to perfect an annual strategic planning process. Getting the calendar set up, designing great meetings and presentations, getting great forms to fill out, having great computer systems which link data to scorecards and budgets, and other such process issues can easily suck up all of our time and attention.

However, the ultimate goal is not to perfect the planning process. It is to optimize the business performance. Spend less time perfecting the process and more time making sure the company adequately grapples and comes to a conclusion on what determines 80% of success.

It’s okay if the planning process is a bit messy. In fact, that is probably a better way to find your position. I speak about that in more detail in an earlier blog, which can also be found as chapter 15 in the book “8 Questions.”

2) Strategy Implementation Processes are Less Important than Strategy Implementation Direction
Although there needs to be a methodology for implementing a strategy (implementation process), that process is fairly worthless if it is pointed in the wrong direction (towards a dry well). As we have seen, getting the right position is the critical first step. Unfortunately, the McKinsey article points out that most companies have their time priorities upside down. They spend 80% of their time on implementation (pursuit & productivity) and only 20% on positioning. Instead, we need to give the greatest priority to discovering the right position.

In the first chapter of “8 Questions,” (which can also be found here), I give a list of 8 questions which can help you get your position right. The McKinsey article referenced earlier also has some questions to consider. This is where the focus should be—on pressure-testing your position, so that you know you are in the right place. Otherwise, your efforts will be as misdirected as they were for Bob.

SUMMARY
Although positioning, pursuit and productivity are all important elements of strategy, proper positioning is the most critical. That is because if you choose the wrong position, your pursuit and productivity efforts will be wasted. No amount of pursuit and productivity can get water out of a dry well. First, spend the time to position yourself where the water is.

FINAL THOUGHTS
Just because positioning is the most important factor does not mean that you need to reposition yourself on a continual basis. Great positions have lasting qualities. If you emphasize them long enough, the position almost becomes synonymous with the brand (think of the association between Wal-Mart and low price). Frequent change will just confuse the customer and dilute the power of the position. That being said, modifications may be needed to ensure that you still own the position and the position is still relevant.

Strategic Planning Analogy #341: Trophy or Pet?

THE STORY
The Roy Rogers and Dale Evans Museum in Branson, Missouri closed back in 2009. The Museum honored the life of cowboy singer/actor Roy Rogers (and his wife Dale), who made movies and had a popular television show back in the middle of the 20th century.

With the museum closed, the contents of the museum were auctioned off on July 16th of this year. Two of the more interesting items auctioned off were Trigger and Bullet. Trigger was the palomino horse Roy used to ride on the show. The horse died back in 1965. Bullet was the German Sheppard that appeared on the show, and was also Roy’s family pet. When Trigger and Bullet died, Roy Rogers had them stuffed by a taxidermist, so that they could be remembered and put on display.

Rural cable television station RFD-TV purchased the stuffed horse Trigger and the stuffed dog Bullet at the auction. They paid $266,500 for Trigger and $35,000 for Bullet. Bullet and Trigger will now be proudly displayed at the new Omaha headquarters of RFD-TV.

THE ANALOGY
I don’t know about you, but I find the idea of stuffing one’s pet after it dies to be a little bit disturbing. Putting one’s dead pet on display like a trophy seems a bit unnatural and creepy to me.

Although this may seem like an odd thing to do to pets, it is not that uncommon for companies to do something similar with their strategies. Instead of caring for the strategy as a living document, they put it on display, like a dead, stuffed animal. Fancy strategy books are placed on the shelf like a trophy. They may even be commemorated with coffee cups, plaques, or T-shirts, with the company logo and the strategy theme emblazoned on them. The coffee cups and plaques also get displayed on the shelf like a trophy.

And there they sit…on display. They may be looked at and admired every once in awhile, but for all intents and purposes, the strategy is treated as if it were dead…a representation of a frozen moment in time past. To me, this is just as disturbing as a stuffed pet.

THE PRINCIPLE
The principle here is that strategies should be viewed as and cared for more like a living, breathing pet than as a lifeless trophy. In particular, there are three ways in which a pet approach is more appropriate than a trophy approach to strategy.

Principle #1: Trophies Come at the End; Getting a Pet is Just the Beginning
Trophies usually come at the end of an activity, to reward the conclusion of some endeavor. For example, after an athletic competition is over, the winner gets a trophy in honor of having won. It is a reminder of the success of prior event—a celebration of a job well done.

Getting a pet is just the opposite. The day you receive the pet is just the beginning of the activity. Now you have to start the work of feeding and caring for the animal. Rather than a celebration of a conclusion, getting a pet involves the promise of much work in the future. One time I got a pet from the humane shelter and they would not let me take home the pet until I promised I would spend appropriate time and money to properly care for it (I even had to sign a document attesting to that).

Getting a strategy should feel more like receiving a pet than receiving a trophy. True strategies are not end-points, but starting points. The primary purpose of a strategy is to help a company achieve a better future state. It is a roadmap to future actions, not a celebration of past activities.

Does your company treat strategy formulation more as an end (like a trophy) or as a beginning (like a pet)? Here are some clues. If people act as if creating a strategy is just a task be done—something to check off on a “to do” list—then they have a trophy attitude. If people say, “Boy, I’m really glad we finally got that done” when the strategy formulation is over, then they have a trophy attitude. If they see the strategy document as proof of task completion, then they have a trophy attitude.

By contrast, if people see the strategy as the first step on a long journey of future activity, then they have a pet attitude. If they see the strategy as a formal commitment and promise to take particular future actions, then they have a pet attitude.

Principle #2: Trophies Sit on a Shelf; Pets are a Part of Your Daily Life
There’s not a lot one can do with a trophy once you receive it. It just sits there like a dead, stuffed animal. You can put it on display and dust it off every so often, but that’s about it.

Living pets are totally different. They require daily care and attention. They need to be fed and exercised on a regular basis. If you have a dog, you soon find that feeding them, walking them, and letting them out to do their thing quickly becomes a regular part of your daily routine. But that’s not all. Pets also need to be checked to make sure they do not get sick. And if they do get sick, you have to provide medicine to cure them. And if you do not take care of your pets on a regular basis, the police can have you arrested for animal neglect and cruelty.

Strategies also need to become incorporated into your daily routine, just like a pet. If strategies do not impact how you act on a daily basis, then why do them? A strategy is like a roadmap. Just knowing where I want to go is not enough. I need to take actions on a daily basis which get me closer to my desired destination. Otherwise, I will never reach my destination.

If you do not regularly care for a pet, it will die. Similarly, if you neglect a strategy, it’s relevance will die. I’d love to see the police arrest executives for cruelty and neglect towards their strategy, just as they do for neglect and cruelty towards animals.

How often is the strategy considered when decisions are being made and actions are being taken at your company? Daily? Monthly? Quarterly? Never? Is consideration of the strategy integrated into the daily routine? Do people even see any relevance or connection between what they do and what the strategy implies? Is the strategy just left on the shelf to be admired like a trophy? Could your employees be arrested for strategy cruelty and neglect?

Principle #3: Trophies Don’t Change; Pets Do
Trophies are typically made out of strong, durable materials. You can put them on a shelf and they will stay there, unchanging, for a long, long time.

Pets, however, change over time. They grow up. They get sick. You need to detect these changes and then adapt to them in your actions. For example, as you see your pets getting older, you may need to change what you feed them. You may need to change the exercise routine.

Strategies are living documents which are to be acted out in a dynamic, changing environment. One needs to become aware of the changes that are taking place and adapt the strategy to the changes, just as you would adapt your actions with a living pet. Otherwise, your actions will be out of sync with your environment and the strategy will sub-optimize.

The original strategy document should not be viewed like a trophy, which always stays the same. It is a work in process. Rather than being like a hard, unchanging metal/wood/plastic trophy, think of your strategy as being more like soft clay. It has a definitive shape, but it can still be modified a bit as conditions change.

This is not to say that you should be changing your strategy as often as you change the sheets on your bed. We’re not talking about strategy abandonment, but strategy modification. Just as we keep the same pet for years and work with it through the changes, we keep the same strategy for years, and work with it through the changes.

Once a strategy formulation process is completed, how often does your company:

a) Scan the environment for changes; and
b) Adapt the strategies/actions to optimize in this changing environment.

Is your strategy etched in unalterable stone, or is it written with a pencil? Is it seen as a living document? Do you ever go back and modify it?

SUMMARY
Strategies should be viewed as being more like living pets than like dead trophies. Trophies celebrate an end, whereas strategies should be seen as a beginning. Trophies sit on a shelf, whereas strategies need to be integrated into your daily routine. Trophies do not change, whereas strategies need to adapt to change.

FINAL THOUGHTS
My wife and I recently went back to visit the college she and her brothers attended many decades ago. We went to the athletic building to look at the trophy case. There were trophies from back in the years when my wife and her brothers attended. There were photos next to the trophies showing the players on those teams, including a couple of photos of one of her brothers. The problem was that the photos were so old and faded that you could barely recognize the players.

That’s the problem with trophies. Over time, the source of that trophy fades away from memory. Time marches on, and if you stop planning for the future, you’ll stop getting new trophies.

Strategic Planning Analogy #320: Efficient Nothingness

THE STORY
Once upon a time, there was a man named Joe. Joe was the CFO of a large retail company. Joe wanted to make his retail company the most cost efficient retailer that ever existed. He made it his life mission.

Joe discovered that two of his company’s biggest costs were buying/managing inventory (having stuff to sell) and servicing customers (helping people buy the stuff). Therefore Joe eliminated these costs. First, he stopped buying inventory. That saved a ton of money on inventory. No more costs to acquire it, distribute it, or stock it. He didn’t need to invest in shelves or displays, either. Eventually, the stores became completely empty.

Then Joe eliminated the door to the store. “I never saw a positive return on investment directly related to doors, so why have them,” said Joe. Without doors, customers could not enter the empty stores. Joe loved it, because now he did not have to spend any money serving those customers.

About the only cost left at the store was rent. Therefore, Joe negotiated with the landlord to have rent set as a percent of sales. Now that sales were $0, his rent would also be $0. At last, Joe had achieved his dream—the most efficient store.

THE ANALOGY
A couple of big priorities in business these days are efficiency and innovation. Therefore, it is not surprising that there are many looking for efficiency in innovation.

Joe found a way to create efficiency in retailing. He got rid of all the management headaches and eliminated all the costs at the store. There was only one problem…he also eliminated every opportunity for that retailer to make a profit.

Efficiency is not the same thing as effectiveness. An efficient path to nowhere is not valuable. Getting to nothing faster and cheaper still leaves you with nothing. Joe had no costs, but also no profits.

The same is true when looking for efficiency in innovation. The ultimate goal is not efficiency…it is effectiveness. An efficient process for innovation that does not create great innovation is not very valuable.

THE PRINCIPLE
The principle here is to not confuse process with outcome. Yes, a process is essential, but it is only useful to the extent it creates the proper outcome. If greater efficiency does not improve the output, it hasn’t helped much, if at all. Sometimes greater efficiency can even destroy output, as we saw in the story.

Profitable retailing requires two things: stuff to sell and a way to sell it. Eliminate those two (for the sake of efficiency) and retailing has no longer has reason for existing. Similarly, innovation requires two things: a great idea and a way to bring it to market. Destroying these, in the name of efficiency, makes the innovation process worthless.

On April 19, 2010, CFO.com published an article about CFOs and efficiency. The article was reporting on a study conducted by The Boston Consulting Group regarding innovation. Not surprisingly, the study found that 85% of finance executives say innovation is an important part of their company’s strategy.

One of the most interesting parts of the study is that while 22% of finance executives say they are the biggest driving force for innovation at their company, only 3% of non-CFO’s see them that way.

Why the disconnect between CFOs and the rest of the executives? I believe it is due to confusion between process and outcome. CFOs are rarely responsible for the two key outcomes of innovation: Innovative Ideas and Bringing the Idea to Market. I doubt that most executives see the CFO as the “go-to” guy for a great innovative product idea or as the key player to bring a new, innovative product to market. How can you be the “diving force” of innovation if you do not do at least one of those two things?

Driving an empty semi-trailer does not make one a driving force (even if empty trailers get better fuel efficiency). The trailer needs to be full of innovation in order to make the trip worthwhile.

The CFO in the story was very proud of his efficiency actions, even though they destroyed the retailer’s profitability. In real life, CFOs need to make sure they do not fall into the same trap with regards to innovation.

Typical CFO innovation activity, like measuring the innovation process (from beginning to end) or helping control how much money flows to an innovation project, have their place—but this is not innovation! This is like the scorekeeper at an athletic event. Just because the person is keeping score accurately does not make them an athlete who is the driving force behind winning games.

I’ve read about executives taking pride in cutting lots of cost out of their innovation system. Well, nobody likes wasting money, but don’t get too proud of that fact if it is choking off future innovation.

True innovation, almost by definition, is going to be disruptive to the status quo. This applies not only to the status quo in the marketplace, but to the status quo of how things get done at your company. Most companies have a bias towards rejecting threats to the status quo. So if you really want innovation, focus on ways to fight this bias. That will be far more beneficial than efficiently monitoring a system biased against innovation.

The monitoring itself can be a detriment to innovation. Studies have shown that if a new innovative idea gets high visibility too quickly, it can choke it before it has a chance to take root. Non-monitored incubation time at the beginning can be a good thing.

Therefore, if you really want a great (rather than efficient) innovation process, I recommend the following.

1) Have access to innovative people
Great ideas usually come from those who are good at coming up with great ideas. You could have 100 people watch an apple fall from a tree, but it took a great thinker like Newton to find the notion of gravity in that observation. Even if these other people had better measurement tools when observing the apple, they still did not see the concept of gravity. Get access to people like Sir Isaac Newton, who find the innovation in common observation.

2) Have access to people comfortable with breaking the status quo
Not everyone is comfortable being the rebel who breaks the rules. Bringing innovation to market is hard enough by itself. Don’t make it even harder by putting it in the hands of non-rebels. I worked with a company once on an innovative new concept. The idea part worked great, but then it was handed over to a status-quo guy who was not a rebel by nature. The forces of the status quo took over and the innovation never saw the light of day.

It may not feel comfortable handing over the project to a rebel who likes breaking YOUR rules. You may not want them as your next door neighbor. But you do want them fighting your wars to get the innovative idea around the obstacles which can prevent success.

3) Empower the people in #1 and #2
Getting the right people is half the battle. The second half is empowering them so that they can actually do what they are good at. They need power. That power can take the form of freedom to think, access to funds, access to other resources in the company (knowledge, people, systems, etc.), the ability to make decisions, the ability to experiment (and sometimes fail).

There was an article in the June 2008 edition of the Harvard Business Review which looked at about 125,000 instances of strategy execution from over 1,000 companies. What they found was that the most successful implementation came from companies that got two things right: decision rights and information flow. In other words, if you want successful implementation

a) Give clear powers for decision-making and let everyone know who has them for each type of decision. Take the second-guessing, passing-the-buck, and bureaucratic red-tape out of the equation. (This provides the power to act without always looking over your shoulder and re-justifying everything all the time)

b) Let information (and the people who have it) flow freely throughout the organization so that everyone is acting based on the proper knowledge. Don’t horde knowledge; be generous with access. (This provides the power of access to the tools that will improve the intelligence of your actions).

These two factors were found to be far more important than getting the organizational chart right or getting the motivational incentives right.

4) Only after this, do you worry about measurements and efficiencies
We need policemen to catch the criminals, but we do not want to live under a police-state, where everyone is assumed guilty until proven otherwise. Innovation measurement and efficiency tools are similar. Use them to catch the really bad behavior (innovation criminals, or really bad concepts), but don’t create a police-state.

SUMMARY
Great outcomes are more important than efficient processes. In fact, you can make a process so efficient that it chokes the outcomes. If you want great innovation, it is more important to have innovative thinkers and operational rebels with access and power than it is to have efficient measuring processes.

FINAL THOUGHTS
I am not advocating that it is okay to use ANY means to achieve your ends. Engaging in illegal/immoral/unethical behavior is not the right path to innovation. The banking industry came up with a lot of innovative financial tricks recently which helped bring down a global economy. Some feel that the means to that innovation fell into the illegal/immoral/unethical realm. Bad means will eventually come out and you will pay the price.

Strategic Planning Analogy #264: An Efficient Waste of Time

THE STORY
Stephanie had an overweight dog. She went to the Veterinarian to get some advice on what to do about her dog’s weight problem.

The doctor said that what the dog needed was more exercise. He knew that there was a large park near where Stephanie lived, so he said, “You should take the dog for a few laps around the park every evening.”

Stephanie heeded the veterinarian’s advice and started walking her overweight dog a few laps around the park every evening. After awhile, Stephanie found this task to be very time-consuming and very boring. Stephanie said to herself, “I’m an expert in making things more efficient in the business world. I should be able to find a way to make this task more efficient as well.”

And so she did. To make the trek around the park faster and more efficient, Stephanie decided to put the dog in a car and drive her pet around the park a few times every evening. Not only was this faster, but the dog enjoyed it more. The dog loved sticking its head out the car window much more than walking.

Everything was perfect, except for the fact that the dog did not lose any weight.

THE ANALOGY
Stephanie found a way to make the process of going around the park more efficient. Driving was both faster and more enjoyable than walking. Unfortunately, her efficiency “improvement” totally missed the point. The purpose of the trip around the park was to get her dog to lose weight. By prioritizing “efficiency of task” over “purpose of task” Stephanie failed to achieve the intended goal.

What Stephanie really created was an efficient waste of time. She got around the park faster, but without meaning or purpose…and the dog was still overweight.

As silly as Stephanie’s efficiency solution was, it is not that different from what I have seen in occur in strategic planning. Strategic planning is a process, but it also needs to serve a purpose. If all you see is the process, then you become like Stephanie, who only saw going around the park as a process. As you try to make the process of strategy more efficient, you can lose sight of the intended purpose. The result is a highly efficient strategic planning process—one that is quick and painless—but utterly worthless in moving the company forward.

THE PRINCIPLE
The principle here is that the best strategy rarely comes from an efficient process. Forming strategies is messy work, and the process usually needs to be a bit messy as well. A little sweat and aggravation is needed to get the job done. Just as the dog could not lose weight in an efficient car, but only by slogging it out the slow way in a walk, great strategic solutions cannot be rushed, either. A slick, fast approach to planning can quickly become an efficient waste of time.

There was a discussion on Linked-in recently about all the neat little strategic planning tools one can use in a strategic planning process. Tools are great, but tools can make a royal mess if used improperly. For example, if you see a SWOT analysis (strengths, weaknesses, opportunities, threats) as just a list of blanks to fill in, then you can quickly devise a way to efficiently fill in the blanks. But you may end up with just a bunch of useless platitudes.

In general, top executives don’t like to spend a lot of time on strategy. They would rather dive into the “crisis of the day” and solve an immediate issue. They will encourage strategists to find “efficient” ways to do strategy, so that it takes up less time. You must fight this pressure and temptation.

Here are four reasons why Strategic Planning needs to be a slow and messy process.

1. Planning Needs to Break Down Preconceived Notions
Most great strategies reinvent the rules. They ignore the traditional way things have always been done and try something completely different. Conventional wisdom is thrown away and a new wisdom is invented. Strategist Gary Hamel puts a high priority on the need to break down preconceived notions about how business is supposed to work. You cannot invent the next new thing if your thinking holds too dear to the old rules.

It takes time to break down the old thinking patterns. You might hold so dear to a current business rule that you think it is the only way to get things done. By closing your mind in this way, you prevent yourself from even considering an alternative. For example, you may believe that:

a) All hospitals have to have an emergency room; or
b) Only governments can own and manage highway systems; or
c) Everything on the internet has to be free; or
d) Product development needs to be fully complete before introducing it to the public; or
e) Only a small niche of people are interested in organic.

There are people today who have defied conventional wisdom like this and are making money.

It can be a messy thing to get people to release their grip on tightly held notions. Letting go of the old and embracing the new takes time. If you short-change this process, you can have a company full of doubters who will not fully embrace your strategy. This will internally sabotage your ability to achieve your strategic goal.

2. Strategies Need to Challenge Current Power Bases
Many of the people in your organization have created a strong power base under the old rules of how things were done. Reinventing the rules can weaken or destroy that power base. Naturally, the ones with the power today will tend to resist a new approach which reduces their stature and influence.

Worse yet, if the only opportunity these people have to respond to this change is in a public planning forum, then they may take a strong public position of resistance which will make it difficult to back down later.

In these cases, there often need to be private moments, when challenges can be presented “off-the record” one-on-one to the ones who might be threatened. Negotiations can take place to help them find new bases of power. Extra time can be given to help them see the bigger picture…all away from the public eye, so that they can save face.

I worked with a company that was developing a new vision which threatened the power and influence of the old base business, where over 90% of the employees worked. Because the new vision was thrust at them quickly and publically, they felt trapped. As a result, they used their superiority of numbers of people to essentially do a coup. They took over the company and threw out all of the executives who were threatening the status quo.

If you skip the messy business of delicately transitioning power bases (because it is inefficient), you can end up with a mutiny rather than a strategy.

3. Eureka Moments Need Incubation Time and Diversions
In prior blogs (see Magic Eye and Genius Sleep), we have looked at some of scientific research behind the development of great ideas. In Magic Eye, we saw that eureka moments of great discovery almost never occur inside focused, efficient efforts at idea development. Instead, they tend to occur after laying aside these efficient processes for awhile and spending time at some seemingly worthless (or at least inefficient) diversion.

It could be spending time at some recreational activity (like sports), or entertainment activity (like watching a movie), or something as mundane as taking a shower. Regardless, the brain needs time to back off from heavy, efficient processing and drift a bit into a more daydream-like mode. Science found that the great insights come during this mental relaxation/diversion time after the “efficient” thinking process is done. Skip the relaxation/diversion time and you lose the great eureka moments.

In the Genius Sleep blog we found that the one most common characteristic between geniuses is that they tend to sleep a lot—often taking naps in the middle of the day. How’s that for a seemingly inefficient process?

This combination of alternating between efficient thinking time and random relaxation (or even sleep) time tends to generate the greatest strategic insights. It is a messy and time consuming process which by its very nature cannot be made efficient.

4. Strategies Need to Evolve and Adapt
New revolutionary ideas are rarely perfect right out of the box. They tend to get adapted and modified over time. That’s why so many firms now introduce beta versions to the public to gain more insight before the product is finalized. If the strategic planning process is only at the beginning of this journey, then you are missing the richness of applying a strategic approach to this adaptation. Instead, you may end up with random adaptation which ends up weakening and destroying the revolution rather than strengthening it through strategic coherence.

Since one loses some control over the process once it is released into the public, one needs a messy strategy process to interact with this more uncontrollable adaptation. Changes will be on the schedule of how the public wants to interact, not on some internal strategy calendar. Again, this cannot be rushed for the sake of efficiency.

SUMMARY
The ultimate goal of strategic planning is to find and execute a path to a more prosperous future. Strategic planning can use some tools and processes to help achieve this goal, but one must never lose sight of the ultimate objective. Perfecting the “process” of planning to be as quick and efficient as possible almost always leads to strategic failure—an efficient waste of time. It is the time consuming and messy approach which brings better results.

FINAL THOUGHTS
Disney is known for its creativity. Chris Heatherly, VP of Toys, Disney Consume Products, described their success in creativity this way: “Some people want to cut to the chase. We tried it, and it just doesn't work…You have to have some decompression time to be creative.” How much decompression time is in your planning process?

Strategic Planning Analogy #260: Are You Better Off?

THE STORY
Back in 1980, it was a close presidential contest between current president Jimmy Carter and former governor Ronald Reagan. Even just a few weeks before the election, there was not a clear leader.

It was hoped that some televised presidential debates would help people make a choice. Unfortunately, there was a split between how to handle third party candidate John Anderson. Reagan wanted Anderson in the debate; Carter did not. This argument caused them to miss deadlines for the debates.

Finally, with a little over a week before the election, Reagan wanted so badly to get in a debate that he caved in to all of Carter’s demands. So on October 28, 1980, Carter and Reagan debated in Cleveland, Ohio.

Ronald Reagan’s closing remarks at the debate were, "Are you better off now than you were four years ago? If so, I encourage you to vote for my opponent. If not, I urge you to vote for me."

Given the Iran hostage crisis, the weakening economy, and rising inflation, it appeared that most felt they were not better off than four years ago. As a result, immediately after the debate, public sentiment moved largely in favor of Ronald Reagan, and he won by a comfortable margin.

THE ANALOGY
Recently, there was a discussion on Linkedin about the sad state of strategic planning. During the current recession, it seems that strategic planners were often in the first wave of people let go. Not only that, recent unpredicted and unexpected events, like the housing slump, the debt crisis and the stock market slide had made people lose confidence that one can ever have much insight or influence over the future.

Finally, there was so much emphasis on near-term survival, that any talk of long-range planning seemed out of place in many companies. People were starting to believe that things change too fast and are too unstable to create any kind of meaningful long-range plan. The entire idea of strategic planning was starting to look out-of-date and useless.

Although I disagree with the conclusion, I can certainly understand the dilemma. To me, it goes back to the 1980 presidential debate. Business leaders were asking themselves a version of the question posed by Reagan: Is my company in 2009 better off now than it was several years ago?

The answer for most is “no.” Sales have plummeted. Profits have vaporized. Stock prices are down. Bankruptcies are up. By almost any measure, things are worse than before.

Now isn’t it the role of strategic planners to be the ones focused on improving the long-term prospects of the business? If the future is getting worse, then it would appear they are not doing their job.

Therefore, just like in the 1980 presidential election, companies are answering the question by throwing out the incumbents (the strategists) and are moving in a new direction.

THE PRINCIPLE
The principle here is that if strategists want any respect (and want to keep their jobs), they need a favorable response to that question: Is my company better off than before? Or to put it another way, is my company’s future any brighter because of the strategic planning efforts we have taken? If not, Reagan’s approach would say to kick out the strategists.

Granted, the current recession is so deep and so global that almost everyone is worse off, regardless of strategy. But has your strategy at least made you less worse off than your competition (are you gaining an edge on them)?

That has been the situation for the Ford Motor Company. Years earlier, it could see what was coming and built a strategy that acted early to get in front of the problem. They refinanced their debt when that was still relatively easy to do. They sold the weaker divisions when there was still a relatively healthy market for selling them. They got leaner and meaner in preparation for tougher times. As a result, Ford may not be having great times today, but they are gaining share and are better positioned than many of their competitors.

Now, it might seem obvious that strategists should measure themselves on how well they are helping to steer a company into a better future. Yet, when I look at what strategists get busy with, that does not always appear to be a priority. Here are some ways that strategists keep busy at tasks that are only tangentially related to creating better futures.

1) Scribe
Yes, it is important to get all the words and numbers written down. Things need to be quantified and clearly described. Accountability requires it. But if most of your time is spent just getting things written down and organized, you are not adding much value to the process. A stenographer or an administrative assistant can pretty much do that.

After a certain point, any improvement in the way words and numbers are written down will not improve the quality of a company’s future. And that point is fairly low on the quality spectrum. Instead, the place where quality time should be is on the ideas and activities behind what is written down. How much influence are you having on crafting the content of what is written? How much time is spent making sure business activities are bringing the content into reality? Don’t just blame the ops people for bad implementation of brilliant words. If you act as nothing more than a scribe, you should expect poor implementation.

2) Oracle
Yes, visionaries can be critical to success. And yes, one often needs to see into the future before one can optimize it. But if visioning is where you stop, then it is not very useful. Unimplemented ideas are like money hidden under a mattress. If it is never spent, then you live like a pauper, no matter how rich you are. You never benefit from it and may as well be poor for all the good the money did. Ebenezer Scrooge may have had money, but he did not have prosperity of life.

If you want a better future, then time must be spent in applying the insights of the oracle. Just being smart is not enough. In fact, studies have shown that B+ students make for better entrepreneurs than A students. B+ students tend to work harder in real life, while A+ students are too satisfied in just being smart and resting on idea-making that doesn’t go anywhere.

3) Activities Director
On the old Love Boat TV show, Julie was the activities director on the cruise ship. Her job was to make sure that there were lots of activities going on (on schedule with no problems) and that people were happy doing something. Sometimes we can get busy doing things like Julie. We spend so much time making sure the activities of the planning cycle go smoothly (the various discussion meetings, the filling out of paperwork, the approvals, the offsite planning meetings, the communication meetings, etc.) that we lose sight of why all that stuff is being done in the first place.

Perfect meetings do not always lead to perfect futures. I’d rather have a sloppy process that creates real substance than a flawless process that nobody treats seriously. True planning is not the process of managing the planning cycle. You can hire meeting coordinators for that. True planning is managing the quality of what comes out of the process.

Better Ways to Be Busy
If you want to have a meaningful part in creating a better future, focus your busyness on three things. First, help people get an accurate understanding of their true condition. Provide knowledge and insight that makes them smarter about what the situation is. Break down inaccurate biases. If your people have an unrealistic bias about what your condition is, then you will create a strategy that is inappropriate for true reality.

Second, control the debate. Make sure the tough questions are addressed and true out-of-the-box thinking is going on. Stretch the minds. Help people see the long-term consequences of near-term actions. Help people to see beyond the status quo. Help people envision alternatives.

Third, don’t hand off all responsibility once the ideas are on paper. Be active in making sure tasks get done. Monitor actions to make sure they stay on track. Keep people accountable. Make sure the long-term agenda does not get lost in the tyranny of the immediate fires which scream for attention. Scream back at them.

If you focus on these three tasks, you should get a better answer when people ask if the company’s future is better off because you were there.

SUMMARY
When strategists get a bad reputation, it is usually because leaders do not see significant value being added by strategists in the creation of a better future. Therefore, it is in your best interest to focus your limited time on the activities which are most critical to creating that better future. Don’t let the allure of “busyness” in lesser activities lure you into thinking your job is complete.

FINAL THOUGHTS
Ever notice any of those employees who have mastered the art of “looking busy” in order to avoid doing real work? You probably don’t have much respect for them. Remember that whenever you start feeling content in the busyness of being a scribe, oracle or activities director.

Strategy Takes A Holiday

THE STORY
Over the years, I’ve organized a number of off-site strategy sessions for top management. They tend to go something like this. First, the CEO tells you what time he or she has available, which is never enough time. Then you scramble to find a resort that is available for that time.

Next, you start carving out time for expected activities. For example, the executives always want time for an inspirational speaker as well as time for a golf outing (and maybe some special dinner event).

Then, if you want to have any discussions and get any feedback from all the executives invited, even if you put them into groups and limit their presentations to about 20 minutes apiece, you pretty much have used up an entire day.

So when you subtract out all of these activities, whatever time that’s left can be used for strategic pursuits (which is never enough). After the meeting is over, everyone goes home, and most of the attendees do not think much about strategy until next year’s outing.

THE ANALOGY
I’ve heard people say that they no longer believe in doing strategy, because they see no value in the process. When you probe a little deeper, I typically find out that these people equate “doing strategy” with the “process” of going to a resort for a strategic off-site session. They see these meetings as a waste of time, so they figure that doing strategy is a waste of time.

If the only strategic activity of a company is to have an annual outing at a resort, then I would agree that the “process” of strategy is flawed. As I tried to illustrate in the story, offsite meetings have a number of agendas which often have little to do directly with strategy. A few hours a year is not enough time to give strategy justice.

According to business strategists Gary Hamel and C.K. Prahalad, executives should spend about 30% of their time on strategic activities. In their research, they found that the typical executive spends only about 3% of his or her time on strategy. Without investing serious time in strategic thought throughout the year, strategy off-sites become little more than pep-rallies or worse, boondoggles.

Given that this is the Memorial Day holiday, I thought that it would be good to dispel the myth that good strategy is like going on an off-site holiday.

THE PRINCIPLE
Good strategy involves much more than just showing up at a resort. There are six essential elements to a good strategic process. They are:

1) Research
2) Option Formation
3) Option Selection
4) Resource Allocation
5) Rallying the Troops
6) Monitoring the Process

These are discussed briefly below.

1) Research
Good strategy is rooted in facts. This is not to imply that all the facts need to be in before making a decision, since strategic decisions can often move a company into uncharted territory. However, strategy is more than just wild guesses. Certain things can be known through research, and that research should be done before making strategic decisions.

For example, consumer trends can be tracked in order to get a better idea of where consumer needs are heading. You can find out what consumers think about you—what are you known for? The more you know about the environment and the more you know about your strengths and weaknesses, the better you can determine how to best fit your company into that environment.

All of that takes research…something that cannot be done at a resort.

2) Option Formation
Before one can decide the proper strategic path, one needs to first come up with some strategic options. After all, it’s hard to make the right choice if you have nothing to choose from.

Developing strategic options requires brainstorming around the knowledge gained from the research. Although a limited amount of brainstorming can take place at a resort, I believe that a better list of options can come from dedicating a larger block of time than afforded at an off-site event.

3) Option Selection
Even if one had the time at an off-site event to develop options, there would most likely not be enough time to do that AND choose which option is correct. To know which option is the correct path to choose requires more than just having a list of options. It requires further analysis of these options. One needs to assess the risks, perhaps do a bit of financial modeling. One may need to ponder what unintended consequences may arise from a strategic decision (for more on this topic, see the blog “The Chisholm Trail”).

Hence, even if you want to choose an option at the off-site, someone needs to prepare in advance some assessment of the options—the pros and the cons of each, base on analysis.

4) Resource Allocation
Choosing an option is not enough. One needs some idea of how to make the vision a reality. This requires an understanding of how to allocate your resources—how to spend the company’s time, its talent and its money. In other words, there needs to be some discussion on what work needs to get done, who’s going to do it, and what do they have to work with to get it done.

Given all of the politics and sensitivities related to these issues, these might not be the types of issues which work well in a large, public discussion. With strategy comes power…and some will see their power grow while others do not. Some hard choices need to be made, since there are typically not enough resources to go around. It may be better to do this type of decision-making in a more private, one-on-one environment, than in a large gathering at a resort.

5) Rallying the Troops
Once the first four topics have been covered, the fifth task is to communicate the vision to the organization and rally the troops around supporting the decision. Off-sites are actually rather good settings for this type of activity. You can control the environment at an off-site and get people focused on the vision without a lot of distraction. There are opportunities to motivate people to action through razzle-dazzle and powerful presentations.

Of course, if you skip the first four steps (which require substantial time prior to the event), there isn’t much to rally people behind.

6) Monitoring Progress
Once a strategy is set in motion, the task is still not over. One needs to monitor progress to ensure that:

a) Tasks are getting done properly, timely and within budget.
b) Tasks are leading to the proper outcome. If not, then what modifications are needed to get the strategy back on track?

Neither of these two points can be done at the off-site meeting. They can only be done later, after the strategy is set in motion.

SUMMARY
Strategic off-site sessions at a resort may be a useful (but not the most critical or most necessary) element in a larger strategic process. Without the entire process, however, these off-sites can become little more than “corporate vacations.” Leave the vacations to your personal time, such as the Memorial Day weekend.

FINAL THOUGHTS
Sometimes today, about the most sophisticated a strategic discussion gets is whether or not to sell out to privatization using money from a hedge fund. That type of discussion certainly does not require time at a resort. And I’m pretty sure the hedge fund won’t want you to spend a lot of money on time at resorts, either.