Strategic Planning Analogy #505: Secrecy is Silly

THE STORY

One time I was doing some work for a client which I found very frustrating. I kept trying to give them the insight I thought they needed for their decision, but it seemed like my efforts were always a little bit off from what they were looking for.

It wasn’t until much later (after the project was over) that I found out what the problem was. My client had deceived me about what their true intentions were. They wanted to keep their true intent a secret, so they gave me instructions under false pretenses.

No wonder my insights were a bit off the mark. They were designed to meet the false pretense rather than the real objective.

THE ANALOGY

My client was not the only one who likes to keep secrets. Secrets can be found all over the business world. This secretive approach often finds its way into the world of strategy.

There seems to be this idea out there that if a strategy “gets out” and is made public, it ceases to be an effective strategy. Somehow, mere knowledge of the strategy takes away its competitive advantage.

The problem is that the true value of a strategy is in its execution. And if those executing the strategy are kept in the dark, they cannot execute it well. As we saw in the story, I could not effectively do my job when I was kept in the dark.

THE PRINCIPLE

The principle here is that strategies are most effective when they are well communicated, both inside and outside the organization. A secretive approach to strategy diminishes its effectiveness.

The Problems With Secrecy

There are quite a few reasons why keeping a strategy a secret is detrimental to its effectiveness.

1. If your employees do not fully comprehend the strategy, they will not be able to fully execute the strategy. Thousands of decisions are made all over the organization every day. Depending on how those decisions are made, they can move a company either closer to or further away from your desired strategic direction. If the strategic direction is not known all the way down the organization, it will only be random luck if their decisions move the company in the right direction. Remember that your REAL strategy is not what you put on a piece of paper, but what you actually do. So to get what you do to match what you put on the paper, you’d better make sure the doers know what is on that piece of paper.
2. When your employees know what the strategy is, then they can use their insights and initiatives to make the execution even better. By contrast, if just the top executives know the strategy, then the only way to get the strategy executed is by having the top executives order people to do specific actions designed to support the strategy while keeping the strategy behind the actions a secret. This only makes sense if you believe that:

1. All the great ideas are found only at the top of an organization; and
2. A top-down only control of the business like the old communist economies is the best way to go.

The bankruptcy of the old communist system should be proof enough that a top-down only secretive approach has many flaws. The alternative is to let the people at the bottom in on the secret and allow them to make contributions to the effort. Strategies are made much stronger when input comes from the collective intelligence of the entire organization working on a common known goal.

3. Strategies usually include a reason why certain consumers should prefer patronizing your brand over the alternatives. Why should these consumers flock to your brand if you keep your reason for preference a secret? You should be shouting your strategic benefit from the rooftops, so that there is no mistake as to why you should be preferred. And to make the claim believable, it helps to show why your strategic approach makes the claim a true differential advantage.

Take the insurance business, for example. If your strategy is based on low price and you get there by going direct and eliminating the independent insurance agent to save money, let the customer know. Conversely, if your strategy is based on best service, play up your strategic approach of having the best local independents working for you (something the price-oriented insurers eliminated).

Positioning is about owning a spot in the mind of the customer. You won’t own that position if you keep it a secret.

4. The stronger you cement your position and strategy with your customers and your employees, the harder it will be for the competition to take it away from you. In fact, if you make it clear to your competition what your strategy is and how strongly you will defend it, you can cause your competition to no longer want to fight in that space and instead take a differentiating strategy. For example, Walmart has made it clear they will fight to the death to defend their low price position, so most competitors stop trying to win price wars against Walmart and instead go a different route, which strengthens Walmart as the everyday low price leader.

The Faulty Logic Behind Secrecy

Some believe that if you let the competition know what your strategy is, then they can quickly copy it and take it away. That is why they want to keep it a secret. But this thinking is flawed, because there is a big difference between knowing what a strategy is and knowing how to best deliver it.

Great strategies are built upon great business models. And great business models are often very complex and very difficult to imitate.

For example, Southwest Airlines has done very well with its low price strategy. But if a competing airline merely copied Southwest Airline’s low prices, they would not be as successful as Southwest. Southwest’s strategy works because they have a unique and complex approach to their business model, including choice of airplanes, choice of airports, point-to-point routes, corporate culture, and so on. You need the full business model to make the strategy work. This is nearly impossible for an established competitor to convert to.

In another example, Wells Fargo has created success with a superbly executed plan to win via cross-selling.  Now it’s one thing to say “we will win via cross-selling.”  It’s another thing to have a sophisticated business plan designed specifically to optimize cross-selling.  As Wells Fargo CEO John Stumpf put it recently, “We could leave our strategic plan on an airplane and it wouldn’t matter.  It’s all about execution.” In other words, there is no reason to hide the “what” of Wells Fargo’s strategy from competition, because it would take them years and years to figure out the “how” behind the strategy, and by then you’d have made even further advances, so they never could catch up.

Here’s a little secret for you. If a competitor can immediately copy your strategy upon hearing it, then you really don’t have much of a strategy. A good strategy is based upon making a number of deliberate choices about how you operate. Trade-offs are made in certain areas so that you can better excel in other areas. These choices and trade-offs attempt to optimize against your unique strengths and weaknesses. The net result is a complex business model which is not easily copied due to its complexity and its unique suitability to your own situation.

We live in an era of transparency and openness. If secrecy is your only defense, then you are in trouble.

Remember, great strategies try to find a place where YOU can win, not where anyone can win. If anyone can supposedly win there, then nobody will win there, because nobody will have an advantage.

SUMMARY

When it comes to strategy, secrecy is a disadvantage. Strategic secrecy keeps your employees from doing their best, it hurts your ability to own your position with the consumer, and it weakens your ability to scare off a competitor from going head-to-head against you. Great strategies are built upon great business models, which are extremely difficult to imitate. As a result, even if competition knows your strategy, it doesn’t mean they know how to take it away from you. So don’t keep your strategy a secret.

FINAL THOUGHTS

If your strategy is nothing more than a hollow platitude, like “We will be the Best” or “We will be the Most Profitable” then I might consider keeping it a secret, because I would be too embarrassed to let others know how silly my so-called strategy is.

Strategic Planning Analogy #463: Where Secrets Aren’t Hidden

THE STORY
Back when I was in High School, I had a friend who wanted to date a girl.  Unfortunately, she did not want to date him.  She said that the only way she would meet with him would be if he came over to her house to have her teach a lesson from her religious organization.  Since that was the only way he was going to meet her, he said yes to those conditions.

Later, my friend had some misgivings about the conditions, so he talked me into joining the religious class with him at her house.  She gave us some religious books to look at and told us to read a particular page.  After we read the page, she asked us a question about the material.  I immediately gave her an answer.  She was impressed by what I said so she asked me how I came to that conclusion.

My reply was that it was not my conclusion.  There was a big footnote at the bottom of the page which had the answer she was looking for in it.  So all I did was read the footnote verbatim.    

After that, she didn’t ask me any questions any more.

THE ANALOGY
Life is full of questions.  Business is no exception.  If you want a build a solid business strategy, you need to first answer a lot of questions regarding the environment, internal competencies, competition, consumers, assumptions, and so on. 

Sometimes, it can be difficult to find the answers to these questions.  However, at other times, the answers may be right in front of us, like that footnote in that religious book.  All we need to do is know where to look (like in the footnotes section) and there it is, staring us in the face.

One of the hardest bits of information to find can be the future strategic intent of key outside stakeholders and competitors.  It is usually in their best interest to keep that information a secret from you.  After all, if you knew their strategic intent, you could use that information against them.  They prefer the element of surprise to work in their favor, so they hide their strategic intent.

This blog will show where some of that supposedly hidden intent is actually out in plain sight, like that footnote.

THE PRINCIPLE
The principle here is that even though competitors may not want to tell you their strategic intent, they are often obligated to tell others of that intent.  For example, they may need to tell their intents to a lender or the SEC or a zoning commission.  All you need to do is look at what they tell the others and the intent can be as obvious as that footnote in the story.  We will talk about several of these places.  

1) Jobs

If a company is planning to move in a new direction, that often requires an infrastructure or skill-set not currently in the company.  It may also require a restructuring of the business (which also may apply if a company is abandoning an area).

As it turns out, these types of changes often lead to new job titles and new hires.  So if you follow what types of people are being hired and how job titles are changing, you can find out what type of work and what type of organization is being developed.  And that will tell you the direction of the strategy.

I’ve read job descriptions where the whole new strategic intent is pretty much laid out in full.  Or the job description may say that the company is planning to enter the “such-and-such” business and is looking for people with expertise in that area.  Or a press release about job promotions may explain the strategic basis behind the reorganization.   Facts they want to hide from you are broadcast to perfect strangers through job boards, press releases and other job-related material.     

So where can you find this data?  Job listing aggregation sites like indeed.com are very valuable.  Search on a company and/or a job title and you can find all the relevant job listings.  The Signal feature of Linked In (look under the header for News) and various Twitter search options can help you track early hiring searches sent out via messages like Twitter.  Just search on the word “hiring” and all sorts of interesting things show up.

And of course, you can look at a particular company’s web site.  Two places of note are useful—the career page and the press release page (to read about promotions and reorganizations).

2) 10 Ks

Public companies are obligated by governmental regulatory agencies to report on key aspects of their business.   These documents need to be filed and can typically be accessed by the public.  The key information might not be at the top in the headlines, but if you look at the interior pages and footnotes, a lot of secrets are disclosed.  In the US, the key documents filed with the SEC (like 10Ks) can be found at www.sec.gov/edgar/searchedgar/companysearch.html.

For example, no company wants to later be cited for not sufficiently explaining all the risks to their business in the business risks portion of the document.  Therefore, they tend to go overboard and overstate risks.  These overstatements can allude to business risks of future strategic intents not otherwise discussed.  A great example of using a company’s filing to discover strategic intent can be found here, where the example of Microsoft is used.

3) In-House Documents

Some companies go to great lengths to keep secrets out of documents going out to the world.  However, they can often be less diligent in documents meant for internal employees.  And guess what?  A lot of company web sites have links to internal newsletters and other such documents.  And anyone can look at them.

By the way, sometimes it is difficult to discover the internal conventions for how company emails are assigned.  However, you can often find out what these conventions are in these in-house documents.

4) Employee Rants

Employees often say more than they should, especially if they are angry.  And some of them put these thoughts on the internet.  There are lots of places where this can be found.  If you can join a particular company employee group on Linked In, you can catch some of this gossip.  Or the Yahoo company message boards in the finance section often have insider comments from employees.  Just type in the company symbol and look for its message board.  Or go to Google and type in a company name followed by the word “sucks.”  Most major firms have at least one site devoted to rantings which can usually be found this way.  Or you can search on company comments on Twitter. 

I know of one high-ranking officer in a company who lost his job because he said too much on the Yahoo message board.

The Jigsaw Puzzle

Many times, press releases, interviews and some of the other sources mentioned above will give some hints about strategy, but not provide a complete picture.  They are like a single piece of a jigsaw puzzle—interesting but not enough to understand what the whole picture is about.  However, if you collect enough of this information from a variety of sources, you can end up with handfuls of jigsaw puzzle pieces.  They may not be all the pieces to the puzzle, but enough to know what the complete picture would look like.

So consolidate your individual pieces and look at them together.

SUMMARY
Just because a company wants to keeps secrets doesn’t mean that the information cannot be found.  If you know where to look, a lot of those “secrets” are hidden in plain sight.   So look for them.

FINAL THOUGHTS
For the truly lazy, there are companies that will do the looking for you.  You really have no excuse.