Strategic Planning Analogy #539: Great Players Make Lousy Coaches

THE STORY
Have you ever noticed that top athletes usually make for lousy coaches?

The reasoning behind this is simple. The great athletes have natural skill and abilities far above the norm for the sport. They are naturally good because they are naturally gifted. It all comes too naturally for them. They don’t even really have to think about it. They just naturally perform well.

As a result, top athletic performers have no real connection with the struggles of the average athlete. The top athletes never had those kind of struggles. They never had to think about how to overcome them.

As a result, the top athletes are relatively clueless as to how to coach the average player through all of this. Their coaching can sound a little silly to the average player when they say things like:

“Just hit the ball to where you want it to go, like I used to do.”

“Just run a little faster, like the speeds I used to go.”

“React faster to the action around you, like I did.”

“I don’t know how I did it. I just did. So you do it, too.”

That’s why average players usually make better coaches. They’ve had to struggle. They’ve had to think of ways to overcome the struggles. They’ve had to find ways to motivate themselves when times were tough. They’ve had to listen more closely to the teaching of their coaches. They’ve had to try a lot of different approaches to the game in order to find their edge.

The journey of the average player is usually a better learning ground for gaining the skills needed to be a coach. So don’t hire the superstar player to coach your team. Hire average.

THE ANALOGY
The CEO is sort of like the coach of a team. Sometimes when looking for the next CEO, we look for the replacement among the best performers in the company. Since they are such great performers, then they will be a great CEO, right?

But that’s like saying the best athlete will be the best coach. It is not necessarily true and is most likely a false assumption.

Therefore, we need to be very careful when choosing our business leaders. The pool of our best performers may not be the best place to look.

THE PRINCIPLE
The principle here is that different roles require different core competencies. Therefore, excelling in one role may make you unsuitable for another role if the needed competencies are radically different between the two roles.

For simplicity’s sake, we will illustrate this principle by dividing a company’s work force into three layers: The Frontline, Mid-Management, and Leaders. As we will see, excelling at one lever does not ensure success at another level.

The Frontline

The frontline is where the basic work of the business occurs—the manufacturing of the manufacturers or the service of the service industries. Success at the frontline is all about doing your task and hitting your numbers. If you have a specialty, success is about being the best at doing that specialized work.

Therefore, the core competencies to excel at the frontline are twofold: a) understanding your task, and b) doing it at the speed and quality required (if not better). Do that well, and you will be a frontline superstar.

Mid-Management

Mid-management is the connection between the leaders and the frontline. Mid-management tries to appease the leaders by making sure the expectations of the leaders are met by the frontline.

Therefore, the core competencies to excel at mid-management are to: a) understand what the leaders want, b) motivate the front line to get it done, and c) report the results back to top management. Do that well, and you will be a mid-management superstar.

Leaders

Leaders run the company. Their job is to decide what the company should be doing and make sure the business has the competencies, capabilities and resources to pull it off.

The core competencies of leaders are: a) Vision, b) Communication, and c) Appeasing all the conflicting demands of the various stakeholders (shareholders, bankers, employees, the community, etc.). Do this, and you are a superstar leader.

The Difficulty of Moving Between Layers

Although these are very simplified descriptions, they do show how each layer in an organization is different. The core competencies are different as well.

The top frontline performers are great doers of a task. But that doesn’t mean they will continue to be top performers if promoted to mid-management. Mid-managers are not expected to be great doers of a task. They are expected to be able to motivate large numbers of other people to do a task. That’s a different skill entirely.

It is like automatically expecting an athlete who was naturally great at throwing to be naturally great at teaching others to throw. As we saw above, that tends not to be the case. And so is the case in the business world.

Since the top frontline person succeeded by doing, they tend to revert to that when a mid-manager. The result is unhealthy micro-managing—an attempt to continue doing rather than motivating.

Similarly, if you find a top mid-manager, that does not necessarily mean that they will excel at leadership. Mid-managers excel at getting someone else’s goal accomplished. Leaders, by contrast, are the ones that have to dream up what is to be accomplished.

The skills needed to get a task accomplished are far different from the skills needed to determine what should be accomplished. Therefore, promoting a top mid-management performer to leadership does not guarantee success.

Therefore, when a top mid-management performer is promoted to leadership, they resort back to their old skills of getting someone else’s vision accomplished. So they take the vision already in place and keep pushing that agenda, even if that agenda is no longer relevant. They don’t change the vision with the times, because they weren’t skilled at that vision thing. So the company becomes obsolete and dies.

Relevancy for Strategy

Great strategies rely on great insights, great vision, and an ability to think outside the box. These are not qualities needed to be a superstar at the frontline or mid-management. Therefore, if you promote from the top of the frontline and mid-management ranks to get your top leadership and strategic leadership, there’s a very good chance you will not get those necessary qualities. Therefore, you run the risk of having lousy strategies.

It drives me crazy when I see companies promote people into key strategy positions who do not have the core competencies for strategy. They may be great at budgeting, financial models, implementation, or operations, but that doesn’t mean they have a clue about insights and visioning.

There are three ways to mitigate this problem, First, hire for the part. If you want a great leader at the top or in strategy, hire people with the skills needed for that part. Instead of looking backward to see how well a candidate was at doing or implementing, look forward to see how they are at visioning and insights. So what if they were only mediocre at doing or implementing, so long as they are great at what the new role requires.

Second, train your leaders to be better at the skills of leadership. There are ways to make people better at the skills of visioning and insight. Invest in your leaders to shore up these key competencies.

Third, don’t be afraid to bring in the experts. There are all sorts of strategy experts out there who would be happy to consult with you. They have the proper skills. Take advantage of them.

SUMMARY
Just because one is a top performer at one level of an organization does not mean that person will excel when promoted to the next level. Since the core competencies needed at the new level are different than the former, there is probably a greater likelihood that the person will no longer be a top performer after the promotion. To minimize this problem:

1. Promote people based on the new skills rather than the old.
2. Train people to become better at the new skills.
3. Hire experts/consultants to help.

FINAL THOUGHTS
Don’t hire a superstar athlete when what you need is a superstar coach.

Strategic Planning Analogy #523: Why Let Facts Get in the Way?

THE STORY
A retailer once asked me to look at the data to see how much sales increased after his stores were remodeled. After examining the data, I concluded that for most of the remodeled stores, sales did not change at all as a result of the remodel.

The response by the CEO of the retailer? “I don’t believe the data.” He went on to spend a bunch of money on further remodels.

Another retailer asked me to study their idea to add a new product category to their stores. I wrote a memo—with lots of facts and numbers—showing that adding this product line would be an incredibly stupid idea.

The response of the retailer. “We had no intention of ever not adding this category. We already signed the deal and are going to do it anyway. We just wanted some paperwork in the files to help justify the deal we already intended to do. If your paperwork won’t support the project, then we’ll just do it without support documents on file.”

I’m reminded of the Mark Twain quote, “Never let facts get in the way of a good story.” Or in this case, it should read “Never let facts get in the way of a pre-conceived notion.”

THE ANALOGY
Business leaders have to make a lot of decisions. Most claim they want their decisions to be based on facts. The problem occurs when those “facts” contradict the pre-conceived notions of the business leader.

Do you ignore the facts and go with your gut (as they did in my stories)? Or do you ignore your gut and go with the facts?

As we will see in this blog, there is no automatic answer that works in all cases, but there is a process to figure out what to do in every case.

THE PRINCIPLE
The principle here is that there is a difference between facts and insight. A fact is an isolated nugget of truth. Insight is having sufficient understanding of the situation in order to make the proper decision.

Not all facts lead to insight. For example, I might have a fact that my grass is tall. From that fact, I might conclude that it is time to cut the grass. But true insight would have also known that at that very moment my grass was wet, the ground was soft & mushy, and that it was a pitch-black night outside. Under those conditions, it was not a good time to cut the grass.

Was my fact on grass length incorrect? No, but that fact did not give enough insight to make the right decision.

My gut intuition can also be insufficient for insight, particularly if my experience is not very relevant for the current decision.

So how do I gain insight when facts and intuition disagree? Here are three suggestions.

1) Question the Fact-Giver

There’s a Samuel Butler quote which says “Figures never lie, but liars often figure.” In other words, a person with a personal agenda can selectively use facts to promote their agenda rather than true insight. They present a false insight, distorted by what they choose to disclose and what they choose not to disclose.

It has been said that you can prove just about anything with the Bible if you are willing to take the words out of context. And that’s what these “liars” (people with an agenda) do. They start with their preconceived agenda and let that bias dictate how they present the facts. Their goal is to sell their position rather than provide true insight into what is going on.

You see this all the time in politics, where each extreme position uses facts to “prove” their agenda is true. How can the use of so-called “true facts” come to such different conclusions? It’s all in the packaging.

Several decades ago, U.S. News and World Report Magazine looked at some of the political hot-buttons of that time, like abortion and gun control. They showed that, depending upon how a survey question is worded, you can get a majority of the people to agree with either extreme.

Therefore, when the facts contradict your gut, one can start by questioning the motives of the one presenting the facts. Do they have a hidden agenda? Is their objective unbiased insight or something else?

Ask yourself these questions:

1. Are ALL the facts clearly moving in only one direction? (Rarely is the world that neat and tidy—there are probably relevant facts not being shown)
2. What does this individual gain or lose personally depending on how the decision goes?

Actions you can take:

1. Ask for all the data collected (not just what is in the Powerpoint deck).
2. Have an independent third party (with no agenda) look at the data.
3. Spend less time discussing the conclusions in the deck and more time discussing the assumptions behind those conclusions.

2. Question the Fact Receiver

The feelings of your gut are based on a lifetime of experience. This experience has exposed you to a lot more facts than just what is in front of you with today’s Powerpoint deck. This experience can help expand your insight and provide a better context for making decisions than just dealing with facts presented at the moment. The gut may indeed be more insightful than the facts.

But, then again, your gut may be way off base. You may have your own hidden biases, which impact your gut (even if you are not aware of them). Perhaps your experiences are irrelevant to the question at hand. Perhaps you’ve spent so much time living detached from the real world and surrounded by “yes-men” that you are out-of-touch with how your customer really lives (I spoke more about that here).

Often times, situations when facts and intuition are add odds with each other occur when a company is going through a crisis. Things are going badly. The old approaches aren’t working any more. Is this really a good time to rely on past-based intuition when the successes and tricks of the past don’t appear to be working?

Therefore, before going with your gut, ask yourself these questions?

1. Is my past experience really relevant for today’s decision?
2. Have things changed enough that the rules of the past no longer apply?
3. Do I have a hidden bias? Does my personal situation change depending upon how I decide?
4. Is my gut based on true insight or desperation and panic?

Actions you can take:

1. Have some confidants outside the industry that you can bounce ideas off of.
2. Spend more time out in the field talking to customers and seeing how the world works out on the front lines where your business interacts with the marketplace.

3. Look for the Story Behind the Facts

An individual fact is like an individual word. It can only tell you so much by itself. However, if you can string a bunch of words together into a story, then you really have something—insight.

All of that intuition you have has been strung together into a wondrous story of how the world works. The problem occurs when the new facts don’t fit into your story of how things work.

The problem may be that the facts have been distorted (as mentioned earlier). In that case, it may make sense to stick with the story in your gut.

However, times may have changed and your story may no longer fit how the world of today (or tomorrow) works. It may be time for a new story of how the world works.

So, when looking at facts which don’t conform with your story, ask yourself these questions:

1. Is there sufficient proof that times have changed enough to make old assumptions irrelevant?
2. Do the new facts string together to make a coherent and believable alternate story more in tune with the times? (or is there no story found within the facts).

Actions you can take:

1. Try to build an alternative story that holds the new facts together and compare that story to your old story.
2. Spend more time discussing what has changed in the environment and WHY.

I knew a company who held a story that the disgruntled customers who complain a lot are at high risk to leave because they are the ones most frustrated. They ran their business based on that story. However, facts showed that it was more often the quiet customers who left. This puzzled them until further analysis came up with a new story. They discovered that the noisy customers really wanted the relationship to work and were actively making noise in order to make the relationship better. The quiet ones had given up on the company and were ready to move on to the competition. Since the new story better fit the facts, they adopted the new story and ran their business accordingly.

SUMMARY
Many times, decision makers are faced with facts that disagree with their gut. Rather than always going with the gut or always going with the facts, do some further investigation. Check to see if the fact-presenter has a biased agenda. Check to see if your intuition is relevant to the situation at hand. Check to see if the facts tell a better story than the story you already cling to. Based on this further analysis you can determine when to go with the guts and when to go with the facts.

FINAL THOUGHTS
In the case of the store remodel research mentioned earlier, the CEO had a story in his head that if you make a store better, customers will like you more and reward you with more sales. In most cases this is true. And that is why he stuck with his gut and ignored the facts. But times had changed and this store concept was becoming irrelevant. This created the need for a new story: When you make an irrelevant store nicer, you don’t make it relevant. You just have a prettier irrelevant store. This new story fit the facts. Today, this retailer no longer exists because of its irrelevance.

Strategic Planning Analogy #476: Passion for What

THE STORY
Back in the late 1990s, I went to a seminar at the annual Consumer Electronics Show in Las Vegas.  There was a panel of experts talking about the future of connected consumer homes.

Most of the “panel of experts” were the geekiest of geeks, the nerdiest of nerds.  They each seemed to live in homes with about a half dozen satellite dishes on them and about four different sets of connectivity wires running through their houses.  They had all sorts of bizarre homemade networking devices trying to connect all their computers.  And they were predicting that eventually all consumers would have homes as geeky as theirs.

The audience was almost as geeky as the panel and were nodding their heads in approval.  That is, until the last panel member began to speak.

The last member was not geeky or nerdy.  He was a consumer marketer.  He had done consumer research and found that the average person would not put up with all of that geeky stuff.  The audience started to boo him walked out in disapproval.

Well, here we are, about 15 years later.  None of the geeky predictions came to pass and the marketer was right. 

 

THE ANALOGY
The members of the so-called “panel of experts” were extremists in their enthusiasm for consumer electronics and technology.  It was their passion.   They knew all the jargon.  They were willing to devote all their spare time to learning the obscure technology behind it.  They could build their own computers and program them to do specialized tasks.

In other words, they were not normal.

These people mistakenly believed that eventually everyone else would have the same level of passion as they did for all this geeky stuff.  In other words, they felt that eventually, their odd behavior would become normal.  It did not.

As it turns out, the panel member who best understood the future of the connected home had no passion for the subject.  His expertise was in listening to the customer, who was saying something entirely different.

I’ve been around a lot of companies who are looking for passionate employees.  I’ve seen a lot of job advertisements looking to hire people with passion for the products the company was selling.  The rationale is that employees who are passionate about the product are better employees.

But is that really true?

That panel of experts was so passionate for their business that the members were blind to the fact that they were outliers in society.  They were so abnormal that they couldn’t understand normal people.  And normal people are the customers.  As a result, they completely missed the mark on helping businesses in the industry prepare for the future.

Instead, it was the one panel member who was not biased by personal passion (the marketer), who could accurately hear the customer and give sound advice.

This excessive passion can be particularly messy for strategic planners.  If they are too passionate for the business they are in, they can become biased extremists who are blind to the realities of normal people.  As a result, their strategic recommendations can be way off the mark and hurt the companies they work for. 

 

THE PRINCIPLE
The principle here is that it is often better to hire people who have passion for their individual job skill than passion for the business where they apply that skill.  In other words, if you are in the green energy business, it is better to hire an accountant who is passionate about accounting than one who is passionate about green energy. 

There are many reasons why I believe this:

1. Improper Bias

In the story, we saw that the people with excessive passion had a biased and distorted view of the world.  Their extremism blinded them to what normal people are like.  They rejected consumer research (the facts), because it did not line up with their distorted, passionate viewpoint.  As a result, they became useless in helping companies address the needs of normal people.

I’ve seen this occur in multiple companies, where passionate extremist employees would promote all sorts of crazy ideas and bad strategies based on the notion that they found it appealing to their own passions.  Their rational was, “I would like that, so everyone else should like it, too.”

Unfortunately, the ultra-passionate segment of most businesses is quite small.  There are not enough of them to support these ideas.  Just because abnormally passionate people like something does not mean that normal people would also like it. 

And when you fill a company with passionate extremists, they start thinking that they are closer to normal than they really are, because all of their co-workers share the same biased extreme.  This leads to bad forecasts, bad strategies, and bad results.

Think about the battery-powered automotive industry.  Many of the companies were filled with employees who loved the idea of electric cars and thought everyone else should love them too.  So they came up with business models that were far too optimistic and now many of these businesses are going bankrupt.

2. The Charitable Cause Phenomenon

Although there are some great charitable organizations out there, I’d have to say that some of the worst-run businesses I’ve ever seen are charitable organizations.  Why?  Usually it is because the people running the business have more passion for the cause than for their individual job. 

They want to be a part of the cause, so they will do whatever job they can get to become a part of it.  That often means doing jobs for which they are not the most qualified.  Yes, passion can make up for some skill inadequacies, but often not enough to make many of them truly productive.  Just because their heart is in the right place doesn’t mean they are best qualified to get their job done.

Organizations need a lot of different skill-sets, from as mundane as janitorial or data entry to as sophisticated as a strategist, CEO, CIO, or COO, etc.  If people do not have lots of skills or passion for their individual task, then that task will not get done well.  If enough tasks don’t get done well, then the entire organization starts to fall apart.

That is why I like people’s primary passion to be around their assigned task, rather than the business.  That way, the people are happily excelling on that which they are assigned to do, because that is their love and passion.

3.  The Stockholm Syndrome

The Stockholm Syndrome is based on studies which show that people captured by terrorists will, over time, tend to become more sympathetic to the views of their captors. If normal people can start feeling more like the radical extremists who captured and tortured them, then I think normal people can start feeling good about the businesses which capture the bulk of their waking hours.

In other words, if you take a great accountant and put him or her into a green energy company, most over time will become more sympathetic to the green energy cause.  It is a natural consequence.

However, I don’t think the opposite is necessarily true.  If I take someone who loves green energy and is only moderately interested in accounting and put them into a green energy company, I don’t think they become a lot more passionate about being an accountant. 

Therefore, hire people who are passionate about their task, and you can train them to care about the business.  This will work out better than hiring people who love the business and then try to get them to love their individual job.

That’s why you commonly hear people in service businesses say that they look for people who love giving service (their job) and then train them in their business.  This works a lot better than finding people intimately in love with the business but have no desire to serve.

 

SUMMARY
Great strategies rely on great insight and great execution.  Great insight and execution often are at odds with people who are excessively passionate about the business they are in.  First, their excessive passion biases them so they cannot see the realities of the normal world.  Therefore, their insights are inaccurately biased and subject to failure.  Second, people who are doing jobs based on their passion for the business rather than a passion for their job are not the best at doing their job, so execution suffers.  A better approach is to fill your business with people who are passionate for the skills of their individual task.  They will execute well on more accurate assessments of reality.

 

FINAL THOUGHTS
I have been a strategist at many companies where I did not have an excessive passion for the products being sold.  And I was proud of that.  I would tell people that this kept me from becoming too biased based on personal distortions.   I was forced to listen to the customer.  Second, my passion was for doing strategy, so they would get great strategies (and isn’t that what they hired me for in the first place?).

Strategic Planning Analogy #459: Strategic Toss-Outs

THE STORY
When its time to clean out the junk which accumulates at my house, my wife and I have different opinions.  She seems very willing to toss out my stuff, but more reluctant to toss out her own stuff.  I, on the other hand am very willing to toss out her stuff while hanging on to my own.  As a result, we often disagree about what should be tossed out.

Sometimes, I’ll come home from a business trip and find out that my wife used the time I was away to get rid of the junk in the house.  Apparently, she finds it a lot easier to make those decisions about what to toss when I’m not around.   The disagreements go away (along with a lot of stuff I would have wanted to keep).

THE ANALOGY
Houses aren’t the only things which collect junk over time.  So do businesses.  Business junk that accumulates over time includes:

   1) Old Products and Services which are no longer relevant.

   2) Formalized Processes and Procedures which are out of date.
   3) Informal ways that things get done which are out of date.
   4) People and positions which no longer accurately reflect best practices.
   5) Ways of thinking about the business.
   6) Unprofitable customers.
   7) Old capital investments.

Although nobody would argue with the abstract concept of eliminating the obsolete and irrelevant, the problem arises in that not everyone agrees about what is obsolete and irrelevant.  This is particularly true if someone else believes that what you yourself do for the business is obsolete and irrelevant.  Like the situation with my wife, someone else’s area in the business may appear less relevant than one’s own, so you fight to toss their junk while keeping your own.

Worse yet, sometimes businesses are in a position like a couple who is downsizing from a large house to a small apartment.  In order to fit into the smaller dwelling, they not only have to get rid of junk, but also get rid of some stuff that has reasonable value.  Similarly, businesses often find a need to downsize and are faced with the tough task of getting rid of seemingly good things in order to fit the budgeted shrinkage.

The problem, of course, is in deciding what seemingly valuable aspects of the business to toss out.  This can be difficult, because it may require getting rid of long-time employees or heritage products associated with the founding of the company.  And, as in the story, there can be differences of opinion as to what is or is not valuable. 

And, if some people are left out of the decision (as I was during a business trip), some highly valuable things could get tossed out because the one doing the tossing did not appreciate the value.

THE PRINCIPLE
The principle here is that strategic planning is about more than just how to grow a business.  Yes, it may be more fun to talk about growth strategies.  However, often times a lot more value can be unlocked from a business by tossing out a lot of the accumulated junk already choking the business.

There can be all sorts of processes, people, products, and factories embedded in the business which are gigantic cash drains.  Getting rid of this junk can create a far greater return on investment than investing in completely new stuff.  (Remember all those statistics about how most acquisitions and new product introductions fail?—it is not a given that every growth move is a winner.) 

Unfortunately, if you get rid of the wrong stuff, like core competencies, key aspects of your competitive advantage, and investments in the future, you can end up destroying the future of the business. (Wrong cutting moves can be as dangerous as wrong growth moves).

Therefore, decisions about what to toss out can be just as strategic as decisions about what to add.  Yet, I’ve seen many examples where cost cutting programs totally bypass any strategic scrutiny.  Perhaps every department is told to cut out 10% of their expenses and they can use their own judgment about what they can toss.  This could end up being a strategic nightmare, because it may not cut out enough junk in some areas while choking off the best potential in other areas.

Without a coordinated, strategic approach to tossing out, you can end up tossing away your best chance at success.  Here are some strategic issues to consider when embarking on a cutting/fixing program.

1) Know what is the Foundation of Success

Nobody would intentionally sabotage the underpinnings of their success.  Yet it happens all the time.  There are two causes.  First a company may not know what is the basis of their success, or they may have a mistaken understanding of what strategic elements created their success.  Unless you first know what is critical to your business model, you will not know how cuts or fixes are going to affect those critical elements.  So before embarking on a cutting/fixing program, make sure everyone is in agreement as to what is important for future success.  Know what your key points of differentiation are and what parts of the business model cause them.

Second, all cutting/fixing suggestions need to be viewed in the context of their impact on the core business model.  If the cuts or fixes critically hurt the core elements of success, then don’t do them.  Remember, these are not isolated decisions.  They impact the overall business model.  Keep that in mind when making each decision.

2) Consider Cross-Linkages

Actions in one part of the business can impact many other parts of the business.  For example, the operations department might cut back on labor to make their department’s costs lower.  They might even get a big bonus for this action.  However, the resulting drop in quality could ruin the budget for the service/repair department and make the selling force much less productive due to the problems in trying to sell lower quality goods.

Therefore, one needs to look at the big picture and all the cross-departmental implications.  Reward people on the total impact of their decision, not just on their individual area.  Otherwise, you can end up with a single individual maximizing their area while destroying everyone else (sort of like when my wife cleans out when I’m not around).

3) Flexibility and Backup is Important

Getting rid of excess fat in your supply chain is usually a good idea.  However, like most good ideas, it can turn into a bad idea if taken to an extreme.  If the 2011 tsunami in Japan taught us anything, it was that an extreme approach to lean supply chains is a disaster if a link in the chain gets broken. 

A lot of automotive manufacturing parts had only a single source of supply and that source was wiped out by the tsunami.  And because of a just-in-time system, there were no excess parts on hand. As a result, the entire global automobile supply chain ground to a halt waiting for the single source for one product to be replaced.  This created great financial losses for many months.

You can prevent these great losses by building a little bit more flexibility and backup into the system. Have backup sources or alternative manufacturing options.

Also keep in mind that needs and desires can change over time.  This can require you to make frequent tweaks to your offering.  If you get so specialized in your process (to save money) that you cannot quickly adapt to minor tweaks, you have really made yourself less efficient. 

4) Consider Fewer, But Larger Cuts

A lot of strategy has to do with making trade-offs (see prior blogs here and here).  The idea is that if your strategy requires you to excel in a certain area, it may require you to put more money in the area to excel in and less in areas which do not add (or even take away from) from your competitive edge.

In other words, instead of cutting back a little bit everywhere, perhaps you need to invest more in some places and completely eliminate other areas.  For example, Wal-Mart invests more in areas where cost savings can be realized (like IT systems) and completely eliminates services which only serve to raise costs (and prices).  When you consider fixed and variable costs, the only way to get big improvements in some non-essential activities is to eliminate the whole thing (to cut out the fixed cost).   

So, before making your decisions on what to toss out or fix, first understand the trade-offs which underpin your strategy.  Then consider becoming more extreme in your approach to those trade-offs.

5) Think Longer-Term

To prosper long term, you need a full product development pipeline.  You need something to sell today, something to sell in the near term and something to sell in the long term.  If you cut off R&D and product development to help near-term profits, you may be destroying long term profits because you let the pipeline get empty.

This is like saving a little money today by not changing the oil in your car and ending up eventually having to replace the entire engine because of the damage caused by improper lubrication.  Those near-term savings pale when compared to the long-term consequences.  So make sure our near-term cuts aren’t crippling your long-term strategy.

SUMMARY
Strategy isn’t just about plans for how to grow and expand.  It should also include plans for how to fix/improve/eliminate the messes in the current business.  If you do not take a strategic approach to these cuts and fixes, you can end up destroying the key elements of distinction which created your basis for existence.  In other words, strategists can’t just dream about a blue sky future; they need to get their hands dirty helping keep the current businesses on a balanced path between cost efficiency and strategic effectiveness.

FINAL THOUGHTS
A lot of companies focus on “best practices” in order to increase efficiency.  But if all you do is focus on industry best practices, then you are not doing anything to distinguish yourself in the marketplace.  To win, you have to do things differently, and you don’t get different by following industry norms.  Strategies help you understand how to be different, and this can open up greater efficiencies through trade-offs than you can find in best practices. So power your cuts and fixes with strategic insight.

Strategic Planning Analogy #332: Why?

THE STORY
There’s a comedian who goes by the name of Professor Irwin Corey. Although still alive and sometimes performing (he’s in his 90s), his prime comedy years were in the 1960s and 1970s.

Professor Irwin Corey always dressed in a frumpy, wrinkled suit with tennis shoes. One time, back in his prime, Irwin Corey was appearing on a TV talk show. The host of the show asked Prof. Irwin Corey, “Why do you wear tennis shoes?”

Prof. Irwin Corey replied, “Actually, that is two questions. The first is ‘Why?’ This is a question that philosophers have been pondering for centuries. As for the second question, ‘Do you wear tennis shoes,’ the answer is yes.”

It’s hard to argue with logic like that.

THE ANALOGY
Professor Irwin Corey was hesitant to answer the question “Why?” After all, the great thinkers and philosophers since the beginning of time were unable to answer such a question. Why then, would one think that Irwin Corey could answer the question?

Instead, he stuck to simple questions, like “Do you wear tennis shoes?” Yes, easy to answer, but not very insightful.

I think a lot of business people are like Irwin Corey. They avoid the tough question of “Why” and focus on the easy to answer questions which provide very little strategic insight.

In reality, the best place is in the middle, asking a more focused series of “why” questions, like “Why do you wear tennis shoes?”—easier to answer than “why” and more insightful than “Do you wear tennis shoes?”

THE PRINCIPLE
The principle here is that merely observing surface behavior (like whether or not you are wearing tennis shoes) will not lead to great strategic insight. If you want to influence customer behavior to your advantage, you need to look deeper into the motivations behind that behavior. You need to ask why.

The traditional technique for doing this is called “The 5 Whys.” The idea is that you ask a person why they do something. Then you take their answer and ask why they said that. If you continue doing this five times, you will have dug down to the true motivation behind the behavior.

It takes multiple layers of asking why to get to the truth, because often consumers themselves do not truly understand their deeper motivations. They cannot truthfully tell you their deepest motivations at the first, because they do not know the truth. You have to dig deeper, one level at a time, because that is all the customer can handle. You are helping them with their own sense of self-discovery on why they do things.

If you stop the process too soon, you will only get a surface response which does not get to the real heart of the matter. As a result, you will miss the true strategic insight.

Discount Store Example
For example, one time I was working on a project to find out why people shop particular discount stores. When customers were asked why they shopped discount stores, nearly all of them said “To save money”, regardless of which store they shopped. Well, that didn’t provide much insight. Worse yet, it gave me no clue as to why some customers preferred saving money at discount store “A” while others preferred saving money at discount store “B”.

Had I stopped there, I would have concluded that everyone sees discount shopping the same and that all discount stores are about the same—places where you can save money. But that would have been the wrong conclusion.

I used the 5 Why approach to dig deeper. What I discovered was that people had different reasons for why they wanted to save money. And, depending on their reason for saving money, people preferred a different discount store.

For example, one group wanted to save money in order to feel like they were doing more to take care of the needs of their family. This group tended to shop discount store “A”. Another group liked to save money because they loved to shop—the more they saved, the more things they could buy. This group seemed to prefer discount store “B”. A third group loved to buy expensive status items. However, they knew that the only way they could afford to buy the status brands at the status stores was by saving money on things that were less important to them at discount stores. This group tended to prefer discount store “C”.

Now I had meaningful information around which one could design a strategy. I could segment customers based on this deeper motivation and take actions to strengthen the value on the deeper dimensions associated with the chosen segment. I would have never discovered this insight if I had stopped at the first level of observation.

The Concept of Self Worth
After having done enough of these 5 Why studies over the years, I have noticed a pattern in the types of deep motivations you discover. In general, people like to feel good about themselves as individuals. Rarely do people take pride in being a bad person. Instead, they want to see themselves in a favorable light. Therefore, if given a choice, people tend to act in ways that will make them feel better about whom they are as a person.

I call this the concept of Self Worth. The idea is that if you know what makes a person feel better about their worth as person, then you can predict how they will act—in a direction which increases that self worth. Then you can increase your profits by helping them achieve that self worth.

What makes all of this really interesting is the fact that there are a variety of ways in which people define self worth. Therefore, you can strategically segment a market based on self worth. You can choose a self worth segment and build an offering which is the best at reinforcing the self worth of a particular segment.

Most self-worth segments seem to fall into one of three broad categories, which I call “The Internal Compass,” “The External Status Seeker,” or “The Accomplisher.”

The Internal Compass people tend to be driven primarily by an internal sense of what is morally right and wrong. They feel better about their self worth when they are doing the things they define as being morally right. This is the internal compass directing their actions. People like this tend to be more religious or are more concerned about large societal issues, like preserving the planet.

To win over these people, you need to convince them that patronizing your business reinforces those moral issues they believe in. For example, people buy Tom’s shoes because they know that for every shoe they buy, Tom’s donates a pair of shoes to a poor person. Their moral compass says that helping the poor is right and those that help the poor are better people. Therefore, buying Tom’s shoes makes you a better person.

The External Status Seekers use more of an external compass. They tend to feel best about their sense of self worth when they think that people in their peer group find them more acceptable. In other words, this group lets others define their worth. They more THEY like you, the more you like yourself. This is about fitting into society. Even more so, it is about having special status within your peer group—being one of the more highly esteemed within the peer group. This is the primary segment for teens and is also very important for a large percentage of adults.

External status seekers learn what the rules are for status in their group and then act to attain them. It could be by owning the right status brands. It could be by belonging to the right social groups. It could be by being seen in the right places with the right people. To win this group, you need to understand the rules of that portion of society and then help them achieve status with their peers via playing those rules. For example, if you convince this group that your brand of automobile is the highest level of status among their peer group, then that group will buy more of your brand of automobile.

The third group is The Accomplisher. These people measure their sense of self worth based on how much they have personally accomplished in their life. The more activities they have done, the more they like themselves as a person. It’s almost like a check list. The more things that are checked off, the higher their self worth. The key here is to find out what types of activities they find meaningful and then help them accomplish them.

By using the 5 Why approach, you can figure out which self worth sub-groups are most relevant. Then you can develop the appropriate strategy.

THE SUMMARY
Observing surface behavior is usually not going to lead to great strategic insight. Insight comes from understanding the motivations behind that behavior. If you understand the motivation, then you can increase the behavior in a direction which is more mutually beneficial. A way to get at the deeper motivation is through the 5 Why approach. This will usually help you to see what creates a sense of self worth in people. Then you can build a strategy which reinforces that sense of self worth.

FINAL THOUGHTS
Don’t be like Professor Irwin Corey, who avoids the tough questions. Take the time to learn the deeper motivations.

Also, this was another blog based on a suggestion of a reader. If you have any topics you'd like me to tackle, let me know.