It's All About the Beans

THE STORY
Back in the first half of the 20^th Century, A.J. Bush decided to start a business. His first choice was to manufacture hosiery. However, a nearby canning company was trying to get rid of its old canning equipment at a price too good to pass up. So A.J. Bush went into the canning business.

A.J. Bush wasn’t very particular about what he canned. He canned just about every kind of vegetable produced by the farmers of Eastern Tennessee. The following generation kept up the tradition of canning whatever came along. They even experimented with more exotic items, like sauerkraut, dog food and spaghetti. If it could be eaten and it could be put in a can, then the Bush family probably canned it (or at least thought about canning it).

This strategy wasn’t working out too well for the Bush business. By the 1970 and 1980s, the company was getting into serious financial troubles.

As a result, in 1990 the Bush business began a serious and highly involved strategic planning process. After a few years of analysis and thinking, they came to make a number of difficult choices. One of those choices was to focus exclusively on canning beans.

These decisions turned the company around. Instead of remaining a troubled also-ran in the vegetable canning business, they are now a profitable market leader in beans.

In the first picture above, you can see me next to a cardboard cut-out of Jay Bush and his dog Duke, who promote Bush beans in television commercials, another part of their success.

THE PRINCIPLES
So what can we learn from this story? Several things…

1) Strategic Planning is Important

When I am asked what the value is of strategic planning, I often say that it can be the difference between having a thriving company and a bankrupt company. That was certainly the case for the Bush family business. Had they not embarked on a serious strategic planning process back in the 1990s, I doubt the company would be around today. As a result of that planning, they not only survived, but thrived.

What kind of value can you place on the difference between success and failure? It is so large, it is too big to calculate. People would pay almost any price to improve the likelihood of success. This is why it baffles me why so many today are claiming that strategic planning is of little, if any value.

Wouldn’t you rather be a successful winner than a bankrupt loser? How much is that worth to you? If strategic planning can improve the likelihood of preventing bankruptcy and ensuring success, shouldn’t you do it?

Part of the problem is that a lot of what is done today in the name of strategy is not tackling those tough issues which can make the difference between success and failure. During that thorough strategic planning process at Bush during the 1990s, they tackled a number of tough issues, like:

a)     Leadership: The Bush family knew they needed to up the game in leadership, so they changed the board structure to bring in seasoned outsiders to the board of directors for the first time. This was a tough decision for the family members who had to give up some control in order to improve the leadership.

b)     Management: To get the quality of management necessary to win, Bush made the hard choice to move management operations from the little town of Chestnut Hill, Tennessee to the larger city of Knoxville, Tennessee. The larger city made it easier to draw in higher quality managers. But it was tough for the family who liked it back in Chestnut Hill.

c)     Product Mix: Not only did the focus shift from canning any food to canning beans, it also shifted from canning food as ingredients to canning beans that were ready to serve from the can due already having the special sauce. This was very radical and at the time perhaps seen as very risky to put all the future into one type of product.

d)     Sales/Marketing: Once the product mix was established, a professional sales force and marketing program was put in place. This was a significant change from the status quo which they knew.

Compare this to what a lot of companies do today and call strategy:

a)     Set numerical goals (with no details on how to achieve them)

b)     Use metrics and systems to try to do the status quo faster and cheaper.

c)     Have a week-long golf outing surrounded by a few meetings so it can be written off on their taxes.

Great strategies tackle the tough issues. They seek the right trade-offs between options. They challenge the status quo. They move companies into uncomfortable new areas. THEY MAKE A DIFFERENCE. And that difference can mean success rather than failure.

2) Focus is Important

The second lesson from the Bush story is the value of focus. The move from an unfocused “can anything” to the focused “experts in beans” made all the difference to the fate of Bush.  Focus is important, because it allows a company to specialize. And specialization is what it takes to win in a crowded marketplace.

Les Wexner, the genius behind the Limited retail empire (which over the years included such stellar brands as The Limited, Victoria’s Secret, Abercrombie & Fitch, among others), would refer to this as “Best At.” He always wanted to know what his brands were “best at” and then would make sure that the brands were doing everything they could to excel at the area focused on to be best.

The consultants at McMillan Doolittle refer to it as the “EST” strategy. Where have you focused to become superlative? Is it to be the big-est, the cheap-est, the hot-est, the easy-est, the quick-est, and so on.

The idea is that once you determine your focus, you know where to place your bets. You know which trade-offs to make. You know which direction to push your business. You know where to win. And over time, your specialized trade-offs will give you the expertise to excel at your point of focus, and you will win.

Bush was never going to win as an also-ran in canning all sorts of food. But by focusing on beans, it found a place where it could excel through focus, outdo the marketplace and win.

3) Positioning is Important

Focus is not only important to making a difference internally. It is also important to your customers. An internal focus allows you to create an externally winning position in the minds of your customers. By having an internal focus on beans at Bush, the company now had a compelling position to tell the consumers: Bush = The Best in Beans. Consumers were willing to seek out the Bush brand and pay a brand premium because they knew that they were getting the best in beans.

We’ve talked so many times in this blog about the value of positioning. Great positions lead to great success. But if you have not built an internal strategy focused on delivering something special, you have nothing solid to build a position around.

If you cannot deliver superiority on the key point of your position, then your position is nothing but a lie. And consumers will eventually figure out if your position is real or a lie.

That is why the integrated planning process is needed. The internal business model and the external marketing message need to be in sync. And this only comes through serious, company-wide planning. Positioning does not just belong to the CMO. It needs to belong to everyone.

SUMMARY
Good strategic planning is not just some numbers game played in the fall to give an excuse for an off-site business vacation. Good strategic planning tackles the tough topics of focus, positioning and the implications of these topics on the status quo. If done properly, it can be the difference between success and failure. Therefore, if you prefer success over failure, put a high value on doing serious strategic planning.

FINAL THOUGHTS
When a company is operating smoothly, it is difficult to see the need for strategy. It is easy to forget that it was earlier tough strategic decisions which created today’s smooth operations. And if you want smooth operations in the future, you need to make more tough strategic decisions today.

Strategic Planning Analogy #509: High Occupancy Vehicles

THE STORY

To help alleviate pollution, congestion and speed up traffic, some urban areas have put HOV lanes on their highways. HOV stands for High Occupancy Vehicles and is typically defined as a car having at least two people in it.  The HOV lanes usually only allow high occupancy cars and other efficient vehicles, like buses.

Because about 75 to 85% of workers commute by driving alone in their car, most commuters cannot legally take advantage of the HOV lanes. As a result, the HOV lanes are less congested and move along faster. Seeing the HOV cars moving faster makes some of those driving alone try to find ways to cheat in order to get into the HOV lanes.

One way used to cheat is to put a mannequin or a life-size blow-up doll in the passenger seat. For example, in 2010, a 61 year old woman put a mannequin in the passenger seat so she could ride in the HOV lane in New York. Unfortunately for the woman it was a cloudy day, and the hat and sunglasses on the mannequin looked out of place to a highway officer. The woman ended up having to pay a $135 fine and had two points taken off her license.

THE ANALOGY

We live in a business environment which has been described as faster than any time in history and getting even faster. Businesses feel the pressure to move ever faster or die. To a large extent, speed has become the default universal strategy.

One way businesses try to increase speed is by unburdening themselves of as much as possible. Management is eliminated, rules are eliminated, and strategic planning is eliminated—all in the cause for speed.

The elimination of strategic planning is justified with reasons like “We don’t have time to waste on that” or “Things move too fast to plan anything long-term” or “All we have to do is release the next version of our product before the competition—you don’t need strategic planning for that.”

The problem is that the business world is more like those HOV lanes than these people realize. All this unburdening is making businesses look more like those single person cars—going it alone. And since nearly everyone is taking this same approach, they are all crammed into the slower lanes.

Ironically, the faster HOV lane is the one where cars are “burdened” with extra passengers. And, as we will see in this blog, if companies load up their “car” with extra passengers like strategic planning, they will have access to the faster lane and get to their destination more quickly.

THE PRINCIPLE

The principle here is that the proper use of strategic planning does not slow a company down, but actually puts a company on a faster path. So instead of dropping strategic planning in the name of speed, we should be adding it to our “car”. Described below are three reasons why adding strategic planning gets you into the HOV lane of business.

1) Strategic Planning Improves Speed Via Focus

A focused company can move faster than an unfocused company, and strategy improves focus. Lack of focus leads to anarchy and confusion. You can yell at an unfocused company to “Move Faster!” all you want, and all you get is faster anarchy and faster confusion. Everyone is moving in random directions rather than making forward progress. Faster randomness is not improved progress.

Strategic Planning, when used properly, is a way to provide a business with focus. Not only can it tell a business what are the right things to work on; more importantly, it can tell a company what are the wrong things to work on. Strategic planning simplifies the agenda by taking a lot of options off the table (the things that are off-strategy). All the time-wasting rabbit trails are eliminated before they begin.

With a strong, focused strategy, you don’t have to waste time in endless meetings continually asking yourselves “should we be doing this or something else?” Instead, you can speed things up by focusing on how to improve on the things everyone already knows are important to the strategy.

Look at Apple. Under Jobs, Apple did not go in all directions trying to do everything as quickly as possible. Jobs had a specific strategy in mind as to what Apple would focus on. It had to do with designs that emphasized quality, elegance, coolness, and user-friendliness, made possible by focusing on building closed end-to-end systems. It became obvious what was appropriate for Apple to be doing and what was not.

The “not” list for Apple under Jobs was large. They did not work on low price products, or products not tied to the larger closed system. They did not even work on manufacturing. This allowed Apple to become very focused and quickly build a whole new digital future.

2) Strategic Planning Improves Speed By Overcoming the Leapfrog Trap

When speed alone becomes the substitute for strategy, a company is no longer building unique competitive advantages or competencies (except maybe the competency of speed). All they are doing is racing everyone else to be the first to release the next new improvement to the status quo. This is very common in areas like consumer electronics & digital media, and becoming more common elsewhere.

This process leads to what I call the leapfrog trap. Any small success gained by getting to the next improvement first is lost when a competitor leapfrogs you and gets to the improvement which follows before you. Gains are short and fleeting, since others are racing to leapfrog your most recent advancement as soon as they can.

Here is the crux of the problem. Because everyone is focusing on the same thing (speed), nobody is creating a competitive advantage. All the companies look about the same, with the same types of engineers in the same types of culture working on the same types of issues. You cannot create a lasting advantage in this scenario because you bring no real competitive advantage to the marketplace. Others can copy you almost immediately because they have a similar business approach with similar tools at their disposal.

By contrast, a true strategy builds differential advantages which allow a business to do certain things better than others. Rather than playing the same game of leapfrog with everyone else, you go your own way and build a different game where you have an edge and are not so easily copied. This leads to the third point below.

3) Strategic Planning Improves Speed Through Business Model Superiority

Great strategies understand the importance of making trade-offs. They don’t try to do everything well. They understand that:

a)     There are not enough resources to do everything well; and

b)     Even if there were enough resources, it is still not possible to win on all fronts because of conflicting agendas. For example, it is nearly impossible to win at lowest price AND highest quality AND most innovation at the same time, because what it takes to win in one of these areas makes it harder to win in the others.

Therefore, great strategies choose what to specialize in and make all the proper tradeoffs to win there, even if it means giving up abilities in places outside their specialty. Take, for example, Southwest Airlines in the US. For decades, they have had both consistently lower prices than their competitors as well as consistently higher profits. Why? Southwest Airlines built a business model to specialize in lowering costs. This caused many trade-offs, where Southwest didn’t do things everyone else did if it got in the way of the low cost strategy.

When other airlines tried to copy Southwest’s pricing, they did not achieve Southwest’s higher profits, but made their profits even worse. Why? Because their business models were not laser-focused on making enough tradeoffs to pay for the lower prices.

When all you look at is speed, you take your eyes off building the right trade-offs in your business model to allow real differential advantage. If the business model does not provide an edge, then you cannot quickly build a place where you can win. You are stuck in the leapfrog trap.

SUMMARY

Ironically, the singular drive for speed does not usually end up putting a business on the fastest track to lasting success. Instead, the faster track also needs to include a drive for great strategy. The addition of strategy improves speed by:

a)     Adding Focus (on what to do and what NOT to do);

b)     Adding Differentiation (to avoid leapfrog trap); and

c)     Adding a Trade-off Based Business Model Design (which makes it harder for others to copy you).

These additions allow you to take a superior path that speed-only businesses cannot get on.

FINAL THOUGHTS

There’s a reason why mannequins are referred to as “dummies.” And if you think you can sneak onto the fast lane without real strategy in the passenger seat, then that mannequin may not be the only dummy in your car.

Strategic Planning Analogy #491: Seeking Choices

THE STORY

When my children were little, they often weren't pleased by what was served at home for dinner. They would complain and ask if they could have something different to eat.

I would explain to them that we weren't running a restaurant. I did not have an extensive menu of options for them to choose from. Each dinner had only one meal on the menu. The only choice they had was to either eat it or go hungry.

It did not make my children happy when I eliminated their eating options.

THE ANALOGY

It’s not much fun looking over a dinner menu if there is only one item on the menu. The lack of options and choices makes the task seem a bit futile. Since you’re going to get the one item on the menu anyway, you may as well skip looking at the menu.

A similar situation can occur with strategic planning. A lot of business people resist going through the planning process, saying they do not enjoy it. In many cases, I think the reason for resisting a strategic planning process is similar to the reason for resisting a menu with only one option on it—a perceived lack of choices.

If you think you are going to be basically doing the same things after the planning process as you were doing before the process (because of a perception of no other alternatives), then why do the process? You can skip it and go back to doing the one thing you knew you were going to do anyway. Under these assumptions, the strategic planning process can be seen as a waste of time, keeping you from getting your one task done (just as looking at a one-item menu wastes time and keeps you from getting to eat the one meal you know you are going to have).

This really hit home with me as I looked at the way business people from different countries treated the concept of strategic planning on social media sites like Linkedin. In fully developed mature economies, pure strategic planning jobs were disappearing and the discipline was not held in high esteem. By contrast, in emerging economies people actually seemed excited about strategic planning and there appeared to be a greater abundance of professional strategic planning positions being created.

Then I started to make the connection that much of the excitement around strategic planning in developing economies was due to a perception that businesses had many more options. As a result, it was important to spend time in these countries doing strategic planning in order to choose which options to focus on. It was as if they saw strategic planning as the way to choose the best items on a lengthy menu of tasty options.

By contrast, those in mature economies or industries seemed to see fewer options available to them.  It was as if the rules had already been written and hardened in concrete.  You couldn’t change anything—choices had already been made.  Your only option was to work harder at the same old thing.  Therefore strategic planning was a waste of time—a one-item menu that could be skipped.

Of course, a skilled strategic planner can see the value of strategic planning in virtually any environment—even mature ones.  But if their audience does not perceive the value, the planning process will be resisted (or even eliminated).  Therefore, strategic planners need to address this issue of perceived choices.

THE PRINCIPLE

The principle here is that great strategic planning processes deal with determining which strategic choices to make.  Choice is the essence of what strategy should focus on.  In his famous Harvard Business Review article “What is Strategy?” (from November-December 1996), Michael Porter said “Competitive strategy is about being different.  It means deliberately choosing a different set of activities to deliver a unique mix of values.”

In the 2011 book Good Strategy/Bad Strategy, Richard Rumelt says that the main difference between good strategies and bad strategies is that good strategies are based on making tough choices and bad strategies refuse to make choices.  Or, in Rumelt’s words “Strategy involves focus and, therefore, choice. And choice means setting aside some goal in favor of others.  When this hard work is not done, weak amorphous strategy is the result.”

In a prior blog, I also talked about how the lack of making choices can lead to disaster.

The problem is that many modern strategic planning processes are missing this key point.  They are focusing on something other than making the hard choices and trade-offs necessary for creating a winning position with a complementary winning business model.

It’s gotten so bad that even many of those in the strategic planning field no longer see their primary task as one of helping companies make tough choices and coordinated trade-offs.  Without someone advocating the need to make tough choices in a strategic manner, the tough choices won’t be made.  Worse yet, business leaders are increasingly buying into the idea that there is no need to make tough strategic choices.  And once they start believing in that, it isn’t much of a leap for these executives to questioning why strategic planning should be done at all.  After all, what is the benefit of staring at a one-item menu?

Common Substitutes for Choice-Making

There are many processes out there which call themselves strategic planning, but really are not, because they do not focus on making choices.  Here is a brief description of some of them:

1. Elaborate Budgeting:  Here, the end outcome is not a set of coordinated choices and trade-offs, but a set of numerical spreadsheets.  In essence, it is just a budget with perhaps a couple more years of length to it and a few more words attached to it.  The tough choices needed to make the budget a reality tend to be missing.  It’s just a bunch of numbers one “hopes” to achieve. This often occurs when the planning process is housed in the finance department and run by the same people who create the budgets or do financial analyses.  In the past, I have used the basketball analogy and said this insufficient process is like focusing on yelling at the scoreboard rather than focusing on the hard choices of what play to draw up on the clipboard.  Yes, the highest score wins, but you don’t get the highest score by just staring at the scoreboard (the numbers).  I've spoken more about this here, here, here, and here.

2. Platitudes and Lofty Aspirations:  In this version, the focus is on lofty goals and aspirations which end up sounding like hollow platitudes. The end outcome is not a set of choices, but a nice phrase that can be put on a banner and hung in the lobby. They say things like “we aim to be a world class this or that” or “delight customers” or “create superior shareholder value” or something similar.  These are nice things to achieve, but unless you make hard choices about how to be different, or how your business model’s trade-offs achieve these things profitably, they are only wishes.  Wishes won’t come true just because you want them to.  They are the outcomes of tough choices. I’ve spoken more about this here and here.

3. More Better:  Here, the goal is to just do the same old thing as before, only more of it and better than before.  The end outcome is list of things to do which improve upon the status quo.  The problem is that this assumes the status quo is the right set of choices. It often isn't  because environments change, making the status quo obsolete. Second, when you try to improve everything, you often improve nothing, because you did not make any trade-offs needed to truly excel in any area.  Instead, the efforts cancel each other out.  The third problem is that this process tends to try to outrun the competition with a similar position, rather than trying to find a point of differentiation.  In other words, this version rushes directly to what to “do” without first stopping to decide (choose) what you need to “be.”  I've spoken more about this here, here and here.

How Do We Overcome This?

So how do we overcome all of these poor excuses for planning and get back to solid strategic planning which focuses on making the right choices?  There are two areas to work on. 

First, we need to offer strategic planning processes where choices are the focal point.  This needs to replace lesser processes which are often little more than budgets, platitudes or attempts to be more better.  We need processes focused on questions like:

1. Where are we going to win? (Customers, Markets, Solutions, Points of Differentiation)
2. Why are we going to win? (What bundle of trade-offs will give us the competitive edge in owning the winning position? What business model will beat out the alternatives?)
3. What do we need to focus on to pull this off (capabilities, capacities, competencies)?
4. What should we NOT focus on? (because it will keep us from winning)
5. How do we tweak the business model so that we not only win, but make money?

Second, we need to get management excited about the importance of making these types of choices.  There are many reasons why management may not see the importance of making choices.  First, they may not believe they have many choices.  This is usually a false notion.  Restructurings, repositionings and new business models come about all the time.  Just look at how businesses and industries are continually being replaced by something new.  Why not become the next new thing which replaces the status quo?

Or perhaps management feels that the status quo is just fine, so there is no need to change it (no additional choices needed). But we all know that the environment changes and that all strategies eventually become obsolete. Isn't it better to be the agent of change and grab all the market share which comes with being the next big thing rather than to be the victim of someone else’s change and become obsolete?  Making better choices will create a stronger, more prosperous company and who wouldn't want that?

In other words, first we need to build processes which create robust lists of options and a way to choose the best option (like the Maitre D who helps restaurant patrons make a great choice from a great menu). Second, we need to get management to want to make the tough choices (desire to go to the restaurant and choose something new to eat off that menu).

SUMMARY

The key function of strategy is to help companies make the tough choices and trade-offs which will place them in differentiated positions where they can win.  Unfortunately, lesser processes which focus only on budgets, platitudes or tactical improvements have crept in to replace the key function of choice. To get companies back on track, strategists need to do two things: 1) Bring back processes which focus on choice; and 2) get management interested in making those tough choices.

FINAL THOUGHTS

To get patrons to try new choices on the menu, some restaurants offer free samples. Perhaps you need to get your management interested in making choices by giving them samples of what particular choices could mean for the company. 

Strategic Planning Analogy #481: Law of Extremes

 

THE STORY
Back about 40 years ago, Wal-Mart had not yet fully cemented its image as a low cost leader.  Other retailers were still challenging Wal-Mart on price supremacy.  One of those chains was TG&Y variety stores.

TG&Y decided to get into a price war with Wal-Mart.  The item chosen to go to war over was a pair of jeans.  TG&Y would lower the price on jeans and Wal-Mart would retaliate with an even lower price.  This pattern continued for many rounds.

Eventually, Wal-Mart dropped the price of jeans to 9 cents a pair.  At that point, TG&Y gave up and stopped the price war.  Wal-Mart had won supremacy on price, and not too long thereafter, TG&Y ceased to exist.

 

THE ANALOGY
Yes, 40 years ago, you could buy a lot more for 9 cents than you can today.  But even 40 years ago, 9 cents was an unrealistically low price for a pair of blue jeans.  Every jean sold at 9 cents would be a huge loss for Wal-Mart.  But that was the sacrifice Wal-Mart had to make in order to win the image of price against TG&Y.

Times may have changed in the last 40 years, but this type of activity still goes on.  Business leaders understand the value of owning an image and will go to extremes in order to win that image.  This seems especially true on the internet. 

In order to create a large network, internet firms will go to great lengths to get people hooked into their system.  Most end up giving away their product for free.  Other go even further by “paying” people to get on-board, either with badges, coupons or some other form of promotion.  It’s hard to make a living if you have to pay people to use your product.

And it’s not just price where companies go to extremes.  Luxury automobile brands are fighting against each other to own the word “luxury.”  They keep upping the ante by adding ever more exotic features to their automobiles.  At some point, even many luxury auto buyers will balk at paying the premium so that auto makers can get an adequate return on investment for these exotic features.

For most auto dealers, the maintenance area is among its most profitable areas, even more profitable than selling cars.  But, to increase the luxury treatment experience, many luxury dealers are throwing in maintenance for free.  Now, they’ve cut off a key source of profits.

The world is very competitive.  It takes a lot to dramatically own a position in that competitive market.  Every winner has to go to extremes to own their position, be it in price, luxury, service, convenience, technological innovation or whatever.  It’s as if the whole world is becoming the equivalent of 9 cent jeans—a world where the only way you can win is to create a costly, unsustainable extreme.

How do you create a profit if the entry level cost to achieve a winning position is unsustainably high?  That requires a sophisticated strategy.

 

THE PRINCIPLE
The principle here has to do with what I call the Law of Extremes.  It is one of my 23 laws of strategy.  (I know I said in an earlier blog that it was 22 laws, but I’ve since added another law.)  The law of extremes goes like this:  “Creating performance levels needed for ownership requires trade-offs and subsidies.”

Another way of saying this is that when the core business can no longer sustain the extremes, you have to:

1)      Add secondary businesses (called subsidies) to provide cash to cover the extremes; and/or

2)      Subtract secondary activities which take away cash from the building the extreme position (a process called trade-offs).

We will look at each of these separately.

Subsidies

Subsidies are non-core activities or businesses which are principally done only to fund the core.  An example of this practice is the “Freemium” model used by many internet businesses.  The idea is that the core business is free.  Yet in order to afford to give away the business for free, a small subset (often under 3%) pay a price in order to get premium extras.  In other words, around 3% of the users of the internet site subsidize the activity of the other 97% so that the site can make money.  Many internet sites use a freemium model like this, including Linkedin and Pandora.

Another subsidy common on the internet is to use advertising.  If you cannot get the users to pay for your extreme pricing position of free, then you have to get advertisers to pay for the site.  Another subsidy example is when internet sites sell information about you to other business that would pay for that information (watch out when companies put cookies on your device—it can be their door to a subsidy business selling your behavior).   

This subsidy phenomenon also occurs in the retail space.  In consumer electronics, the pricing policies are very extreme, often selling the main items near or below cost.  To subsidize these prices, the retailers need to bundle profitable subsidy purchases to the transaction.  A familiar one is the extended warranty, which is often more profitable to the retailer than selling the item being insured.  Other examples are selling ad space on the screens of the computers being sold, selling extra ink with the printer, selling smartphone accessories, and so on.

This is also seen in fast food restaurants where the core hamburger is sold at a loss and is subsidized by the sales of more profitable french fries and beverages.  (I’ve gotten in the habit of buying a second burger instead of the fries in order to get a better extreme value for myself). 

The irony here is that in a world of extremes, the core business becomes almost like a loss-leader for the subsidy add-on businesses.  At some point, it’s hard to tell what is the real core business anymore.  IF the subsidies are where all the profits come from, does that become the new core?  The extreme image won with the traditional core could now be seen as a loss leader positioning to mask the real positioning, which is to be best at selling the subsidies.

It goes to show that business strategies are getting more complex.  If subsidies are not integral to your business model, the model may no longer work in a 9 cent jeans world.

Trade-Offs

If subsidies are about adding income to the business, then trade-offs are about subtracting costs from the business model.  The principle behind trade-offs is as follows.  If you try to be all things to all people, you will probably never obtain an extreme position on anything.  For example, if you try to be the highest quality, lowest priced and fastest in innovation, you will have to make compromises which will prevent you from being the most extreme in any of these attributes.   There will be specialists focusing on only price or only quality or only innovation which will be the most extreme and win the battle for these positions. 

Therefore, to win in one space, you may need to stop pouring money into other spaces, so that more money can be funneled to the space where you want to win.

An example would be extreme low price “hard discount” grocers, like Aldi, Save-A-Lot, and Lidl. They have prices substantially below conventional grocers—extreme enough to win the low price image.  Yet those low prices are sustainable because these firms make trade-offs.  They stop doing many things the conventional operators do which add costs.  Examples include:

1)      Smaller, Less Costly Assortments (only one brand in one size per category)

2)      Eliminating Lower Margin Branded Goods by Going Direct to the source to create their own brand.

3)      Large reductions in labor by not having service departments, not stacking products individually on shelves, etc.

4)      Lower rent by building smaller stores in less prime real estate.

By trading away variety, ambiance, convenience, selection and other such factors, they can divert cash flow from those activities into sustainable extreme prices.

Southwest Airlines is another example.  They make money when other airlines don’t because they do more trade-offs than traditional airlines.  Activities like only selling point to point tickets, refusing to sell tickets on third party travel websites, focusing on only one-sized plane, and other non-conventional approaches, they have eliminated a lot of costs borne by their competitors.  This allows them to focus on the things important to their image and still make a profit.

The idea with trade-offs is that your successes is defined as much by what you don’t do as by what you do.  Your strategy needs to delineate what activities go onto each list (the do’s and the don’ts).

SUMMARY
In a highly competitive world, it takes extreme levels of performance in order to win a position.  Gaining extreme positions is costly.  In order to afford the cost and still make a profit, firms need strategies about subsidies and trade-offs.  Subsidies are the add-on activities which provide extra cash flow beyond the core.  Trade-offs take away activities which to not reinforce the extreme position in order to provide extra cash flow to invest in the extreme.

 

FINAL THOUGHTS
The things which “delight” the customer tend to “deplete” the cash of the company.  To remedy the situation, the company needs to “destroy” unnecessary costs and “deploy” subsidy businesses. And that is “de-truth.”

Strategic Planning Analogy #474: Weighing Money

THE STORY
Back in the 19^th century, the US was primarily a rural nation.  In those days, if you wanted to purchase something, you didn’t have all the malls with all the stores nearby like we have today.  Instead, if you needed something, you got out your Sears or Montgomery Ward paper catalog and ordered what you needed by mail.  Then, a few weeks later, the mailman would deliver to you what you ordered.

Not only weren’t there many stores back then, there weren’t many ways to pay for the things you bought.  No credit cards or PayPal existed.  Only the very rich had checking accounts.  As a result, almost everything was paid for in advance with cash—usually with coins.

This caused a problem for Sears and Montgomery Ward.  Thousands upon thousands of orders would come to them by mail—each of them in envelopes filled with coins.  Trying to figure out if the right amount of coins were in the envelope to match the cost of the order was a logistical and financial nightmare.

Sears eventually came up with a way to simplify the process.  In fact, they eliminated the process.  Instead of counting the money, they weighed the money.  As it turns out, Sears discovered three things:

1)      The vast majority of people are honest about putting in the right amount of coins;

2)      You can get a reasonable (but not exact) estimate of the value of a pile of coins by weighing them; and

3)      Weighing coins is a lot faster, easier and cheaper than counting them.

By switching from counting to weighing, Sears could process the orders faster with a lot fewer employees.   The big shortages of money would still be caught.  And whatever little shortages that slipped through were small and infrequent.  The money saved from not counting more than made up for any losses from shortages in payment.

So everybody won.  The consumers got their orders processed faster and Sears made the process more profitable.

 

THE ANALOGY
Sears could have spent a lot of time and money to perfect the system of counting all those coins.  And I’m sure they could have made significant improvements to the money counting process.  But I’m also sure that those improvements would never have been as cost efficient as abandoning the process altogether to switch to weighing money.

At first, it seems counter-intuitive to say that profitability goes up when you stop accurately checking to see if you were properly paid.  How could a company like Sears stop counting its payments?

Well, as it turns out, the top line on the income statement is not the most important line.  The long-term prospects for the bottom line are far more important.  If a little less accuracy on the top line can create far more money on the bottom line, then we should be happy with that. (and, by the way, Sears eventually knew the exact total of all coinage coming in—even if they couldn’t tell which order the coins came from).

I bring this up because a lot of businesses are focused on increasing accuracy all over the place.  Using a host of processes like Six Sigma or Lean, a great deal of time and effort is used to gather tons of data to figure out how to do things better or faster or cheaper or with fewer defects all over the company. 

These practices may improve the individual areas being studied.  But, like Sears, perhaps even more improvement to the consolidated bottom line would have occurred if the study had not occurred and the process was entirely eliminated.

Precision and improved performance is not always the right answer for every process. Sometimes, the bigger picture is better served when some processes stay a little looser or are eliminated altogether.  The secret is in knowing when to apply these tools and when not to.

  

THE PRINCIPLE
The principle here has to do with the difference between efficiency and effectiveness.  Efficiency is about focusing on making a process operate as well as possible (speed, cost, accuracy, etc.).  Effectiveness is about focusing on doing those things most critical to long-term success (pleasing customers, gaining competitive advantage, improving long-term cash flow, etc.).

The Folly of Putting Efficiency Ahead of Effectiveness

The difference between a focus on efficiency or accuracy can be great.  For example, I could create the most efficient process for sending messages in Morse Code, but that would never be a more effective way of communication when compared to smartphones and the internet.  If the end goal is communication, I should abandon the Mosrse Code and adopt smartphones and the internet.

Focusing on perfecting Morse Code while ignoring smartphones may seem silly, but companies do things almost as silly all the time. 

Most companies never really have an adequate answer to what I call “The Most Important Question,” which is:  What is it about your business strategy which would cause customers to naturally prefer you over the alternatives?  In other words, they have never figured out what will make the company uniquely effective in the marketplace. 

Instead, they do pretty much what everyone else in the field is doing.  They offer essentially the same solution in the same way.  Then the hope is that they can eke out a small advantage by doing the whole thing just a little bit better. So, they use tools like six sigma and lean in an attempt to make everything they do a little more efficient than the competition.

The problem with this approach is that:

1)      Perfecting the status quo does you no good when the status quo becomes obsolete (like when smartphones and other communication tools made Morse Code obsolete).  Being the best obsolete alternative is not much to brag about.

2)      The competition rarely stands still.  They are also trying to become more efficient.  As a result, it is difficult to get a meaningful long term advantage in doing what everyone else does just a little better.  Think of the battle between Fuji and Kodak to become the best at producing photographic film.  They alternated having small temporary advantages until digital technology made both of them obsolete (see more here).

3)      If you don’t start first with understanding what is most critical for effectiveness, you have no way to prioritize what efficiencies to work on.  In addition, you don’t know which approach is best to improve them (is it by reducing costs, reducing defects, saving time or something else?).  As a result, you can end up working on the wrong projects (like improving money counting instead of moving to a less accurate process of money weighing).

The irony is that putting efficiency first is not the most efficient way to improve your long-term prospects.  It wastes a lot of effort on doing things that do not meaningfully improve the really important things, such as winning in the marketplace.

The Benefits of Putting Effectiveness First  

True, lasting efficiency only comes when effectiveness is given top priority.  Effectiveness focuses on finding a way to win.  That “way to win” involves understanding the underlying problem you are trying to solve (your solution) and differentiating attributes where you will excel in order to be the best at that solution.

For example, Wal-Mart’s solution is to improve the lives of lower income people by making the things of life more affordable.  The differentiating attributes they focus on are lowest cost and lowest price.  Wal-Mart doesn’t waste a lot of effort perfecting service or luxury, because that focus won’t improve their ability to win with their strategy.  Instead, they place all of that efficiency and perfection emphasis in areas which lower costs and lower prices.  And Wal-Mart didn’t stop at just trying to perfect the status quo discount store.  When they discovered that supercenters were a more effective way to solve their problem, they quickly made the switch.

The key to strategy execution is knowing which trade-offs to make.  It is virtually impossible to be the best at everything.  If you try to simultaneously be best at low prices, high quality, speed, service and innovation, you will probably end up being inferior to someone on all of these attributes.   No, if you want to be meaningfully superior, you have to focus on only a couple of attributes.  You trade off (do less) in the areas less important to your effectiveness so that you can afford to trade on (do more) in the areas critical to your effectiveness.  

Starting with effectiveness lets you know where to prioritize you efficiency efforts.  And it lets you know which aspect of efficiency (speed, price, etc.) to focus on.  And, most importantly, it lets you know where not to direct your efficiency efforts.  And, finally, it keeps an eye open for non-status quo approaches which are more effective at solving the underlying problem.  This provides an effective way to win year after year after year.

 

SUMMARY
If you focus too hard on trying to be perfectly efficient at everything you do:

1)      You can end up never winning superiority at any attribute relative to competition (because your efforts are dissipated over too many conflicting areas); and/or

2)      You end up perfecting the obsolete.

However, if the primary focus is first on being effective at owning a solution, you will know how to make the right trade-offs, so that you can become perfectly efficient in the places necessary for you to win in the marketplace.

 

FINAL THOUGHTS
Tools like Six Sigma and Lean should not be looked at as substitutes for strategy (or as being your strategy).  No, they are merely tools.  Tools in the wrong hands can be dangerous.  Tools in the right hands can produce great things.  If you want those tools to do great things, you need to first understand your effectiveness strategy.  This provides the context for knowing where and how to apply those tools.

Strategic Planning Analogy #472: Watering Seeds

 

THE STORY
This past summer was unseasonably hot and dry.  My lawn suffered from the harsh weather.  As a result, I needed to plant some grass seed this fall to fill in the dead spots. 

Getting grass seed to grow takes a lot more effort than just throwing some seeds on the ground.  First you have to loosen the soil.  Then you have to keep watering it on a regular basis for several weeks.  Then you have to fertilize it.  That was tough work.  Tossing the seeds on the ground was the easy part.

At first, I thought I wasn’t watering the grass enough.  But then I saw a cardinal giving himself a bird-bath in a puddle where I had watered.  So I guess I watered enough.

And now, my lawn is covered with new grass.

 

THE ANALOGY
Strategy is like grass seed.  It is something new sown into the business with the hope of increasing the growth and value of the company.  And if you want to take the analogy further and think of US dollars as “greenbacks,” strategies are the grass seeds that create that green (money).

The problem is that just because one throws seed on the ground does not guarantee that the growth will occur.  If the ground is hard and dry, the seeds will just sit there until the birds eat it.  Similarly, if strategy is just thrown at a company, there is no guarantee that the strategy will take root. Just as it took a lot more than just tossing seeds to get grass, it takes a lot more than just delivering a strategy in order to achieve a strategy.

If you see the role of strategy as merely delivering a fancy document with all the clever ideas on it, then all you have done is just toss seeds at the company.  The document will then most likely just end up on a shelf and never be touched again.  It’s as if the birds ate all your seeds.

No, if you want a strategy which gets implemented, you have to get involved in all the other work—the ground preparation, the watering and the fertilizing.

  

THE PRINCIPLE
The principle here is that strategies only succeed in a company which is committed to making it succeed.  And that does not usually happen naturally.  In fact, there is usually active resistance to strategies because they require changing the status quo—and that bothers those who are comfortable or have power in the status quo.  Therefore, if you want to successfully implement a strategy, you can’t just give it to the company—you have to actively counter that resistance as part of the strategy process. 

We will refer to those actions as preparing the soil, watering, and fertilizing.

1. Preparing the Soil

In grass-growing, you prepare the soil before planting the seed. The idea is to loosen the soil so the seed can penetrate and get buried in the soil.

A similar activity needs to take place in strategy.  Before presenting the strategy, you need to first prepare the audience so that the strategy will penetrate their wall of resistance.  Since that wall of resistance is in their minds, then the mind is where you need to prepare the soil.

The core idea is very simple.  People act based on the way they think.  Therefore, if you want to change the way they act, you must first change the way they think.  In other words, if you want the leaders embrace and willingly implement the strategy, then you must first get them to think that it is right to abandon the status quo and embrace the new strategy.

There are several ways to change that mind.  The first approach is “The Burning Platform.”  This is where you change how people think about the status quo.  The idea is to convince them to believe that remaining with the status quo is not a viable option for the long term.  It does not work in the changing environment.  Instead, it is like being on a platform which is burning up.  It is only a matter of time before it is all burned up.   And if we do not jump off that platform, we will burn up as well.  It is only a matter of time.  So we may as well jump as soon as possible.

The second approach is “The Locked Door.”  The idea here is to paint a picture of a glorious and prosperous future—a place so desirable that it makes your executives salivate with anticipation when thinking of it.  Then you convince them that there is a locked door between them and that glorious future.  That locked door is the status quo.  It is impossible to reach that future as long as we cling to the status quo, because that approach cannot get you there.  It is only by tearing down the status quo that we can enter that glorious future.

The first approach of thinking prevents actions of turning back and the second approach of thinking increases enthusiasm for actions moving forward.  Depending on the nature of your soil (type of resistance) you may need one of these or some other thinking approach to prepare them for proper acceptance and action.

2. Watering the Soil

Watering the soil is an intensified effort for the period immediately after planting the seed.  It is not a one-time act, but needs to be done continually until the grass seed has fully sprouted.  The strategic planning equivalent is working intensely with executives until they see the connection between the long-term strategy and their daily actions.

If executives do not see a connection between their daily decisions/actions and the long term strategy, then they will not change their daily decisions or actions.  And, as we all know, if the daily actions don’t change, then the long-term outcomes will not change.  The real strategic outcome of a company is the cumulative result of all those daily actions (not the result of that document on the shelf).  So if you want to get the new strategy implemented, if must be meaningfully represented at the point when daily decisions are made.   Watering the seed then means that strategists need to be present when daily decisions are being made—to teach people how the new strategy should influence how those decisions are made.

For example, new strategies are typically about winning a particular position.  And in order to have enough emphasis in the winning area, one usually needs to makes trade-offs with areas less critical to that success.  Therefore, our daily actions need to make the right trade-offs so that we choose in the direction of the winning position.  And if intensive effort is not placed on training people to make the right trade-offs, then wrong trade-offs will occur.

Think back a few years ago to the crisis at Toyota.  Their strategy was built upon winning in dependability.  However, for awhile, management’s daily decisions were not keeping dependability at the forefront.  Ideas of growth, expansion, and low prices got in the way.  As a result, dependability suffered (numerous crashes, lawsuits and recalls) and Toyota had a huge set-back.  Management had to go back and re-water the soil—to get everyone to realize that dependability is top priority and must penetrate every decision made on a daily basis.  Once the soil was sufficiently watered with that intensive effort, dependability came back and so did the prospects at Toyota.

3. Fertilizing the Soil
Fertilization is a brief activity which takes place at set intervals.  For example, many recommend fertilizing grass 5 times a year.  The equivalent activity in strategy is the strategic review.  The idea here is that just as periodic fertilization keeps the grass on track to grow, periodic strategic reviews help keep the strategy on track to proper implementation.

There are several methods to do this.  One is the dashboard approach.  The idea is to set desired near-term outcomes related to the strategy.  These are usually referred to as KPIs, or key performance indicators.  You then measure actual performance against the KPIs and display them on a dashboard.  Periodically you look at the performance on the dashboard and make the appropriate adjustments to get back on track.  Depending on how broadly you want to measure the strategy you will end up with different dashboards.  In the broadest approach, you end up with something like a Balanced Scorecard.

A strategic review which will occur less frequently is the review of assumptions.  The idea here is to periodically go back to the core assumptions behind the strategy to ensure that they are still relevant.  If they are no longer relevant, then it is time to modify the strategy.  Sometimes, this process makes use of scenario planning.  In scenario planning, several potential environmental assumptions are examined.  Strategies are developed for the most like sets of assumptions.  Then, at the periodic reviews, one looks to see which scenario is coming to pass, so that  one will know which path to take.

A third approach for strategic review is known as stage-gating, or real options.  The idea here is that large strategic initiatives are broken down into smaller parts.  Each part optimizes the strategy based on what is known at the moment the stage is started.  Then, based on what is learned over the interim of that stage, you choose the proper next stage, and so on.  The periodic reviews occur for each stage.

An example would be in oil drilling, where one buys an option to drill well before drilling begins.  Then one examines in more detail the likelihood of that being a good place to drill.  If yes, the next stage is to prepare drilling.  If no, you let the right to drill lapse.  The idea is to maximize action while minimizing risk.

 

SUMMARY
Just having a strategy does not guarantee that the strategy will become a reality in the business.  To increase the likelihood that the strategy comes to pass, you also need three other activities:

1. Preparing the Soil--Changing the way the company thinks, so that they naturally want to work hard to make the strategy come to pass.
2. Watering the Soil—Intensive effort up-front to teach people how to incorporate the essentials of the strategy into everyday decision-making.
3. Fertilizing the Soil—Periodic strategic reviews in order to make sure everything is on track, that the assumptions still hold, and that periodic adjustments can be made.

 

FINAL THOUGHTS
You can’t prepare the soil, water the soil and fertilize the soil if you are locked up in the ivory tower at corporate.  No, you have to get your hands dirty and get out into the field where the soil is.

Strategic Planning Analogy #467: The Flavor Conspiracy

THE STORY
There’s a global conspiracy out there which is trying to get you to believe a lie.  I call it “The Flavor Conspiracy.” 

Think about those artificial flavors.  You can find “cherry” flavor in hundreds of items, from candy to cough syrup.   And every item which claims to have the “cherry” flavor tastes exactly the same.  If everyone is claiming that to be cherry flavor and they all have the same flavor, then that flavor must be the flavor of a cherry, right?

WRONG!  If you were to bite into a real cherry and it tasted like the so-called cherry flavor, you’d spit it out and say that it tasted funny.  Real cherries don’t have the flavor of what manufacturers call cherry.  It’s a lie!

That artificial banana flavoring is even worse.  The flavor doesn’t even come close to that of a real banana.  But every manufacturer uses that same imitation flavor and calls it “Banana Flavor.”  Just because they are all telling the same lie does not make it true.  It’s merely a conspiracy—the flavor conspiracy.

 

THE ANALOGY
A similar conspiracy is taking place in the world of strategic planning.  There is a lie out there that strategy is little more than setting numeric goals and then tracking progress against those goals.  Just shout the numeric goal and plot the progress on some dashboards and spreadsheets and you are done.  Your strategy is complete (except perhaps for additional shouting when the goals are not met).

In more and more companies, this is pretty much how strategy planning is defined.  It is a small offshoot from accounting, where being a CPA is considered a primary prerequisite to working in strategic planning (since those people are skilled in tracking numbers).  If you don’t believe me, go to a job openings site like www.indeed.com and search for strategic planning positions.  Most of the job descriptions tend to move in that direction.

But just because everyone is calling that “strategy” does not make is so, no more than claiming that artificial banana flavoring tastes like bananas makes it so.  It is still a lie.  The conspiracy of having large numbers of people promoting the lie may make it harder to go against the flow.  But that doesn’t mean the majority is right.

Just as those artificial flavors do not accurately represent what the true fruit flavors are, this idea of strategy as merely goal monitoring does not represent what true strategic planning is.   

 

THE PRINCIPLE
The principal here is that unless the planning community stands up to the goal monitoring conspiracy, real strategy will fall away.  It will be like people who never got to taste the real fruit, so they have no reason to reject the false artificial flavors.  Similarly, unless we show the business community what real strategy looks like, the false notion about strategy will be all they know, so they will have no reason to reject it.  They will not know what they are missing.  And they will be missing a lot.  In this blog, I will refer to what is missing as the three R’s.

1. Missing A Reason

Numerical goals are nice, but if you have no reason for why the goal is attainable, then there is no reason why you should assume the goal will be attained.  For example, I could have a goal of wanting to be seven feet tall (2.13 meters).  But I have no reason for why my mature body should suddenly become so much taller.  Therefore, I am unlikely to reach my goal.

Similarly, expecting a mature business model to suddenly jump significantly in sales or profits without any underlying reason is also highly unlikely.  Without a reason, that goal is rather worthless.  And improving the accuracy in your tracking of that goal does not make the goal any more reasonable. 

In my latest book, The Most Important Question, I talk about how the most important question in strategy is “Why should a customer naturally prefer me over the alternatives?”  If you have no reason for why a customer should prefer you, then they will not prefer you.  There will be no reason to expect results to suddenly get better and reach much higher numbers because you have not given customers a reason to reward you with higher numbers.

Sure, you can work a little harder and a little longer at the same old approach and perhaps squeeze out a few drops of extra performance.  But this has a very limited impact.  Any advantage from working harder is usually met with a competitive response which negates the advantage.  And the extra pressure could chase away your best employees or cause them to create more errors due to fatigue. 

 

Also, as markets change, you may find that your old status quo position is becoming less relevant.  And working harder at an obsolete approach doesn’t make it more relevant.  If you are not looking for reasons to succeed, you may not even notice the drift away from a relent reason to exist.  You will only see that goal.

Sure, you can overcome no reason to be preferred a bit by “bribing” the customer with lower prices or better deals.  This may increase sales a bit, but lower profits due to the cost of the added incentives.  And since most of these types of bribes or incentives are easy for competitors to copy or neutralize, they may not even improve sales.  Finally, since there is no underlying reason for why they customers should stay, you could lose those gains as soon as the “bribing” is stopped.

That is why true strategy doesn’t start with a numeric goal.  It starts with defining a position where you have a reason for being, a right to win.  It examines the marketplace to look for viable positions which are desirable, attainable and winnable.  It looks at both rational and emotional drivers of consumer behavior (something not found on a CPA exam).  It dreams up ways to be different from everyone else (whereas accounting tries to achieve conformity in rules with everyone else). 

And most importantly, true strategy questions the status quo to make sure you continue to have a reason to win in a changing marketplace.  It is willing to abandon old rules and adopt new ones.  It is a creative exercise more than a tracking exercise.

2. Missing Reinforcements

True strategy is about making strategic decisions regarding resources.  Where should I put extra resources; where should I take away resources?  Just having a numeric goal doesn’t tell you how to make those choices.   

Michael Porter says the essence of strategy is making the right trade-offs.  In other words, what do I de-emphasize, so that I can afford to create superiority somewhere else?  To answer that, you need to know:

 

       a)      Where you are trying to win (your reason);

b)      What business model makes winning possible;

c)      What attributes are most critical to that business model;

d)     How all the various parts of the business work together to reinforce the winning position.

True strategy isn’t just about telling the people you have today to go out and reach for a goal.  It may first be about eliminating lots of activities (and people) who need to be traded away so that investments can be made in new competencies and capabilities (and new people) that don’t currently exist in the business. 

Until you get the right infrastructure in place, shouting the goal may be shouting at the wrong people.  To win, you need to reinforce the areas of the business most critical to success.  To fund the reinforcement, you need to take funding away from less critical areas.  A true strategy points the way to how those trade-offs are made.  This is a complex task, requiring cooperation and a reduction of political in-fighting and turf wars (particularly from the areas being de-emphasized).  You won’t get that from just shouting a numerical goal.

3. Missing Restrictions   

Strategy is more than just saying which way to go.  It is also about saying which way not to go.  Strategy is about getting alignment around a proper go-to-market strategy.  It is about moving the company in a common direction, so that actions reinforce the reason for being. 

That means that there are more actions which can be wrong than can be right.  And if you are not specific about which activities are wrong, you will not stop them from occurring.   

There are lots of ways to hit a numeric goal.  And a lot of those ways can do harm to the long term prospects of a company.  For example, you can increase profits for a little while by:

a)      Eliminating necessary investments in maintenance or infrastructure;

b)      Destroying quality or damaging services;

c)      Raising prices to non-competitive levels.

In the long run, these actions can destroy a business.

If all you emphasize is hitting a goal, you can end up with all sorts of actions which hit the near-term goal, but destroy long-term prospects.  That is why a true strategy puts restrictions on activities to prevent wrong actions.  True strategy is more about doing the right thing than in hitting a number.  Because if you keep doing the right things, it is easier to hit good numbers year after year after year.  But if all you do is try to hit today’s number by any means possible, there may not be any future.

 

SUMMARY
Just because nearly everyone is doing the same thing doesn’t make it right.  Even if everyone says that imitation banana flavor tastes like bananas, it does not make it true.  Similarly, if most businesses are defining strategic planning as just goal setting and monitoring, that does not mean they are right.  True strategic planning is much more.  It involves determining a reason for winning, a well-thought out trade-off analysis about where to make reinforcements, and restrictions on bad behaviors.

 

FINAL THOUGHTS
Richard Rumelt, in his book Good Strategy/Bad Strategy, says that a goal monitoring approach is bad strategy.  More specifically, Rumelt says that this type of bad strategy “is not the same thing as no strategy or strategy which fails rather than succeeds.  Rather, it is an identifiable way of thinking and writing about strategy that has, unfortunately, been gaining ground.  Bad strategy is long on goals and short on policy and action.  It assumes that goals are all you need. It puts forward strategic objectives that are incoherent and, sometimes, totally impractical.” 

In other words, this approach is not just doing strategy poorly.  It is taking on an approach which is the enemy of true strategy and poisons the mind so that true strategy cannot occur.  We need to fight this conspiracy.