Strategic Planning Analogy #535: Only the Experienced Need Apply?

THE STORY
Of all the Help Wanted ads out there, I think the most inconsistent ones come from the advertising industry. They wax on about how they want a diverse workforce. They say that creative minds can come from any background and that they want to find all that diversity of creativity in order to serve their clients. Therefore, they claim to be open to looking at people from all walks of life to fill their job openings.

However, at the bottom of the advertising agency help wanted ads they always say that only people with 6 years or longer experience in an ad agency should apply for the job. Some say you need at least 10 years of ad agency experience.

How can you hire a diverse group of creative people from all walks of life if you only look in one place (inside other ad agencies)?

I pointed this inconsistency out to an ad agent executive who was hiring people, and her response was, “Yeah, we tend to do that.”

She didn’t say it was wrong, or a mistake, or apologize for it. She only admitted the hypocrisy was true.

It makes you wonder how an industry so full of professional advertising copywriters could write such bad Help Wanted ads.

THE ANALOGY
I understand that there are some benefits to hiring people who already have experience within that industry. But there are also some drawbacks. This is especially true if the key criterion for success is diversity in creative thought.

If you keep drawing your talent out the same pool of candidates, who are trained in doing things the same way, you are never going to get diversity. It’s like inbreeding. That leads to nothing but disease.

And if everyone is creative in exactly the same way, is that truly creativity or is it just repetition of the way things have always been done in the past?

I think a similar dilemma can occur in strategic planning. Great strategic planners are skilled in strategic thinking. This is a skill somewhat akin to creativity. It is a particular way of approaching problems that really isn’t related to a particular industry. Strategic thinkers can come from all sorts of diverse backgrounds.

Yet, when you look at Help Wanted ads for strategic planners, they almost always put a high premium on finding people who spent a large part of their career within the industry of the hiring company. Just because I spent a long period of time in an industry does not mean that I can think strategically about that industry.

Strategic thinking is either a skill that you have or a skill you do not have. If you have it, then you can help a business with its strategy, pretty much no matter what industry it is in or where your background is. Conversely, if you don’t have the skill, then you cannot help the business do strategy, even if you have decades of experience in that industry.

So why do so many firms look for strategists within the industry pool rather than the strategic thinking pool?

THE PRINCIPLE
The principle here is that if the critical success factor in strategic planners is strategic thinking, then hiring companies should put a higher priority on finding strategic thinkers then on finding people who know their industry.

Yes, I know…everyone will tell you that their industry is different. It has all sorts of quirks and idiosyncrasies, so you need to hire someone familiar with all of that.

Well, I’m here to tell you that it is a lot easier for a person gifted in strategic thinking to figure out your industry than it is for an industry veteran to learn strategic thinking if they are not naturally gifted in it. So go with best thinkers, regardless of their industry, because they can usually pick up the industry part pretty quickly once they are hired.

It reminds me of an old saying in the retail industry: “It’s better to hire someone naturally gifted in customer service and teach them retailing than to hire a retail veteran who doesn’t get customer service.” The idea is similar. If you get people with the right natural skills for success, you can teach them the industry. But if the natural skills are missing, then industry knowledge isn’t very useful.

Change Agents

I think this principal is especially true for strategic planners because of their common role as change agents. It often falls to the strategic planner the responsibility of figuring out how to change a business, so that it no longer continues the status quo.

This change can take many forms:

1. Diversification or transformation from a declining industry to a growth industry.
2. Reinventing the business model to be more in tune with a changing environment.
3. Looking for ways to positively differentiate one’s business from the competition by doing something different than what everyone else is doing.
4. Looking for competitive “white spaces” or “blue oceans”, i.e., new places where industries have not previously operated.

In all these cases, intimacy with the status quo is not of much use, because success is created by leaving the status quo to move in a new direction. If fact, too much experience in the status quo might blind you to all the new possibilities. Spending too much time perfecting one way of doing things may make it harder to think of other ways to do it.

By contrast, hiring a strategic thinker with a more diverse background may be better able to envision new ways to break away from the status quo. Because they are not bound by conventional industry wisdom, they are freer to envision better possibilities for change.

The Innovator’s Dilemma

In The Innovator’s Dilemma, Clayton Christensen talks about how most industries are revolutionized by those outside the industry rather than those on the inside. Those currently in the industry tend to focus on how to do the status quo better. Those from outside the industry look for radical new ways to better serve the customer. The outsiders then become the agents of change.

In the transformation from analog businesses to digital, it is the rare exception of a company that successfully maintained its leadership both before and after the transformation. Instead, the typical path was that the incumbent was replaced by an outsider.

The leaders in travel agencies were replaced by outsiders like Orbitz and Expedia. Kodak was replaced in imaging by outside firms like Apple and Instagram. Status quo brick and mortar retailers are losing out to outsiders like Amazon. One of the rare exceptions would be Staples, who is transferring its leadership from one space to the other. The rarity of exceptions tends to prove the case.

Given the preponderance of evidence that change tends to originate on the outside, why would you want to hire a change agent (strategist) whose majority of experience is from the inside? Looking outside seems to make sense.

SUMMARY
When hiring a strategic planner, there is often a bias to hire someone with industry experience. This can be a mistake for three reasons. First, strategic thinking for a strategist is a more critical skill than industry knowledge. Therefore, hire for strategic thinking and then teach them the industry.

Second, strategic planners are often the agents of change. Experience in the past is not very relevant when looking for ways to reinvent for the future. In fact, it may be a hindrance.

Third, history shows us that most revolutionary change comes from industry outsiders rather than insiders. Therefore, it can make sense to bring some of those outsiders into your company, so that you can better adapt to revolutionary change.

FINAL THOUGHTS
You probably don’t want an entire company to be filled with outsiders, but if there is any place where outsider thinking is beneficial, I would think it would be in strategic planning. Therefore, be careful of what you ask for in your Help Wanted ad. You may get what you ask for rather than what you really need.

Strategic Planning Analogy #518: Deadly Serious

THE STORY
I recently saw the movie “Inside Llewyn Davis.” It’s the fictional story of a folk singer back in the early 1960s. I also recently pulled out and listened to some old vinyl records of folk singer Bob Dylan from the early 1960s.

A common element about much of the folk music scene in the early 1960s was a sense of utter seriousness about the music. I could feel it in both the movie and the Bob Dylan records.

Many of the songs spoke about big, serious issues, like Peace & War, Love & Hate, Life & Death, and Social Injustice. The audiences at performances were quiet and serious. They focused on the words as if they were oracles from God. The mood was a bit like going to a (godless) church. And the backs of the albums were full of long liner notes from reputable reporters and serious music critics. They wrote about the music as if they were critiquing the works of the greatest masters of art and literature. Many of the folk artists were willing to almost starve to get the message out.

That’s quite a bit different from the music scene of today. Today’s popular music has been downgraded to little more than a background beat—a soundtrack to a video where someone wearing little clothing prances about. The suggestive video gets the emphasis and the background music feels like an afterthought. The audience is loud and rowdy—more like a party than a church. Nobody takes the “artists” like Miley Cyrus or Justin Bieber seriously. And you can tell they are in it for the money, not the message.

Things have certainly changed.

THE ANALOGY
I think a similar change has taken place in strategic planning. If you go back in time—to perhaps roughly around the 1980s—strategic planning was taken very seriously. Like the folk music of the early 1960s, the strategy topics covered in the past were large and deep—of life and death importance to the company or brand. Positioning, competencies, structure, differentiation—a search for a sort of “eternal purpose”, a reason for a brand to exist, a reason to keep the company from dying.

People with the word “strategy” in their title back then were treated with respect. The most respected consulting firms, who hired the best and the brightest, specialized in strategy. People listened attentively when they spoke on the subject, like hearing a sermon in church.

And like the long liner notes on the back of the folk records, there were lots of people writing serious books on the topic of strategy.

Now, it seems that strategic planning has, like today’s music, fallen out of seriousness. Strategic planners today are often relegated to merely creating the background beat—the monthly rhythm of KPI (Key Performance Indicator) reports, plan vs. actuals reports, and other such monthly scorecard updates. The real focus has moved elsewhere. Strategy work is seen as merely a temporary stopping point for high potential employees or those seeking to become something else, like a CFO—it is not a serious career destination. Even the big consulting firms rarely do strategy work anymore.

There aren’t many forums left where the big “life and death” issues of the corporation get serious discussion. Some of the newer social media firms take strategy work about as seriously as one would a Miley Cyrus video.

Things have certainly changed.

THE PRINCIPLE
The principal here is that long-term success requires making the right choices on some major, serious topics. Make the right decisions on these major topics and your company lives. If you ignore them, or guess wrongly, your company will die. They are, quite literally, life and death decisions.

When strategic planning is relegated to being just the rhythm section (only producing the monthly reports), companies lose an important focal point for dealing with these larger, serious issues. And that makes survival a lot riskier.

I will bundle these serious issues into two categories—“Reason To Live” questions and “Reason Not to Die” questions.

1. Reason to Live

If you want your company or offering to live, then you need a reason for why customers would want it to live. Otherwise, your company will die.

There is too much competition; too many alternatives. With all of those choices, a consumer is not forced into choosing your offering. They can choose something else, and unless you give them a reason to prefer your offering, they will choose something else. That is why I have said many times that the most important question in strategy is: What is it about your strategy which will cause customers to prefer you over the alternatives?

Preference is caused by offering a differential advantage over the alternatives. There are many ways to create this edge: by being faster, lower cost, higher quality, better service, more features, more specialization, higher convenience, and so on.

The important point here is that differential advantages rarely come about by accident. If all you do is the same thing everyone else is doing in your space, you end up just like everyone else in your space. There is no difference. There is no advantage. There is no real preference. At best, you gain customers randomly.

No, if you want to be preferred you have to be different; you have to choose a different strategic path than your competition. You have to choose where to build an inherent advantage. And then you have to design and build a different business model in order to profitably deliver your different results.

All of that requires serious discussions. The answers won’t turn up in a monthly update report. You need serious time devoted to the issue.

It bothers me that so many people just look to where the hot business space is and then rush in to fill the demand—just like thousands of other companies. Yes, there can be big winners like Apple, Google and Facebook. But the vast majority of the ones jumping into hot spaces fail.

They are lured into the hot space just like people are lured by the hot singer prancing about in the music videos. It looks so inviting. But because there is no substance built behind the scenes, it fades away.

Before jumping into the hot space, ask yourself some serious questions. What would give me an inherent edge over everyone else jumping into this space? What would I need to do differently in order to create that edge? How do I build a business model that excels in delivering that edge? Where do I get the competencies and capacities to pull it off? How do I build a superior advantage over others who may want to create the same advantage?

Without these serious discussions, you are not designing a reason for living. You are merely playing the lottery and hoping to get lucky. And we all know that nearly everyone who plays the lottery loses.

2. Reason to Not Die

Just because a company is successful today does not mean that it will continue to succeed. Many one-time great and successful companies have died or nearly died. Just think of Kodak, Lehman Brothers, Tribune Co., Global Crossing, Woolworth’s (US), and Sears.

The problem is that the environment changes. What succeeds in one environment may fail when that environment changes. Past success is no guarantee that success will continue into that changing world. Instead, one needs to be examining the environment and asking the tough, serious questions about whether your business is falling out of favor with change and on a path to death. And, if the current path is death, what big changes need to be made to avoid death.

The companies above either ignored the changes or made bad choices about how to deal with the change. Kodak bungled the transition from analog film to digital imaging. Tribune Co. bungled the transition from newspapers to digital media. Lehman Brothers misread the future of mortgages. Global Crossing misread the evolution of communications. Woolworth’s and Sears stayed in the middle while retail bifurcated into high-end and discount.

If all you do is measure success over the past month, you will miss the bigger picture. Not only can it make you blind to the larger changes, it can actually make the transition even harder. For example, sometimes the path from the old strategic vision to the new requires taking a temporary dip in earnings, as investments are shifted from the old to the new. The only way to preserve the near-term results may be to delay or ignore investments into the new. As a result, you miss the transition to the new and you die like the examples.

Take time to stand back and seriously assess the bigger, longer term picture. That way, you can get in front of the change and successfully transition into the new environment. If you don’t, you will probably die.

SUMMARY
Companies fail all the time. Usually, they fail because they did not properly address the big, serious issues of life and death. Companies live/thrive if they provide a differential advantage by choosing the right way to be different. Companies avoid death if they adapt to the changing environment. Unless you devote significant time to seriously discuss these issues, you will not ultimately survive. That is why I am in favor of strong strategic planning disciplines which tackle these tough issues.

FINAL THOUGHTS
Just because serious strategic planning may appear to be out of fashion does not mean that many of its critical functions are no longer necessary.

Strategic Planning Analogy #504: Fixing a Plane After it Crashes

THE STORY

After 17 years, the tragic crash of TWA flight 800 is back in the news. A documentary has come out claiming that the official explanation of the crash (static electricity igniting the fuel) is wrong. Instead, the documentary endorses the alternative explanation that the plane had been attacked with a rocket, perhaps sent by terrorists.

I have a couple of thoughts about this. First, I can easily understand why so many prefer the rocket attack explanation. After all, it always feels better to blame some outside force (beyond our control) for our problems than to admit internal incompetence, either in the plane design, maintenance or operation.

My second thought is that for the 230 aboard that flight who died 17 years ago, it largely doesn’t matter anymore which theory is correct. Neither explanation will bring them back to life or restore the plane so that they could reach their original destination. For them, it is too late.

THE ANALOGY

The business world is full of tragedies. Companies crash and burn, negatively affecting hundreds, if not thousands, of people. In terms of financial impact, these corporate tragedies are larger than the tragedy of TWA flight 800.

When these events happen, it is common for the leaders of these destroyed organizations to take an approach similar to the one in the TWA documentary—they try to blame it on outside forces beyond their control. “It wasn’t me or my leadership which caused the disaster,” they say. “No. It was the fault of some evil outside force which nobody could have prevented.”

Outside forces which get the blame can include international economic conditions, the weather, political unrest, too much (or too little) government intervention, illegal market manipulations, unfair competitive environment, and so on. The logic is that despite the Herculean effort of management to counter these evil outside forces, the situation was just too great. Nobody could have saved the company.

In a narrow sense, there may even be some truth to these claims. Dire situations can be devastating to companies. But this explanation only works if your time horizon is narrow.

In reality, strong, well run companies can anticipate most of the potential tragedies which could occur. Using strategic planning and scenario analyses, they can anticipate and be prepared for the worst. In fact, the great strategic plans avoid the disasters entirely by steering their company in a new direction before the outside forces come to pass.

Sure, it’s easy to claim that nothing can be done if you wait until your “plane” is on fire and already close to crashing before looking for a solution. But, in most cases, advanced strategic thinking years earlier could have provided a solution so that you avoid the fire altogether.

The best time for analysis is not after the crash occurs. By then, it is too late. The tragic results have already occurred; the damage is already done. No, the best time for analysis is years, if not decades in advance. That way, you have sufficient time to use the knowledge to create a path which puts a company out of harm’s way.

THE PRINCIPLE

The underlying principle here is that the best time for critical strategic analysis is not during (or after) a crisis, but before the crisis, when times are still relatively good. By attacking potential future disasters while times are still good, you have many advantages:

1)     You have more time to prepare and implement a solution;

2)     You have more cash flow to apply to the solution;

3)     You still have a strong reputation, good market share, and a consumer following, making the transition easier for your key stakeholders;

4)     You can analyze the problem more rationally, instead of making rash moves in the heat of the disaster.

5)     If you have to retreat from a business to avoid the future disaster, there is still time to find buyers for it who will pay a good price.

By contrast, if you wait until the disaster is upon you before creating an exit strategy, the situation is working against you:

1)     You have very little time to find and implement a new course;

2)     Your options are limited because your cash flow is already decimated and customers have already started abandoning you.

3)     The crisis is so obvious that nobody wants to bail you out by paying a handsome sum to take over your disaster.

Example #1: Department Stores

Look at the situation JCPenney is in. It’s on fire and looks like it could be headed for a crash. There is a lot of speculation about what or who to blame for the disastrous results of late, such as losing about a third of their business.

Some would say that the problems for the department store industry are so bad that there was really nothing that any leader could have done to save JCPenney, be that Ron Johnson, the recently fired CEO, or Mike Ullman, the replacement executive (as well as having been the top executive prior to Johnson).  The reasoning is that the department store industry was doomed due to outside economic, technological and competitive forces. It is beyond redemption.

But that is only if you start trying to fix the problem now, after the plane is already on fire.

Look at the Dayton Hudson Corporation. They used to be a major player in the department store industry decades ago. The executives there were smart. They knew that the best days for the department store format were behind them. They knew that the format was on a course headed for eventual bad times.

So while times were still good, Dayton Hudson started selling off its department store properties. First, they got rid of their holdings in the fast-growing southwestern part of the US in the 1980s, when competitors were trying to out-bid each other to buy them. They finally sold the remainder of their department stores to the May Company (another department store company) in 2004 (for a good price).

But then the bad times started to hit the industry. Soon thereafter, the May Company was in such bad shape that they had to sell themselves to Federated (now called Macy’s) at a terrible price. And now, almost all the remaining department store companies are struggling to find a winning strategy, like JCPenney, Sears and Bon-Ton.

What did Dayton Hudson do? They took the money from the sale of the department stores to invest in the future, their Target store chain. Dayton Hudson (now called Target Corp.) is doing well and avoided the department store mess.  

The point is that if you wait until the industry is in trouble (like JCPenney) before crafting a solution, you will find it very difficult. But if you start crafting a solution while the times were still good (like Dayton Hudson), you have a greater chance of success.

Other Examples

A similar situation occurred in grocery wholesaling. To an astute observer, it was obvious decades ago that the small independent grocer (the key customer of grocery wholesalers) was entering a troubling future. Walmart supercenters and the big grocery chains were putting pressure on many of the independents. Eventually, it was likely that many of these independent grocers would be out of business. It doesn’t take an expert to figure out that if your key customer is going out of business, it doesn’t bode well for those supplying them.

Therefore, while times were still good, Cardinal Foods decided to act. They used their cash flow to diversify into a field where their distribution expertise had longer life—pharmaceuticals. Now, Cardinal Foods, whose name was changed to Cardinal Health, is a strong #21 on the Fortune 500 while many of the few remaining grocery wholesalers are in challenging times.

Google did not wait until its computer-based business model was in trouble before pushing hard into the smartphone space with Android. Google did it while it could still leverage its strength. Amazon did not wait for its strength in the computer-based ecommerce era to end before launching Kindle.  By contrast, Zynga was already in trouble from smartphones taking over gaming from the computer when it decided to take the challenge seriously (and is having serious problems now making the transition because it waited until it was in a position of weakness).

There are many more examples I could mention. I’ve talked about some in previous blogs here, here and here.

SUMMARY

All strategies eventually fail. If you wait until failure comes before starting to change, you will most likely not change successfully.  By contrast, if you start adapting while times are still good, you are more likely to make a successful transition.

FINAL THOUGHTS

Think of strategic planning as a parachute to help escape problems. But a parachute is of no use if you wait until the plane has already crashed before putting it on. It only helps if you escape while the plane is still flying.

Strategic Planning Analogy #480: Landing a Strategy

THE STORY
I used to live in a city which had a small regional airport.  The city wanted to get more of the large airlines to land at this airport, but the airlines kept refusing.

The airlines said that they would not schedule flights to that airport because the runway was too short.  Sure, it was long enough to land the smaller planes that the airlines use, but not long enough to land the largest jets.  Because the airlines want flexibility in the use of their airplane fleet, they didn’t want to schedule flights into airports which couldn’t handle their largest planes.

After hearing the complaints, the city invested in building longer runways.  And not long after the longer runway was built, a large 747 jumbo jet landed at the airport in grand fashion.

I think it was many, many years later before the second large jet landed there, but it didn’t matter.  The renovations and the longer runway resulted in getting more scheduled flights at the airport.

 

THE ANALOGY
I like to use the term “landing a strategy.”  This concept refers to getting a strategy from being just a cool idea floating in the clouds to being a reality playing out on the ground where the company is operating.

Landing a strategy is a lot like landing an airplane.  If the airport’s runway is too short, the larger jet will not be fully landed before it runs out of runway.  The plane will keep moving at a high rate of speed beyond the edge of the runway and crash into something, creating a total disaster.  That’s why airlines insist on having long runways before committing to an airport.

It takes a lot of time and money to land a strategy (to get it from idea to reality).  If you run out of time and money before the strategy is fully landed, you are like a pilot in a big plane that ran out of runway.  Your strategic attempts are about to go off the runway and crash into something, creating a total disaster.

Due to our optimism, we may think we need a shorter runway (less time and money) than we really need to land our strategy.  As a result, we may already be well into the strategic transformation before we realize that we are trying to land our strategy at an airport (i.e., company) whose runway is not long enough (not enough time or money to finish the transformation).  Then we find ourselves frantically trying to lengthen the runway at the same time our plane (i.e, strategy) is already approaching the runway.  That’s not a very wise approach.

When a strategic transformation runs out of runway, the worst possible scenario occurs.  The old strategy is bankrupt because all the time and effort and money went into the transformation.  The old strategy is too obsolete to create sufficient cash flow to keep the transformation going (running out of money). The time for bankruptcy under the old model keeps getting closer (running out of time).  Yet, because there is not enough time and money left to finish the transition to the new strategy, you don’t end up the replacement strategy, either.  Instead, you are stuck with neither strategy.  A total disaster.

Think about Kodak.  It didn’t start trying to land a digital strategy until the analog business was almost dead.  The old analog business was not producing cash flow and was soon to die (no time or money).  As a result, Kodak’s runway was too short.  They ran out of time and money before a digital strategy could be landed.  The company ran off the runway and imploded.

The airlines in the story had a safer approach.  First make sure the runway is plenty long enough.  Then, only after the long runway is built, will the airlines consider trying land planes there.  Our strategic approaches could learn from this.

 

THE PRINCIPLE
The principle here is about change management.  Nearly all new strategic initiatives require significant change in the business in order to become reality.  You may have a great new strategy, but if you mis-manage the change process to get there, you will not effectively land the strategy.  It will crash and make a disaster.  

If you cannot effectively land the strategy, it is irrelevant how great that new strategy was.  It will crash when you run out of runway, just like a bad strategy.

Therefore, a key piece of change management needs to be assessment of the length of your runway.  If the runway isn’t long enough (not enough time and money), then the process is doomed.

Option #1 Lengthening the Runway

If the runway is too short, one solution may be to lengthen the runway.  In other words, before embarking on the transformation, look for ways to either:

1. Increase Cash Flow; or
2. Slow Down the Demise of the Status Quo.

These actions may not have any direct relationship to the change you are trying to accomplish, but if you do not do them, you will not have enough time or money to do those things which directly relate to the change.  So you need to do them as well.

Tactics to lengthen the runway could include:

1. Selling off peripheral assets.
2. Restructuring the Balance Sheet.
3. Massive layoffs in peripheral areas
4. Sale and lease-back of properties.
5. Looking for legal or governmental protections of the core to keep threats to the core further away.

One of the main reasons why Ford Motor Company did not have to go through bankruptcy and government bailout while GM and Chrysler did was because Ford had taken many of these types of steps to lengthen their runway prior to the great recession.  As a result, Ford’s runway was long enough to last until they could transition through the economic recession and get to their revitalized strategy.

GM and Chrysler ran out of runway because they did not do enough of these types of things.  Without a lot of outside help, they would have crashed when their runways ran out.

Option #2 Shortening the Plane

If lengthening the runway is not enough, you can try to switch to a smaller plane.  By this, I mean that instead of trying to create massive change all at once, you can chop up the change into smaller bundles (like smaller planes) which require less time and money to land (and thus can use a shorter runway).  Those smaller changes with the quickest payback can be done first and create the new money and extra time needed to land the rest of the transformation.

Thus, you fund the latter change by strategically creating funding via the early changes.

Netflix was originally designed to be a digital downloading service (which is why the company was called Netflix instead of Mailflix).  However, the company realized that it would take massive amounts of time and money to create the Netflix model.  Therefore, Netflix started with a smaller plane (movies by mail). 

Movies by mail required less time and money to start up.  And it got Netflix a huge subscriber base and clout in the marketplace that could be applied to the ultimate vision.  And because the near-term model was profitable, it could fund the efforts needed to make the ultimate transition.

Option #3 Changing the Flight Schedule

A third option is to change the scheduling of your flight—prepare to land your plane earlier.  The idea here is that if you start the transformation earlier, before the status quo deteriorates too much, you have many advantages:

1. The old strategy is stronger and producing more cash flow to fund the landing.
2. The company’s image and clout are stronger which makes it easier to introduce your change to the marketplace.
3. The ultimate demise of the status quo is further away, so you have more time.

Kodak essentially invented the world digital imaging.  They had plenty of time, clout and money to implement the change.  The problem was they waited too long to do anything about it.  If they had scheduled the landing of the digital transformation much earlier, the odds are good that it would have succeeded. 

The problem is that companies worry about cannibalization.  After all, the sooner you start the transformation, the quicker you cannibalize the old core.  What you need to realize is that someone is going to eat your core.  Your only real option is to decide whether you are going to do the eating or someone else is going to do the eating.  And if you wait, like Kodak did, and let the competition eat your core, you have no runway to get to the replacement.  All you are is eaten.

 

SUMMARY
Strategic initiatives usually require change.  Change requires time and money (and usually more than you initially realize).  Therefore, if you want to land your strategy, you’d better make sure there is enough time and money to get the change implemented.  If there isn’t, you will need to adjust your approach to that change by either:

1. Finding more time and money;
2. Starting with smaller change initiative bundles; or
3. Starting the whole process sooner.

 
FINAL THOUGHTS
I worked with a company that was running out of runway.  They did not have enough time or money to finish their transition.  The solution they picked was to sell the business to someone with deeper pockets and more time.  In other words, they sold the plane to a company which owned a better airport with a longer runway.  So, before you panic, look for creative ways to get a longer runway.  Creative solutions are out there.

Strategic Planning Analogy #468: Defeating Concrete

 
THE STORY
The previous owners of my house had put up a pole in the back yard to connect a clothesline to the house, so that one could hang wet laundry outside to dry.  I did not dry clothes outside, so one day I decided to take down that pole.

The job was a lot more difficult than I thought it would be, because the pole was secured in place with concrete.  I had no idea how much concrete was used until I tried to dig out the pole.  The previous owners had used a lot.

With a great deal of effort, I eventually got the pole out of the ground.  Then, I took a hammer to the concrete in order to break it up into smaller pieces.  I was able to discard the smaller pieces of concrete in the trash can.

 

THE ANALOGY
There is something about concrete which seems permanent.  Once it hardens, it appears like it will last forever.  But I was able to destroy that concrete in my backyard.  The pole was no longer permanent.  I threw it all away.

In the business world, market conditions can also seem quite permanent, like concrete.  This feeling is especially true in mature businesses.  The market has already consolidated; the few remaining players have staked out their positions.  It looks like nothing will change—it is as if everything is secured in place with concrete.   However, just as I was able to get rid of the concrete in my back yard, market conditions can also change, even in mature markets.  A seemingly solid position, like that pole, can be thrown away.

Therefore, we cannot sit back and relax.  We cannot rely on the markets to stay unchanging as if set in concrete.  We still need strategic planning.

 

THE PRINCIPLE
This is another blog which tackles arguments for abandoning strategic planning.  In the past, we refuted the argument that certain markets are moving so fast that strategic planning is irrelevant.  In this blog we refute the argument that certain markets are moving too slow to require strategic planning.

Let’s face it.  Although emerging nations and new industries are exciting to talk about, most companies operate the majority of their business in relatively mature sectors or markets.  Mature markets tend to have the following characteristics:

1)      The market is consolidated down to a few players (who don’t change much over time).

2)      The reputations and brand positions of the remaining players are well set (like concrete) and it is difficult to change a customer’s long held perceptions of the remaining players.

3)      Changes in market share are very small and don’t tend to occur very often (like they are set in concrete, too).

 
      4)      The rules for how everyone plays the game appear to be set in concrete as well.

In such an environment, many will reach the conclusion that sophisticated strategic planning is a waste of time and money.  If everything is set in concrete, then why bother spending a lot of effort trying to change it with strategy?  Focusing on doing things a little better and a little cheaper is all you can do.  So stop wasting effort on strategy and just work a little harder and a little cheaper.

However, as we saw in the story, concrete may not be as permanent as it appears.  Change still happens.  And we can become the unfortunate victims of change if we do nothing, or we can take advantage of change if we work to destroy the concrete as I did in my back yard.

Coke Vs. Pepsi

Think about Coke versus Pepsi.  The cola market is very mature in most places.  Coke and Pepsi have eliminated or weakened most of the serious challengers.  Growth is minimal overall and market share doesn’t change very much.  If you are a dedicated Coke drinker, you are probably not going to suddenly shift your alliance and dedication to Pepsi.  The individual brand images have been too strong for too long.

So, why should firms in mature markets like Coke & Pepsi concern themselves with sophisticated strategy?  Because it still matters.

1) The market may be set in concrete, but customers can walk away.

If all one does is focus on doing the same thing better or cheaper, one gets myopically focused on the false assumption that there are no alternatives.  Everything appears to take place in my little area of concrete.  But customers can use your concrete as a sidewalk to move to another market.

Yes, core consumer problems may last forever, but the way they satisfy the problem can change radically.  I may always have thirst, but I do not have to drink a cola.  Starbucks started a revolution to make coffee-based drinks a viable alternative to cola for an entire generation.  Trends in health, wellness and other events have created a rise in demand for fruit drinks, energy drinks, vitamin drinks, etc.  Suddenly, the mature cola industry is becoming a declining industry.

If your feet are stuck in your own industry’s concrete, you may not look up to see the customer revolution and you may not be able to move fast enough to get to where the customers are going.  Suddenly it is no longer a war between Coke and Pepsi.  You are fighting a whole host of alternatives who are not playing by the old rules.

Radical changes can come from all sorts of places.  People are buying fewer watches because they can just look at the smartphone which is always in their hand showing the time of day.  Why buy a newspaper when you can get live updates from everywhere all the time in the digital space?   Why buy meal ingredients at the supermarket and spend the time preparing them when restaurant value meals can be cheaper, easier and faster?

Strategic planning is needed to spot these radical changes before it is too late and then prepare a response.  Perhaps if you make watches, you need to reposition yourself less as a timepiece and more as a piece of jewelry.  Perhaps if you are a supermarket, you need to sell your own value meals.  If you are a newspaper, perhaps you need to radically transform your entire business model.  If you are Coke or Pepsi, you may need to diversify.  Finding and building the right response can take a lot of time and a lot of thought.  An ongoing strategic planning program gives you that time and that thought. 

If you wait until the revolution sneaks up on you, then it is too late.   At that point, all you can do is either acquire into the revolution at a price which is too high to make a decent return, or sell out of the old business at a price which is too low to make any of your stakeholders happy. 

Just working a little harder and cheaper at making Coke or Pepsi will not get someone to stay if they find that coffee or fruit juice or energy drinks are a better solution for them than cola.  And if that is all you do (the status quo a little harder and cheaper), that concrete is going to look more like a granite tombstone.

2) Rules are just words on a piece of paper.

Just because something has always been done the same way does not mean it is the only way.  Rules are just words on a piece of paper.  They do not have to be etched in stone (or concrete).  If you rewrite the rules, perhaps you can get a huge advantage—even if the market is labeled as “mature.”

Retailers like Aldi in grocery retail and Ashley in furniture retail found a way to reinvent mature businesses by re-writing the rules.  They designed their own specifications and went directly to the factories to have products manufactured just for them.  By cutting out the middle man, they were able to improve margins while cutting prices.  This gives them an edge over people playing by the old rules.  A similar event occurred when “fast fashion” retailers like H&M and Zara rewrote the rules about inventory (much less) and fashion seasons (much more) and made huge gains in an otherwise mature business.

Apple rewrote the rules about how music got distributed and became a leading player in a market where they had no prior presence.  They broke through the concrete because they saw it as merely paper—a place where they could write new rules.

Rethinking an entire business model does not come out of just doing the same old thing harder, faster, and cheaper.  Working intently on carbon paper will not create the photocopier.  Working intently on books will not make an e-reader.  No, new business models require new thinking.  And if you eliminate strategic planning, there will not be a strong advocate for encouraging out-of-the box thinking and experimentation on a regular basis.

And if you only work on executing the old rules better (rather than looking for new rules), you will be surprised when a competitor rewrites the rules and takes most of your business away.

 

SUMMARY
Labeling a business as mature does provide an excuse to eliminate or dilute the strategic planning effort.  Radical improvements can still be gained if one uses strategic planning to either find ways to move to new solutions with the customer or to find ways to rewrite the rules for offering the old solutions.  Conversely, if you stop this type of planning and your competition (current or future) do not, then others will get those radical improvements at your expense.

 

FINAL THOUGHTS
In a mature business, don’t think of strategic planning as an expense to be cut, but as a doorway to leaps in opportunity that cannot otherwise be found when the status quo is hardening.

Strategic Planning Analogy #448: Tornado Chasers

THE STORY
Tornado chasers are an odd bunch of people. Some would say they are crazy.

First, they spend countless hours in research looking the next possibility of a tornado attack. Most people would say that there is enough trouble coming our way on its own, so don’t look for any extra trouble. But tornado chasers are driven to proactively look for the next opportunity for danger. (Yes, to them tornados are an “opportunity”).

Second, once they find the danger, tornado chasers don’t run away from it. No, they run towards it. They try to get as close to the tornado as they can. They chase after it as fast as they can as soon as they can.

Third, the tornado chasers don’t stop after doing it once. They continue to do it year after year after year, running towards danger.

Yes, that does sound a bit crazy.

THE ANALOGY
Tornados are not the only dangerous and destructive force out there. Just look at the business landscape. Large, formerly great, industry-leading companies disappear all the time. It is as if a tornado wiped them out. Nothing is left but debris. Enron; PanAm; Lehman Brothers; Kodak; Firestone; Worldcom; Montgomery Ward. and the list goes on.

Sometimes the destructive force starts from within the company. Sometimes the destructive force that destroys the company comes from the outside environment. But no matter where the force comes from, the ultimate blame for the destruction needs to fall on management. It’s their fault, because they did not come up with a strategy to deal with the destructive force.

Destruction is not inevitable. Other companies have been faced with similar destructive forces and survived. They reinvented themselves to stay on top. Like Judo, they used the dangerous force coming at them and redirected it to their advantage.

In many ways, these surviving firms are like the tornado chasers. Rather than ignore or avoid danger, they embrace it. They look for it. They run towards it to take it on before it has a chance to destroy them.

At first this approach may seem crazy, but as we will see in this blog, it is a lot safer for businesses to chase after the tornado than to just sit in their headquarters and have the tornado come and blow them away.

THE PRINCIPLE
The principle here is that often times the best way to deal with a destructive force is not by avoiding it or by building a bigger defense. That can be the path to ruin.

As Victor Hugo put it, “There is nothing more powerful than an idea whose time has come.” It is so powerful that no defense can overcome it. When it was time for the digital revolution, there was nothing the analog world could do to prevent it. The force was too powerful. The analog firms who tried to ignore or stop the revolution lost. The firms which embraced the transformation won.

No, the best approach is often to run towards the destructive force and embrace it. We need to become more like tornado chasers.

In particular, there are four things we can learn from tornado chasers which can help our business thrive in world of destructive forces.

1. Look for Danger Before It Exists
Tornado chasers don’t wait until a tornado has touched down before taking action. No, they look for meteorological conditions where tornados MIGHT appear. In other words, they prepare for tornados before the tornado exists by examining conditions which can lead to tornados. That way, they are fully prepared in advance—in the right place at the right time when the tornado comes.

This same principle applies to business. If you wait until a danger is in full force before starting action, it is usually too late. There is not enough time to respond. You will miss your window of opportunity. The rules will already be re-written by others. You will be left out. In addition, by acting early, you still have the strong cash flow of your core to help fund the battle. The more you wait, the more cash flow you will need in the fight, and the less you will be generating (as the force increasing eats away at your core).

Think about Google and its Android platform. Android was conceived at a time when smartphones were little more than a novelty and the thought of doing meaningful activity on them via the internet was little more than a dream. However, like a tornado chaser, Google could see that mobile could create the condition for a major competitor force in the future which could blow away Google’s computer-based search foundation.

Therefore, they went to mobile early and created a way to harness the eventual force to their advantage. Experts predict that by 2013, internet access via mobile will surpass internet access via mobile. It has indeed become a major force which could have destroyed Google’s base. However, because Google attacked the danger before it existed (via Android), they have used the force to their advantage and can move their search strength to the mobile platform.

Contrast this to the history of Microsoft. Historically, Microsoft has waited until the force of threat is already quite strong before making a move. It occurred with internet access, cloud computing and mobile. With mobile already larger than computers, Microsoft is still just trying to penetrate the market. They are very vulnerable to suffering significant damage from this force because they waited too long.

Do you have an eye out looking for where potential dangers can occur, or do you wait until the danger has built up a force of power before taking action.

2. Move to Where the Action Is
Tornado chasers don’t wait for the storm to come to them. They go to the storm. This is also true for businesses. In a prior blog, I explained why it is usually advantageous to fight your battles at the periphery before it gets to your core. If the new force is going to be the next new thing, then you need to embrace the force before it makes you obsolete.

When Google saw internet time moving to mobile, they went to mobile. When Sam Walton saw that supercenters, with groceries, had the potential to under-price his discount stores, he shifted to Wal-Mart Supercenters. When Amazon saw how digital books could ruin their business model, they agressively brought out the Kindle reader.

Now people could argue that Google had no right to get into creating a mobile platform. Their expertise was search algorithms and advertising. It looked crazy. People said the same thing when Wal-Mart added groceries—it was not a part of their expertise. It looked crazy. Amazon was a digital retailer, yet it reinvented itself as a device manufacturer with the Kindle. It looked crazy.

But here is the point. If the new force is drawing away your customers, you don’t have much of a choice. Either you find a way to become an expert in the new area, or the force will blow you away, like a trailer park in the path of a tornado.

3. Take the Threat Seriously
Most tornado chasers are not idiots. They realize that tornados are powerful, destructive forces. They respect that power and take precautions. They take their threat seriously. That’s how they stay alive. The same should be true for businesses. When a new threat arises, don’t be casual and half-hearted. Treat the threat for what it truly is—a force with the potential to destroy your brand’s very existence. Take it seriously and fight as if your life depended on it.

Google took the mobile threat very seriously. They did not wait for someone to build a platform to put their search engine on. They made sure there was a platform available for them by building it themselves (Android). In addition, they were concerned enough with the possibility that the Apple platform would try to lock them out that they gave away the Android for free. Now that shows how seriously Google respected the threat. As a result, Android now has close to half the market share and Google remains a powerful force in search and advertising.

Facebook could see a potentially forceful threat by Instagram, the photo-sharing site. They took the threat so seriously that they immediately purchased the company for $1 billion, even though the sight had no revenue. Now the potential threat is an ally.

Other companies often will put up a small fight in the new space, but do not treat the battle as seriously as they should. They do not fully respect the power of the new force to destroy them. Kodak did not fight the digital imaging war as seriously as it should have.  As a result, it did not land a new position in the digital space and had the digital competition blow away Kodak’s analog film business. It ended up with nothing.

Whereas Wal-Mart was willing to bet the company on an aggressive push into supercenters, Kmart only dabbled half-heartedly with the concept. As a result, Wal-Mart grew ever-stronger and Kmart grew ever weaker.

All strategies eventually fail. They become overtaken by a new force in the marketplace. Resisting the new force in an attempt to save the core usually leads to failure in both spaces. You end up with nothing. Take the threat seriously for its potential to wipe away your core and envision a way to win even if your core is severely damaged (or completely wiped out).

4. Never Rest
The thing about tornados is that they come back every year. You can never say that you’ve seen the last tornado. There will always be another one.

The same is true in business. Forces of change will continue to come. Today’s status quo will be replaced by the next big thing. And that next big thing will eventually be replaced as well. It doesn’t stop.

As a result, one cannot rest on the past. One has to always keep an eye out for the next storm.

That is what makes the half-hearted moves by Kmart into supercenters so interesting. Back in the 1960s, Kmart (then called Kresge) could see that the force of discounting was going to destroy their Kresge variety stores. Therefore they bet the company on the new trend by abandoning the variety stores and aggressively embracing the Kmart discount store format. As a result, Kmart was a powerful, dominant, and highly profitable force in retail for many, many years.

Yet, when the supercenter force came, they did not follow the pattern of destroying the old (Kresge) for the new (Kmart). They rested on the strength of Kmart and only pursued supercenters as an additional piece—not as a replacement. As a result, Wal-Mart supercenters are replacing Kmart in the marketplace.

And now we look at the force of e-commerce on the brick and mortar stores. Was Wal-Mart resting on its supercenter success too much and not taking the e-commerce threat seriously enough? Has Best Buy rested on its past too much and missed the next retail transformation? Only time will tell.

Yahoo and AOL may have lead the change on one wave of force. However, they may get wiped away by the current wave. You can never rest on the past.

SUMMARY
Economist Joseph Schumpeter coined the term “creative destruction” to describe how capitalism works. His point was that there are forces in the economy which destroy the status quo, much like a tornado. The status quo is then replaced by something more in tune with the marketplace. As a business person, you need to devise strategies to use creative destruction to your advantage. Otherwise, the natural forces will wipe you away.

FINAL THOUGHTS
Which is more dangerous—going out to attack the tornado or sitting inside a mobile home not knowing that a tornado is about to cross your path and destroy your existence? Get out of hiding and embrace the new force before it blows you away.

Strategic Planning Analogy #446: The Mighty Fall, Too

THE STORY
I had a summer job in college going door to door in the worst sections of the inner city of Detroit. My job was to interview residents at each house to get information for creating a directory.

It was a tough job. I had people come to the door with rifles and attack dogs. I had my life threatened. I had my car stolen. All so that I could get the information for the directory.

It seems kind of silly now all these decades later. Today, people voluntarily give up more information than I was asking for to Facebook all the time. And if you want to learn about people, there are all sorts of web sites you can go to. It can all be done digitally, from the privacy of your own home. There is no need to go outdoors and put your life at risk like I did.

THE ANALOGY
Over time, the idea of what is a “normal” activity changes. When I was in college, the normal way to get data was out of books and printed directories. The people who put those directories together made a lot of money because that data was scarce. The publishers could afford to send out thousands of people like me to go door to door to get that data.

Today, that activity seems abnormal. Data is easy to come by and quite often free. All you have to do is go to the internet. And the data on the internet is often volunteered for free. That is the new normal activity. And as we will see below, this new normal is causing the directory business to fall apart.

When a business finds a way to exploit the normal way things get done, its leaders can get complacent. By becoming a huge, highly profitable player within that “normal,” you can start to feel invulnerable—too big to fail.

Unfortunately, today’s normal can become tomorrow’s idea of silliness. And being #1 at something people find to be silly and antiquated isn’t worth much. Yes, even the very big can become irrelevant if the new normal makes them obsolete.

THE PRINCIPLE
The principle here is that all strategies eventually fail—even the really good and really successful ones. The reason all strategies eventually fail is because the environmental context in which that strategy operates does not stay constant. It changes over time. Eventually that environment will change so much that your old strategy is no longer relevant.

Normal is not permanent. It only lasts for a limited time. Then a new normal appears. And these days, that time span keeps getting shorter. And being big and highly successful in the past is no guarantee that you will even survive in the new normal.

Two recent stories in the news point this out.

The Demise of Phone Directories
On Monday, April 9th, AT&T announced that it was selling off a majority stake in its Yellow Pages phone directory business. They did this because the profitability of the Yellow Pages model was falling apart. Revenues had declined 30% in just two years. Impairment charges were wiping out the profits. Verizon sold off its competing unit in 2006, which filed for bankruptcy in 2009.

At one time, the Yellow Pages were one of the most profitable legal enterprises on the planet. Businesses paid a fortune to get a tiny ad in the directory because it was a highly valued place to be. After all, the normal way people found businesses was to look in the yellow pages. It was such a valuable book, that people wanted to steal copies. As a result, places in the past would chain the directory to the wall so that it could not be removed.

Now, that old normal seems a little silly. Why trust a book full of biased ads when you can go to places on the internet like Yelp or Angie’s List and see unbiased reviews from people who used the service in question. That’s why one of the most profitable businesses of the 20th century is now becoming obsolete. It no longer makes sense in the new normal.

The Demise of Big Box Stores
On Tuesday, April 10th, Best Buy announced that its CEO Brian Dunn was immediately stepping down. Although there were a lot of reasons for this, part of it was due to the recent poor performance of the company. Sales, traffic and profitability were all going down, and it appeared they would continue to go down. The stock price for Best Buy has dropped over 55% from where it was five years ago.

What happened? Best Buy dominated electronics retailing for two decades. It was huge. It was highly profitable. Now, it cannot find enough profitable items to fill up its large stores.

One of the problems is a concept called “showrooming.” This is where people come to the store to find out what they want and then go buy it at a cheaper price from an online competitor. Customers bring their smartphones into the store and check to see if they can get a better deal somewhere else before picking up the item. And since there is almost always somebody online willing to sell cheaper than the big box store, the big box store loses. This is the new normal.

It used to be that customers were confused about all of the new digital products. They went to places like Best Buy to get expert advice. That was the old normal. In the new normal, that seems silly because:

1) Consumers can find more information on the internet than what can be found from asking the so-called expert sales help; and

2) Digital items aren’t new anymore. They are becoming familiar commodities that you feel comfortable buying anywhere on your own.

As a result, one commentator said, “Best Buy is dying because the free standing consumer electronics stores model is obsolete.” It no longer fits well with the new normal.

So What Should We Do
So if pillars of past success like the Yellow Pages and Best Buy can fall, so can anyone. There is no “too big” or “too successful” to fail. Even the most valued and prized option can become irrelevant if it falls out of step with where normal behavior is heading.

So what is a company to do? Remember two words—Best and Bold.

a) Be Best at the Right Thing
Nearly every company or brand tries to be the best at something. Unfortunately not all of these goals to be best are suitable to an ever-changing normal. In particular, there is a big difference between being the best at who you are verses being the best at solving a problem.

For example, if you are a telephone directory business or a big box retailer, you can try to become the best telephone directory or the best big box retailer. Unfortunately, if nobody wants that product any more, being the best doesn’t get you very much. Being the best at who you are is only relevant if people like who you are. And with a changing normal, that will not last long.

By contrast, one could have instead tried to provide the best solution, such as the best source for finding a business or the best source for buying electronics. This implies that you may need to radically change who you are in order to stay the best as normal changes. Although this is a lot of work, it is better than becoming obsolete.

Unfortunately, I see so many companies focused just on becoming better at who they are. They are looking for incremental improvements to the current model rather than new models which better serve the changing normal. This is a recipe for obsolescence. The better recipe is to also have an eye open for new ways to stay relevant by offering the best solution—even if it is radically different than the old offering.

b) Be Bold in your Change
If you find a need to replace your business model to remain relevant, do it boldly. Remember that your new competition is boldly moving forward because they have nothing at stake in the old business model. Amazon was much bolder than Best Buy in pursuing ecommerce. Yelp and others were much bolder than AT&T in embracing a social media approach to finding companies. If you are timid in your transformation, you will not win against people like these.

Also keep in mind that it can be futile to hold back in an attempt to prevent your new venture from cannibalizing the old. Just because you are not willing to cannibalize your core does not mean that others won’t do it to you. Ford was timid about introducing minivans for fear of hurting its station wagon business. So Chrysler did it instead and Ford still lost the station wagon business. The same thing happened to Kodak, who was timid about digital imaging for fear of hurting its core analog film business. It still went away. It is better to be bold and have a business left after the old one goes away.

SUMMARY
Because the world keeps changing, the concept of what is normal behavior changes over time. Therefore, if you want to remain relevant, you have to change as well. To stay relevant, focus on being the best solution and be bold about it.

FINAL THOUGHTS
When’s the last time you really thought seriously about how silly your offering may appear to the next generation?

Strategic Planning: Business as the New Government

BACKGROUND
Back in February, Peggy Noonan wrote an editorial in the Wall Street Journal about how enthusiasm for politics is declining in the US. In what many political pundits feel is an historic election year the US, the public is not all that engaged with the process.

According to Peggy Noonan:

a) Voting in primaries tends to be down compared to prior elections;
b) News viewership drops when election stories air;
c) Political stories on the web are not getting many clicks (far less than other news);
d) Cable news ratings aren’t going up as normal in an election year;
e) Viewership of the President’s speeches is down.

People in the US just don’t seem as interested in politics as before.

THE HYPOTHESIS
I have a theory about this. It goes back to the business principle of “Solution-Selling.” The idea is that consumers don’t really desire products. What they really desire are solutions to problems. Products are only the means to that end. And as soon as people are convinced that there is a better way to solve a problem, they will abandon the old products and go with the new alternatives offering the better solution.

A perfect example is weight loss. Most people really don’t desire exercise or diet or surgery. What they really desire is losing weight. Whatever method promises to be the fastest, easiest, most convenient and least costly way to lose weight will win. That’s why there are so many weight loss fads. People keep switching to the next fad in hopes that it will provide a better weight loss solution. I speak more about this solution-selling concept here, here, here and here.

I believe that a similar situation is occurring in politics. Yes, there are those political junkies out there who love politics as much as football junkies love football. However, for most people, politics in and of itself is not a desire. No, people are looking for solutions for life and for society.

For a time, politics and government appeared to be the best solution for solving many of these problems. However, I now believe that there is a growing movement towards the idea of a better “product” for solving those problems. That better product is a combination of social media and business.

EXAMPLE
As an example, I’d like us to consider sustainable fishing. There are many who believe that if you keep taking more fish out of the ocean than the replenishment rate, that eventually you will run out of fish. Therefore, there is a movement to support fishing practices which are more sustainable over the long term.

Trying to solve this problem via government is extremely difficult. The oceans don’t easy fall under government rule. There are many different vested interests in different countries, so universal compliance would be difficult. Even if you could get all the governing factors to agree to laws and standards, they would be nearly impossible to enforce, making the laws relatively worthless.

Now compare that to what has recently been happening. Social media pressure has been placed on the large companies which purchase the most fish. As a result of this pressure, many of these companies have enacted policies to only purchase fish from those who practice sustainable fishing. It looks like this pressure has impacted a critical mass of large fish purchasers (like Wal-Mart and Supervalu). The market equilibrium has shifted.

The fishing world is now faced with a dilemma. If they want to sell the fish they catch, they are more likely to do so if they practice sustainable fishing practices. It is in their best interests since that is what the largest customers demand. It is self enforcing.

Now compare the two alternatives to solving the sustainable fishing problem—government versus social/company. To me, it is a no-brainer. The social/company approach is faster, more efficient, and easier to enforce. So following the principles of solution-selling, market share should flow from “government as solution” to “social/business as solution.”

Hence, the decline in political interest. The people have found a better solution for many of their problems.

THE IMPLICATIONS
If this is true, the implications for business are enormous.

Expectations Have Changed
First of all consumer expectations have changed. An ever growing number of consumers now expect that businesses will take up some of the responsibilities formerly handed off to governments. They expect businesses to not only be good citizens, but to be proactive in using their clout to right many of the wrongs of the world, like sustainable fishing, reducing environmental waste, helping the poor, etc.

You see this in how the millenial generation acts. They are increasingly more interested in the social activity of the companies they choose to work at or purchase products from. The largest economic generation is using their clout to bend the businesses to their point of view. It is all expected as part of the new normal.

There is Nowhere to Hide
And if a company chooses not to comply with these new expectations, it will become known. In today’s society there is no place to hide. People will discover your actions (or lack thereof) and broadcast them across the social media spectrum.

Within literally moments, a groundswell of discontent can be pointed against your company. Remember, this social media helped topple heavily entrenched governments in the Middle East. Don’t assume you are so heavily entrenched that the social forces cannot “topple” your business.

This is serious stuff.

Your Strategic Plans Must Reflect the New Reality
If the new expectation is that businesses are supposed to take up responsibilities formerly given to governments AND failure to comply can lead to nearly instant and massive retaliation, then your strategic planning should reflect this. It needs to be at the discussion table.

First of all, one needs to determine which formerly governmental responsibilities they will pick up. This can be tricky, because of two factors. First, not everyone wants the same outcomes. As we have seen in the news, stands regarding contraception, homosexuality, and Planned Parenthood can create controversy no matter what you do. Therefore, be careful about the issues you choose to fight for.

Second, there can be unintended consequences to your actions. For example, Target Corporation decided to take a stand to promote the growth of business. Therefore, they made contributions to candidates pushing a pro-business agenda. Unfortunately, one of those individuals—in addition to their pro-business stance—also had a strong position on one of those controversial issues mentioned above. Word got out that Target was supporting one of these controversial issues because of their support for this candidate. The social media’s anger was pointed at Target. All for the wrong reason.

Then, you need to determine how to use your corporate clout to affect change. This is also equally tricky for many of the same reasons.

These decisions are easier if you understand your customer and understand how to use issues to reinforce one’s strategic positioning. For example, Wal-Mart’s position is about lowering prices for people who cannot afford to pay more. Wal-Mart has chosen to fight environmental waste. The connection is that environmental waste increases costs. If Wal-Mart eliminates environmental waste, they can afford to make prices even lower. In theory, it becomes a win for everyone—the environment, the customers, and Wal-Mart.

SUMMARY
There appears to be a rising tide of opinion that the social/company approach can provide a superior solution to major problems better than the political/governmental process. As a result, companies are now expected to take on some of these governmental roles. If your strategic planning ignores or downplays this new role, you may suffer grave consequences.

FINAL THOUGHTS
Consumers are angry over their perception of the “do nothing” congress. Don’t follow in their path and get the perception of being a “do nothing” company.