Strategic Planning Analogy #512: Working on the House

THE STORY
I was recently eating at a Taco Bell restaurant where the inside temperature was only 63 degrees Fahrenheit (about 16 degrees Celsius). It was so cold, I had to eat lunch with my coat on (and it is only October). This got me to thinking…

Imagine that you have a home-based business and that your home is extremely cold. The extreme cold in your house causes your typical day to have problems like these:

1. Much of your day is spent trying to create warmth, doing things like:
1. Chopping wood for the fireplace.
2. Doing exercises to warm up.
3. Checking the thermostat.
4. Heating pots of water on the stove. 

2. Working on your laptop, smartphone and tablet is difficult because you are bundled up in bulky clothes and wearing mittens on your hands. 

3. Lots of money is wasted on utility costs in a futile attempt to warm the place. 

4. Because of the pre-occupation with the cold, you find it hard to concentrate on anything else (like your home-based business).

If you had to deal with problems like that day after day after day, I suspect that your home-based business would be a disaster.

Now let’s suppose that instead of focusing on trying to do work IN the house, you tried to do work ON the house. You go around inspecting the house. What you find is that there are several big holes in your wall exposing you to the cold outside environment. In addition, you find that the insulation in the walls is missing.

After spending a little time working ON the house (fixing walls and insulation), you quickly notice that it becomes a lot easier to do your business IN the house, because now it is comfortably warm all day.

1. You gain back all that time wasted on trying to heat the house.
2. It is easier to work on your devices when not wearing mittens.
3. Your utility bills go way down.
4. It is easier to concentrate on the business now that the distraction of being cold is gone.

And now the home-based business is a lot more successful.

THE ANALOGY
In the world of business, you have two choices on how to spend your time. You can spend your time either:

1. Working IN the business (doing the daily stuff which keeps the process in operation); or
2. Working ON the business (doing the big-picture stuff which improves the structure of the business and its ability to win in the marketplace).

Both are important; both need attention. But for leaders, more time needs to be spent working ON the business rather than IN the business.

I believe that leadership in most businesses under-allocates time working ON the business. It’s easy to understand why. Fixing the crisis of the day (IN the business) sucks up time leaving little left for the examining the big structure (ON the business). But, as we can see in the story, that approach is very unproductive.

The crisis of the day in the story was the cold temperature. Extensive time and money were wasted trying to find ways to get the work done in this environment. Dealing with trying to work through the crisis was crippling the business (working IN the business wasn’t working).

However, by taking time to step away from the day to day and look at the big picture, one could easily see that the overall structure of the house was inadequate. After fixing the structure (the holes and the insulation), the crisis went away. Productivity skyrocketed. By spending time ON the business, the work being done IN the business got a whole lot more productive—more productive than what could be achieved by merely working in the business.

THE PRINCIPLE
The principle here is that structure matters. How you structure the business can have a big impact on how effective the work is inside the business. Even if your employees are hardworking and want to succeed, if the structure is wrong, that effort will be as effective as trying to use devices with your mittens on.

Structural Questions

Structural issues would include questions like these:

1.     Do you have a winning position in the marketplace (a reason for customers to prefer you)? If you have no reason to win, then you will lose, even if you work hard. Working hard at mediocrity or in offering the same as everyone else will not get people to prefer you. The winning position is the foundation of your structure. Without a solid foundation, the structure will fall and crush your operations. Everyone gets all excited about the smartphone business, but keep in mind that only Apple and Samsung are making a profit in this segment. The others are working very hard IN the business of smartphones, but they are losing because they have not developed sustainable positions which create a natural reason to prefer them. Unless they first address this issue (working ON the position), their efforts IN the smartphone business will be wasted. You can read more about this concept here.

2.     Do you have a business model which is designed to give you an edge in achieving your position? Why should you expect to win if you do not have a structure designed to increase your odds of achieving superiority at your point of differentiation/winning? Just working harder in the business is usually not enough. Think about hard discount retailers like Aldi. They create a preference based on a low price position. These low prices are not achieved by merely working harder IN the grocery business. No, they are achieved by working ON a structure which makes low prices easier to obtain:

a.      Very Limited Assortments

b.     Virtually all Private Label Store Brands

c.      No Service

d.     Selling from pallets of open boxes rather than placing individual items on the shelf.

This structure gives an edge in achieving the low price position which businesses under a more conventional structure cannot touch.

3.     Have you supplied the business with adequate levels of capacity and competency? Working hard IN the business will not lead to success if your structure is missing the capacity and competency needed to win. Without an adequate supply chain (access to enough raw materials, manufacturing capacity, distribution capacity, etc.), your work IN the business will not be able to deliver on the promises. Similarly, without the needed knowledge, skills, and tools, harder work will be wasted work. The lack of capacity and competency is like the lack of insulation in that house. It prevents the work inside the house from being productive. In the modern economy of tech firms like Google, Yahoo, Facebook, Apple, and other social media firms, there is an understanding that if you cannot get an adequate capacity of engineering competency, you cannot deliver the winning position. Therefore, the winners design structures which create an edge in attracting and keeping this component.   

Role of Leaders

Answering these three questions is the role of leadership. They are the ones who need to step away from the day to day to think about the structure. Thinking back to the story, they need to ask: Where are the holes in the house? Where do I need more insulation? Do I need to build an addition to the house? Do I need to totally remodel the house?

If the leaders do not proactively make the time to step away from being IN the business to work ON the business, it will not get done. The crisis of the day will naturally choke it out. Like the story, you will spend so much time and effort dealing with the cold that there is little left for focusing on winning in the marketplace.

The lower levels are too closely tied to the day-to-day or their little area of specialty. They cannot see the whole structure. Only the leaders can wrap their arms around the bigger picture. And when you do, the improvements can be amazing.

And the fancy word we give to all this attention to structure is STRATEGY.

SUMMARY
Hard work is nice, but it can be a lot of wasted effort if the business structure is wrong. When all of your time is focused on finding ways to do more work IN the business rather than first working ON the business to make sure it is set up to win, you are merely creating action, not results. A good business structure has a winning position, a business model which supports the position, and enough capacity and competency to deliver on the promise of the position. If you do not work ON the business to build this kind of structure, your work IN the business is going to go nowhere.

FINAL THOUGHTS
The key here is delegation. Leaders need to delegate more of the day-to-day so that they can spend increased time on the bigger picture.

Transcendent Strategy

THE PREMISE
There seems to be a consensus building in the business world claiming that concepts like positioning and competitive advantage are becoming obsolete. This premise is based on the assumption that the business world is moving too fast. In such a fast-paced changing world, nothing lasts—including positions and competitive advantages.

This leads to the conclusion that if competitive advantages and positions have no lasting value, then it is a waste of time to focus much effort on them.

I tend to disagree. Here is my rebuttal to this point of view.

THE REBUTTAL, PART 1
Yes, technologies come and go; products come and go. But the truly important issues endure.

Has the desire for value gone out of style? Has the desire for quality gone out of style? Have the desires for prestige and self-esteem gone out of style? No.

These eternal desires have been around or hundreds of years and will continue to be around for hundreds of years to come. Eternal values such as these do not become obsolete.

The problem is not that positioning and competitive advantages have to—by their very nature—become obsolete. No, there is nothing inherent in positioning or competitive advantages which creates obsolescence. Instead, the problem is that people are focusing on the wrong things to build a position or competitive advantage around. If you focus your position or competitive advantage on a particular “product”, “technology”, or “feature set”, then of course your position or competitive advantage will not last—because the best alternative in these areas is constantly changing.

By contrast, if you focus your position or competitive advantage around mastering and owning the enduring attributes of prestige, self-esteem, quality, value, etc., then your position and competitive advantage will endure. Advantageous strengths in areas like this transcend all of those ever-shorter life cycles in products, technology or feature-sets.

Your company lasts, survives, and thrives even if particular products come and go, because your position and competitive advantages in understanding and providing solutions to enduring desires allow you to better migrate to the next iteration of how that need is satisfied. You continue to win, because you have built your strengths around owning the solution itself (e.g., prestige) rather than merely owning the current manifestation of that solution (e.g., a smartphone).

Think of Virgin. The company is not linked to a particular product, industry, technology or feature set. Virgin is into hundreds of diverse businesses from media to transportation—even transportation into space. Instead of focusing on a particular product or technology, Virgin has built competencies and advantages in winning a position in the enduring values. Here’s how Richard Branson, founder of Virgin, describes it:

“We've become a sort of way-of-life brand. ... People think of Virgin — if they hear that Virgin's going into a new area, they know that the quality will be good, that we'll do it in a fun way, that we'll give good value for money. And so it gives us a leg up when we go into a new venture. People already [trust] us, and they'll give us a try and, generally speaking, people seem to like what they find.”

Virgin the corporation wins and endures, even when particular ventures come and go, because it is always on the prowl looking for the next evolution for its “way of life” solution. It takes its skills (competitive advantage) in imbuing these way of life values into an industry and wins.  

And think about Apple. Its popularity has transcended a wide range of obsolescence in products, technology and feature sets. People love Apple because it wins on enduring values. Status, elegance, simplicity, easy-integration, and being “cool” are all integral to everything it does. Apple built competitive advantages in pursuing these enduring traits. This allows the company to endure, because positions and competitive advantages in these areas endure.

The fact that Apple is hiring Angela Ahrendts, the CEO of the Burberry fashion house, to run its retail division shows that Apple is structuring its competency around status, elegance and “coolness” rather than particular products or technology.

So if you build your position and your competencies around the enduring values (like Virgin or Apple), you can have a competitive advantage which can last a relatively long time.

THE REBUTTAL, PART 2
Winning positions and competitive advantages win because they best fit into the context of the environment in which they operate. The battle is decided in the marketplace. To win in the marketplace, you have to be designed to win within the context of that marketplace.

If we buy into the original premise that the business world is undergoing accelerated change, then that is the context where we must design a winning strategy. Therefore, a good way to win in this marketplace is by building competitive advantages in adapting to change.

Competitive advantages in adapting to change could include superior competencies in areas like:

1. Monitoring the environment to get early detections in the direction of change.
2. Building a flexible supply chain.
3. Having an organization that can quickly reallocate resources (human, monetary, etc).
4. Building skills around enduring values rather than temporal products and technologies.
5. Speed in execution.
6. Developing a tolerance for risk.
7. Quickly building strategic partnerships in areas needed to adapt to the change.

Companies which can do things such as these better than anyone else will have an enduring competitive advantage within the context of a rapidly changing marketplace.

SUMMARY
It is a false notion to claim that positions and competitive advantages can no longer be enduring. Yes, many positions and advantages will not be enduring, because they are linked to particular products, technologies or feature sets. But that is the fault of the people who picked the wrong things to focus their positions and advantages on. If, instead, one focuses on enduring values or adapting to change, then you can build enduring positions and competitive advantages.

FINAL THOUGHTS
Don’t blame the concepts of positioning and competitive advantage when your business becomes obsolete. These tools still work well if applied properly. Think of the axe. In the hands of a skilled lumberjack, the axe is a wonderful tool. In the hands of an axe murderer, it is a horrible tool. Are you more like the lumberjack (building enduring skills) or the axe murderer (focusing on products, technology and feature sets)?

Fixing Symphony Orchestras

Introduction
A friend was recently bemoaning the problems with his community's symphony orchestra. It got me thinking about approaching this problem strategically. I quickly put together my thoughts (see below). I think this is a good example of how to:

     1) Structure A Problem
     2) Establish Key Assumptions
     3) Develop Hypotheses
     4) Look for Analogies and Context
     5) Use Storytelling

After all, if you do not structure the analysis properly, you may not get the right answer for the right problem.

Core Assumptions

First, let’s start with a couple of core assumptions:

Core Assumption #1: Performance Art is Not Dead

There are lots of performers out there making tons of money, like the Dave Matthews Band and Circ de Soleil. Brittany Spears just sold out an extended engagement in Las Vegas.  So the problem is not being in the performance industry. Many have found a way to mine it for large profit.

Core Assumption #2: This is Not Just a Problem for a Single Orchestra

Location-based symphony orchestras all over the US are in trouble. The problem is not just what’s happening in in your community. The entire location-based symphony orchestra model (as currently operated) is broken.

So the problem to be solved is this: How do you change the symphony business model so that it can be more like that of successful performance artists?

Key Hypotheses for Orchestras

Now, let’s look at some key hypotheses about the problems with the Symphony business model:

Hypothesis about Performance Symphonies #1: The Target Audience is Small

Symphonic music has a fairly narrow appeal. There’s a reason why most classical music radio stations are heavily subsidized (including tax dollars). There’s not enough demand. “Pops” orchestras who perform with guest artists (outside of classical music) with a wider draw exist because the purer symphonic appeal isn’t large enough. It’s difficult to make a lot of money off your target market if the market is too small.

Hypothesis about Performance Symphonies #2: The Current Performance Approach is Not Very Compelling

The current typical symphony approach only offers the customer two things: music and snob appeal bragging rights (I was there with the elite crowd). The problem with the music is this:

1. As mentioned earlier, this form of music has a narrow appeal.
2. Most of the music is old stuff, performed hundreds of times by hundreds of others. There is no compelling reason to be at this particular performance of that music at this particular time.
3. You can get superior recordings of the same work by better performers to listen to in the comfort of your home for less money. So if you only want to hear the music, you have better alternatives.
4. Sometimes more obscure works are added to the mix, but usually there is a reason why those works are obscure—they aren’t as good. 

The problem with the snob appeal is that there are superior ways to achieve that snob appeal:

1. You can go to the traveling Circ de Soleil or Broadway Shows when they come to your town (which have similar bragging rights while offering what many consider a more compelling performance); or
2. You can travel to the meccas of performance art (Broadway, Carnegie Hall, Las Vegas, etc.) and get double bragging rights for the performance and the trip.
3.  In today’s social environment (particularly with younger generations) the status bragging rights are moving from consuming high culture to improving social conditions. They get more status capital out of going to Africa to build a school than in being seen plopped in a chair at a symphony (better stories to brag about and seen as less selfish). Getting involved in social causes is taking the place of high performance art as the place to put your efforts to improve your status.

Key Hypotheses for Performance Successes

Now for some hypotheses on why other performance models seem to be working:

Hypothesis About Success Models #1: They provide a reason to be right here, right now.

Some of the most successful touring performing groups that have endured for decades include The Dave Matthews Band, Phish, Ozric Tentacles and The Grateful Dead. They all have one thing in common—they are jam bands. They have a high degree of improvisation in their music. Each performance is unique and different. You never know in advance exactly what you’ll get (even the performers don’t know). This provides a sense of excitement. You never know if this particular performance is going to become the “classic” version of the song that gets talked about for generations.  People follow these bands from location to location for the excitement of hearing the different versions. They need to appear often to make sure they catch the special moments. Each performance has a special reason to be there.

It’s like sports (which is more popular than symphonies). One of the appeals of sports is that each game is different, and you do not know the outcome in advance. Contrast this with symphonies where they practice in order to eliminate the variability and surprise. It becomes a sterile, polished performance which is highly predictable. There is no special reason to be there to witness the surprise, because there isn’t going to be one.

Hypothesis About Success Models #2: They Create Winners and Losers.

Sports would be a lot less popular if they stopped keeping score and did not declare winners. Watching the struggle to win is exciting. Look at TV. The typical variety show format for performing is essentially dead. It has been replaced by contests like American Idol, The Voice and Dancing With the Stars. Performing plus winning is more exciting than just performing. How often do you see a Symphonic Battle of the Bands?

Hypothesis About Success Models #3: They Involve Audience Input.

In today’s social media world, consumers expect to be a part of the process. They want a greater say in what they consume. Successful performers are getting more savvy about this. But even if we strip out all of the technological hoo-ha like twitter, there is the basic idea of taking requests. How many symphonies take requests at a performance? And what would a symphony do if everyone in the audience started singing along with the performers (which is common for other music performances)? Symphonic performances are one of the most passive venues alternatives for their audience. They are expected to just sit there. And that is not good. One of the big appeals at a Springsteen performance was that somewhere in the show he would pick out a beautiful girl from the audience to briefly dance with him on stage. That was a big deal. (I knew a gal who got that honor—she bragged about it decades later—and yes, she was stunningly beautiful). Have you ever seen people rush the stage at a symphony?

Hypothesis About Success Models #4: They Provide a long list of benefits.

As mentioned earlier, symphonies provide only music and status (and perhaps neither one as good as some alternatives). Other performance options provide much more, including:

1. Hero Worship. The “gods” of our culture are found on celebrity gossip shows and in the magazines next to the supermarket checkout. You go to the performances of these people in order to see your god in the flesh (regardless of how well they perform). The local symphony does not have this godlike status to offer for worship.
2. The ability to vent and express our emotions. Other alternatives are more open to yelling and screaming and dancing in the aisles.
3.  A socially acceptable opportunity to overindulge in alcohol (think Jimmy Buffett concerts or a sporting event).
4. The opportunity to experience something new (be there for the first offering). Symphonies rarely do a lot of brand new compositions.
5. And then there are the things mentioned earlier, like experiencing winning & losing, being involved in the process, surprise, and so on.

The more benefits you offer, the greater your appeal.

A Story 

I once heard a lecture by a music professor from Berkeley talking about what classical musical performance was like at its peak (like when Mozart was still alive). The professor said the symphonies of that day were like the National Football League (NFL) teams of today. Each major city had one and people rallied around the local symphony team like we do with our NFL team. Each team had its equivalent of the quarterback hero—the composer. The local composer was part of the local symphony team.  The symphonies would travel to each other’s cities to compete against their local symphony. Each symphony team would pull out its latest composition and perform it. The fans would often travel with the symphony teams to see these contests.

And there were strict rules about how a symphony was supposed to be structured (like the rules in football). And the audience was very familiar with these rules. If the new composition did not play by those rules, the crowds would get rowdy and boo at the symphony. (Remember the stories of the great riots caused by Igor Stravinsky when his Rite of Spring broke too many of the rules?) The professor said that Mozart played very well within the rules, while Beethoven went to the very edge of what the rules allowed. He was sort of like the 1930s Green Bay Packers American Football team who looked at the rules and saw nothing which prevented the forward pass (even though no other team at the time was doing it).

So what can we learn from these earlier performances?

a)      They had superior team bonding with the local community.

b)      They had the excitement of winners and losers

c)      They let the crowds get very emotional and expressive at the performance.

d)      They had the hero worship of the local composer (the rock star).

e)      They played mostly brand new material (the excitement of seeing it performed for the first time).

f)       By getting everyone involved in understanding the rules of play in composition, they broadened the appeal of the music.

g)      There was a compelling reason to be right there, right now because you never knew what would happen.

h)      They made the spectacle much more than just the music.

Conclusion:

Without getting into a lot of detail, I think symphonies need to do more of what they did hundreds of years ago and more of what successful performance acts of today do. They need to broaden the appeal by making it about a lot more than just the music. They need to get the audience more involved in the performance. They need to create winners & losers, heroes and goats. They need more spontaneity and surprise. They need more new stuff.

Strategic Planning Analogy #511: Motivated by Money

THE STORY
Years ago my team was proposing a new business plan to our CEO. In brief, the idea was to stop a competitor’s aggressive move into our markets by making a reciprocal move into their most profitable market. Since we were in a stronger cash flow position than them, we could afford to attack their key source of cash, and they would have to retreat in order to protect their core.

We could inflict great pain on them in their key market with only limited pain on ourselves. And this would cut off the cash they were using to attack us. Hence, we would create a long-term gain for ourselves with only a small immediate hit to ourselves.

The CEO listened to the detailed strategy with a puzzled look on his face. Eventually, he looked up and said, “Don’t give me a strategy. Just tell me how to make money.”

Since the strategy did not immediately make more money for the firm, the CEO rejected it. As a result, the competitor continued attacking our company. Eventually, their cash flow became even stronger, so they became even more aggressive. Over time, this aggressive behavior wiped out a key division of our company, leaving us with a huge loss of earnings.

The CEO’s actions helped us make a little bit more money in the near-term, but wiped out an entire division in the long term. It appears that we would have made a lot more money if we had focused less on making money and more on having a strategy.

THE ANALOGY
In the world of capitalism, making money is a good thing. If you aren’t eventually making money, your investors and other key stakeholders will get upset. However, if your only motivation is to obtain money, then you may make decisions which lead to bankruptcy. The irony is that a single motivation towards money is not usually the best path for achieving the most money.

As we saw in the story, the best path for making the most money involved a time consuming process which caused near-term pain. By rejecting this approach and instead taking steps which created the most money immediately, the company put itself on a long-term path which destroyed a key division of the company.

Key decisions are made based on what motivates us. If “making money right now” alone is the key motivation, then we may end up making the wrong decisions. Other motivators are more likely to make more money.

THE PRINCIPLE
The principle here is that motivations matter. And the singular motive to just “make money” is not the best motivation.

The Principal Applied to Entrepreneurism

Many studies have been done to look at what makes a successful entrepreneur. These studies consistently show that if the primary motivation for the person becoming an entrepreneur was “to make a lot of money,” then they usually failed as an entrepreneur.

Becoming a successful entrepreneur takes a lot of hard work and a lot of sacrifice. It often requires living near the poverty line for quite a while before the business takes off. If all you want is a lot of money right away, then you typically will not put up with the level of sacrifice needed to succeed as an entrepreneur. So you will fail.

In fact, there was a recent stream of articles on Quora.com about people who voluntarily chose to become homeless in order to invest everything they had into their entrepreneurial start-up. In essence, they were looking for ways to become as personally cashless as possible for the sake of building the business. That type of sacrifice requires a different type of motivation than merely wanting to make money.

The studies on entrepreneurism usually show that the most successful entrepreneurs are motivated primarily by a desire to create a superior solution over what is currently in the marketplace. They are more driven to build a better answer for others than build a bigger pile of cash for themselves. Yet, ironically, by not focusing so much on the bigger pile of cash, the entrepreneur is more likely to eventually have that big pile of cash.

The larger, grander, and nobler motive of giving the world a better alternative is needed to motivate the extreme levels of sacrifice needed to create success. It also has a secondary benefit. Customers don’t just want to give you money because you want them to give it to you. The customer wants great value. If you are motivated to provide superior value for the customers, then you are motivated by the same thing that will motivate customers to give you their money.

In other words, an outward motivation to better the lives of others is the best way to get others to voluntarily want to give you the money needed to get rich. This point really reached home to me when watching the recent movie about the life of Steve Jobs. Making money was nowhere near the top motivator for Jobs. He was driven by a motivation to make great products (and got very angry with those who did not share that motivation). Yet, in the end he was very wealthy.

If all you want is a lot of money and aren’t motivated by a larger purpose, then you’re probably better off seeking a life of crime than one of entrepreneurism. In crime you get the money involuntarily from people. Rather than giving them a reason to want you to have their money, you just steal it.

This is not to say that successful entrepreneurs have no motivation for wealth. No, a desire to be rewarded for one’s sacrifices is logical. If there is no potential for a pot of gold at the end of the rainbow, then the entrepreneur will eventually stop the effort of chasing the rainbows. The point is that a money motivation alone is usually not enough. A larger, external motivation to provide the world something better is also needed.

The Principle Applied to Big Business

This same general principle also applies to large corporations. In the story at the beginning of the blog, we saw a large corporation destroy one of its business divisions because it focused too much on looking for easy ways to make money quickly rather than looking at the sacrifices needed to ensure long-term viability.

The grander, market-based motivations help large corporations in many ways. First, they provide a reason for all of the employees to give a strong effort on behalf of the company. Let’s face it. In large businesses, most of the employees are not going to become extremely wealthy. So why should they put in the extra effort?

When you have a business mission based on a larger, nobler goal, you provide a motivator that everyone can rally around. There’s the old story of the government official in the 1960s who was getting a tour of the NASA operations. He was asking people at NASA what they did. When he asked the question to a NASA janitor, the janitor replied “I’m helping to put a man on the moon.” Because the janitor captured the larger vision, he became a more diligent janitor.

Is your mission wrapped in a nobler goal, like putting a man on the moon? This is a great motivator for the masses in your organization.

Second, if a large business does not see its mission in larger terms, then it will not know what to do to succeed. Many large businesses have strategic plans which say little more than “We want to make a lot of money.” Sure, they may disguise it in more “flowery” language and make it sound more tangible by attaching a numeric target to it. But fancy words and numeric targets won’t disguise the reality that these types of “strategic plans” are nothing more than vague wishes for greed.

Just because you can say “We want to make a lot of money” does not mean that you have a clue as to how to make that money. Money is made when you have a solution desired by the marketplace that you can profitably provide because of the unique business model you have designed to deliver that solution. Unless your business has a specific strategy about…

1.     What it is delivering to the marketplace;

2.     Why it is a superior solution; and

3.     How it can be delivered profitably

…then you will not make those big piles of money. Without a reason to succeed, there is no reason to expect to succeed. Therefore, large companies need a planning process to ensure that the reason to succeed is discovered.

Finally, in large companies, you have lots of people doing all sorts of different things. If there is not a common understanding of what your success formula is, then employees will go off in all sorts of different directions. These uncoordinated efforts will be more like random anarchy than a coordinated march to success.

If you want a large company to be successful, you need to everyone moving in the same direction towards that success formula. That requires not only developing the grander plan, but making sure it is widely known and is rewarded when followed. Otherwise, the plan will not reach reality.

SUMMARY
People act based upon their motivations. Ironically, the best primary motivation to create business wealth is not an inner motivation for wealth. Instead, it is an outer motivation to provide a superior solution in the marketplace. This outward focus forces one to create the types of value needed to cause others to pay you for your offering (the source of wealth). It also provides that higher cause which motivates people to work harder. That is why companies need strategic plans which outline what the outward success formula is and put it in words which motivate employees to put it in place because it achieves a higher, nobler goal.

FINAL THOUGHTS
In the movie Wall Street, Michael Douglas (playing the role of Gordon Gekko) famously says, “Greed is Good.” I say “Greed is Not Enough.” You also need a viable plan and an external motivation which transcends greed.

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.