Every company I can think of has a strategy. Some are documented more formally than others. When I teach strategy to MBA students I would argue that it involves making specific choices about where and how we would like to compete with the sole purpose of producing a Sustainable Competitive Advantage vis-à-vis others in our market. This means that a good strategy is one with the intention of winning. And as in an intense football game, your game plan does not operate in a vacuum. The opposing team is watching your plays from the box at the top of the stadium, sending observations and insights to the sideline so that their executives can shift their play calling to exploit your new-found weaknesses. Business competition is a dynamic event.
So here is a question for you – is your company playing to WIN or playing to play?
The challenge of course is having the courage to choose. In my article (see other resources) on the Three-Box system describing three sets of strategic initiatives that companies should consider, one of the “boxes” is about addressing what programs, projects, departments, divisions, or businesses to close, drop, or exit. This should be as natural a part of corporate life as pruning is to a garden (something my wife has taught me). Pruning away the unproductive or ineffective things frees up resources that can be deployed in other areas of the business that can yield better and healthier growth.
Steve Jobs had a phrase. He called it being willing to “knife the baby”. The imagery surrounding that phrase is so unpleasantly evocative, it’s no wonder people don’t want to do it.
So these choices are hard. Executives can get pretty feisty defending their own “turf”, whether motivated by a genuine concern for people, or a thirst for power and responsibility. Either way a CEO wanting to clear out the withering vines most assuredly faces strong head winds.
Many just don’t quite “get it”.
I am struck by the number of companies I see who really don’t do strategic planning at all. What they do is planning, including building budgets and possibly deciding on what items to hold different executives accountable for. There isn’t much strategic about it. Many don’t see a reason to be strategic. If you have a successful product, the market is growing and sales and profits are good; everything seems OK so “don’t fix what ain’t broke”.
The problem is, your success is likely to attract worthy competitors. (Just ask Apple what they think about Androids.) The next thing you know, your market share is being eroded and you’re your ink turns from black to red in the blink of an eye. In addition, the market is subject to continuing evolution due to new technology, economic, political and social trends. Strategy must be continually adapted to the things that today seem only specs on the distant horizon. Time is not your friend, and there is no such thing as status quo. You are either getting better or worse. There is no staying the same.
Even when companies try, they don’t often get it right. Steve Tobak’s article (see Other Resources) he criticizes Yahoo for having no sense of strategy. In their case, they even hired a prestigious management consulting company to assess the situation. The outcome was that the company announced it was restructuring and laying off 2,000 people. Sure, that will bring another $200 million to the bottom line, but is that a strategy? No, argues Tobak, strategy must be a clearly articulated plan to defeat Google, Bing, and AOL who are increasingly dominating their industry.
Even if you get the strategy right, that is not enough.
In his book Making Strategy Work: Leading Effective Execution and Change, professor Lawrence Hrebiniak points out that while we may be able to graduate generations of smart MBA’s who can formulate interesting strategies, they don’t always succeed in the marketplace as a result of weak execution. Some of the common missteps include:
Shifting Focus: HP’s Carly Fiorina tries to shift the company direction by moving into services buying Lotus, and then trying unsuccessfully to buy PricewaterhouseCoopers to launch a consultancy. In the end, she ends up buying Compaq and leads the organization on an aggressive struggle to cut costs. In the end, she loses her job while on the search of the synergies that didn’t materialize fast enough for her Board. (One minute, we are talking about differentiation based on superior development of services, and the next minute we are trying to play the high volume/low-cost game. The organization doesn’t know which way to turn.)
Poor Alignment with Core Strengths and Culture: United Airlines once launched TED, a subsidiary intended to compete with low-cost innovator (Southwest Airlines). However United did not have a culture or set of relationships with its unions that permitted the kinds of flexible work habits used by SWA, and their intended productivity never materialized. They also kept most of the legacy infrastructures in maintenance, scheduling, airport gates, reservations, etc. used by the mother company. They never came close to Southwest’s cost structure and the initiative was soon abandoned.
Poor Communication: Strategies that are hatched in the C-suite may be thoughtful, but getting the entire organization to get it is challenging. Hrebniak says when he is hired as a consultant, he often will travel down 4 or 5 levels in the company to ask people how things are going only to learn that no one even KNOWS that a new strategy has been initiated. A colleague of mine, Guy Hocker (former Senior VP of Strategic Initiatives for JetBlue) says that people who sat in the room for six months debating and creating the strategy may understand it, but those who were on the outside seldom appreciate the justification for it, the context within which it was created, the assumptions upon which it was based, or the key success factors to make it work. The senior people try to explain it, but they might as well be speaking Klingon. (The winning approach is to involve a wide swath of the organization in creating the strategy in the first place).
Lack of Clarity in the Business model: In the C-suite we might conclude that to defeat our competitor (say Dell – who has a low-cost model), we want to compete based on superior technology (something Dell is not well equipped to provide by itself). At the 50,000 foot level, that sounds right. But It isn’t nearly enough to guide what the rest of the organization must do to make this strategy succeed. We need to define What technology(ies)? What customer segments we are developing new technology for? How will we measure our success (Metrics)? How much money we are willing to invest in this initiative above what we must spend on sales, marketing, IT and so forth? What new people skills we may need to develop the products we need? Until these pieces are defined, we don’t have an executable strategy.
Do you really have a strategy? Here’s what P&G’s A.G. Lafley thinks, by James Ritchie, the Cincinnati Business Courier
Three-box system: Balancing Break-through Innovation with the short term, by Len Brzozowski
Why most business strategies fail, by Steve Tobak, CBS Moneywatch
Three Reasons Why Good Strategies Fail: Execution, Execution…, by Lawrence G. Hrebiniak, Knowledge@wharton