#10 | Are you taking the time to think?
“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions, than most people in business.”
When being busy gives us purpose, it can be challenging to find time to stop and think.
To research market conditions, talk to team members, analyze the 5-forces, or let alone paint a 5-year vision.
Developing strategy takes time.
Time that many CEOs and top leaders fail to commit. Instead, we prefer to fight fires and respond to emails.
Those who can afford it outsource strategy to McKinsey and the likes. Only to find their recommendations detached from reality.
We then command consultants to adjust their findings to match our preferred view of the world.
As result, our strategy is put together too quickly, guided by people who don’t know our business. Failing to account for critical insights about our customers, competitors and employees.
How much time are you dedicating to thinking and strategizing?
#9 | Do you understand the problem?
In the First World War, 250,000 British troops fell at Passchendaele as they tried to advance over a muddy field.
According to M.D. Feld from the Defense Research Program at Harvard University, the strategy was set at headquarters on a sunny day, yet unchanged as rain poured:
“No senior officer from the Operations Branch of the General Headquarters, it was claimed, ever set foot (or eyes) on the Passchendaele battlefield during the four months the battle was in progress. Daily reports of the condition of the battlefield were first ignored, then ordered discontinued. Only after the battle did the Army Chief of Staff learn that he had been directing men to advance through a sea of mud.”
Our actions in business may not result in deaths, but certainly fail to create competitive advantage.
Roger Martin, strategy professor at the University of Toronto, tells in The Execution Trap the story of a bank teller who independently created a CRM system to tailor her services to her customers’ preferences, yet never shared the idea with her manager. Martin explains why:
“Mary understood just as clearly that she was in no position to influence the decisions made at the top of her organization. Although she had chosen to reject the conventional, her superiors had not. So the bank, which could have benefited from her strategic insights, was shut out. It’s a pattern I have seen again and again throughout my career. Often, what senior management needed most—although it was rarely able to recognize it—was to have someone talk with the rank and file in order to understand what was really happening in the business. Senior management couldn’t get that information itself because it had created a model in which its employees were convinced that no one was interested in what they had to say.”
Martin then explains how managers gather intelligence without having to listen to their own people:
“It’s a vicious circle. Feeling disconnected, employees elect not even to try to share customer data with senior managers. Senior managers then must work around their own organization to get the data necessary to make decisions, typically by hiring outside consultants. Frontline employees find the resulting choices inexplicable and unconvincing, because the data comes from outside the organization.”
What’s the other options? Henry Mintzberg, strategy professor at McGill University, shares in the Rise and Fall of Strategic Planning:
“Effective strategists are not people who abstract themselves from daily detail, but quite the opposite: they immerse themselves in it, while being able to extract strategic messages from it. Opportunities tend to be hidden in the details, the context of situations.”
Do you know what keeps your leaders awake at night?
#8 | Does everyone agree on the key problems?
Let’s assume we’ve identified all problems facing frontline teams. Next, does the leadership team agree on the key strategic priorities? Understanding the scope problems faced does not guarantee stakeholders will empathize with each other and agree on priorities.
Without agreement on strategic objectives, each departmental leaders will do what they view as most important, without collaborating with peers.
A majority of organizations suffer from this issue. Donald Sull, strategy lecturer at MIT Sloan, exposes in Why Strategy Execution Unravels:
“Only 9% of managers say they can rely on colleagues in other functions and units all the time, and just half say they can rely on them most of the time… When asked to identify the single greatest challenge to executing their company’s strategy, 30% cite failure to coordinate across units… Managers also say they are three times more likely to miss performance commitments because of insufficient support from other units than because of their own teams’ failure to deliver.”
The result is a misaligned strategy. A lack of focus.
Different teams face different problems, report to different leaders, and therefore prioritize different strategic actions.
An interesting point is that strategic agreement is rarely reached by debating what to do. What initiatives to adopt.
Strategy experts advocate instead for a debate on what problems represent priorities. Russell Eisenstat, strategy consultant and former faculty at Harvard Business School, notes in Why Change Programs Don’t Produce Change how we can…
“Mobilize commitment to change through joint diagnosis of business problems. As the term task alignment suggests, the starting point of any effective change effort is a clearly defined business problem. By helping people develop a shared diagnosis of what is wrong in an organization and what can and must be improved, a general manager mobilizes the initial commitment that is necessary to begin the change process.”
Do your leaders agree on what problems represent priorities?
#7 | Do we know what success looks like?
Strategy is about figuring out how we’re going to get what we want.
So first, we must know what we want.
Unfortunately, organizations large and small exist without vision or purpose.
Economists will argue that the ultimate goal of business strategy is to find a way to maximize shareholder return, or to pursue sustainable growth and profits.
While economical, such a goal is out of touch with the very people working at organizations. Michael Jensen, professor at Harvard University, is quoted in Lords of Strategy on the fact…
“…managers, particularly those without large ownership stakes in the corporation, often had motives and interests different from those of shareholders.”
Some top leaders put employee well-being first. Jack Welch, former CEO of GE, told the Financial Times that..
“…on the face of it, shareholder value is the dumbest idea in the world… Shareholder value is a result, not a strategy… Your main constituencies are your employees, your customers, and your products.”
Herb Kelleher, Co-founder of Southwest Airlines, shares the same belief. He notes in an interview with Strategy + Business:
“You put your employees first. If you truly treat your employees that way, they will treat your customers well, your customers will come back, and that’s what makes your shareholders happy. So there is no constituency at war with any other constituency. Ultimately, it’s shareholder value that you’re producing.”
Organizations seem to have a hard time ranking shareholders, employees and customers by priority. C-Suite executives may prioritize shareholder return, while managers prioritize their team members’ well-being, and front-line team members prioritize customer needs.
One goal uniting the needs of employees, customers, and shareholders seems to be growth. With growth, employees have advancement opportunities, customers have more valuable and cheaper products, while shareholders reap higher dividends and stock prices.
Survival can also serve as a definition of success. Having an entire organization focused on survival can often help companies tackle great challenges.
For example, a former executive at U.S. Airways shared in an interview that right after the airline industry was deregulated in the U.S., everything became a “New game, and we needed a strategy to survive and make deregulation work for us. We did just that.”
Ultimately, an organization needs to know why it exists. It must have a purpose and a vision to guide strategic choices.
Do you know why your organization exists?
#6 | What’s your competitive advantage?
Why should someone buy your product versus that of a competitor?
According to Michael Porter in Competitive Advantage, you have a higher chance of being chosen…
- By customers prioritizing low price if you are a low-cost provider (e.g. H&M);
- By customers looking for something unique if you provide something different nobody else offers (e.g. Canada Goose); or
- By customers looking for a supplier who understands their special needs if you focus on a specific customer group (e.g. Nike).
In other words, the customer segment we aim to serve guides our choice of competitive advantage to adopt.
As a mistake, too many companies want to serve “everyone” and become the biggest player by market share (usually the same companies without any idea of what success looks like).
This incorrect understanding of business competition is reinforced by many strategy “experts” – professors, investors and CEOs who put market share on a pedestal.
One strategy professor shared in an interview that “Most companies have to have poor strategies – if not, most companies would ‘win’ and this is not possible.”
Under this light, strategy is viewed as a zero sum game much like in sports. Only one team can win the Super Bowl, the Stanley Cup, the World Series.
He is wrong.
Chasing market share initiates unnecessary price wars that don’t benefit anyone. Price wars erode profits of all players and limits how much resources go into R&D, limiting a company’s growth prospects.
In reality, we can find profitable companies co-existing in most industries. There are always more than one winner in an industry, each with a slightly different target customer segment, value proposition, and capabilities. Each with a different growth path and vision of the future.
Southwest Airlines and Delta Airlines can co-exist and both win because they serve different customer segments.
Are you blindly chasing market share?
#5 | Are you making strategic choices?
Strategic analysis usually yields a number of options for leaders to choose from.
Yet making choices remains difficult.
One CEO of a credit union shared in an interview that his “biggest challenge is having the guts to say no to incremental business. To fire customers. To focus energy on the core vision.”
For one, some companies rely so much on analytics and forecasting they become paralyzed. Forecasting doesn’t always help organizations choose a strategy.
In Implanting Strategic Management, Harry Igor Ansoff reviewed how organizations faced the petroleum crisis in the 1970’s and reported that “…many firms which do forecasting including scenario building exhibit similar behavior as reactive firms.”
Ansoff attributed the problem to forecasting systems and processes (time spent observing, interpreting, collating, communicating information to managers), to verification delay (organizations waiting for trigger events to happen), to politics (some managers may feel threatened), to rejection of unfamiliar (managers refuse to accept seriousness of a vague threat which has no precedent or they are unfamiliar with).
Secondly, even with the latest business intelligence tools, it remains challenging to understand the impact our decision will have. One strategy professor shared in an interview that to make a choice, we have to…
“…assess group and leadership strengths and characteristics, interests, how they filter different strategic options. Not just teams in place today, but also history of organization, history of politics, interpersonal relationships. It’s a complex system of human actors with emotions. There’s always going to be things missing. We won’t be able to pick up the nuance of a decision. Sometimes, we can’t let a team go because that person is the best at doing something else we need. There’s much nuance facing decisions that cannot be recorded in data systems. Successful leaders know that stuff in their head. It’s hard to codify.”
Finally, the majority of business leaders have trouble making trade-offs. According to a survey by Strategy&, 64% of executives report having too many conflicting priorities.
A key driver of this behavior rests in the fact we think we can always take on one more initiative.
An executive at Caterpilar shared in an interview how “Our tendency is always that our eyes are bigger than our stomachs. As a leader you constantly have to drive the organization to stay focused on those few things that will make the biggest difference.”
Are you choosing and avoiding distractions?
#4 | Does everyone know what the strategy is?
“95% of a company’s employees are unaware of, or do not understand its strategy” –Research by Robert S. Kaplan (Harvard)
Strategy cannot be a secret. Everyone at the organization needs to know and understand it.
Unfortunately that’s not always the case. As shared during an interview with another strategy professor from Harvard:
“More often than not, companies have a strategy. It’s just not articulated, not communicated, not implicit. The strategy ends up being a little different in each individual’s mind. Very few companies put strategies on a piece of paper. It’s the exception rather than the rule.”
Can you say what your strategy is?
#3 | Are people motivated by your strategy?
A strategy people don’t believe in will never get implemented.
Consultants know this best.
A BCG consultant shared in an interview how, in many situations, after identifying a problem and proposing solutions, …
“…management thinks ‘we can’t do that.’ They’re often people from the past. Not open to big change. Re-structuring everything is too much for line managers. They can’t change.”
Walter Kiechel describes a specific case in Lords of Strategy where Clark Equipment, a forklift manufacturer found itself with increased competition and asked BCG for help, only to neglect the consultants’ recommendations:
“After thoroughly studying Clark’s costs and its competitors’, BCG came in with an elegantly complete strategy recommendation that Clark build a new, more streamlined facility to produce a competitive offering, a forklift that would offer fewer features than Clark’s regular models but cost significantly less. Clark, its culture largely in the grip of engineers who delighted in devising the next bell and whistle, promptly went out and did just the opposite, constructing a factory to build an even costlier, feature-laden product.”
For the organization to buy into a strategy, leaders must consider what motivates the workforce.
Research by Carole L. Jurkiewicz, a psychology researcher, suggests that the top 3 motivating factors (by rank) are: interesting work, full appreciation of work done, feeling of being in on things.
William J. Roche, former Manager of personnel development at Texas Instrument, notes in a HBR article how, from a worker’s perspective, meaningful work is when managers “ involves him in the identification and solution of the problems that affect him.”
Put simply, people are motivated when they have influence over their work.
It’s clear buy-in can be facilitated by giving each team member a voice, the ability to influence their day-to-day as well as the corporate strategy. As Kiechel concludes in Lords of Strategy:
“What the [strategy] systems don’t capture is Keynes’ famous ‘animal spirits,’ entrepreneurial energies and imaginings that bring a business to life. They also miss out on the aspirations employees may harbor to think a bit on their own, experiment with new ways of doing the same old drill, and perhaps even be recognized by the company for what they create. For most of strategy’s history, those are precisely the factors that the paradigm hasn’t found a way to work into its calculations. If the discipline is to continue to be of service, it will have to find that way.”
Are your frontline teams involved in strategy formulation?
#2 | Do you stand ready to change?
One executive at Caterpillar shared in an interview that:
“If we’re going to change, we need to communicate what’s going to change. Have a new set of priorities… What we can’t do is to do everything we did before and ask teams to also focus on the new priorities. We can’t ask them to do what we did in the past and all the new things.”
Strategic change requires putting a stop to the momentum of past activities and redirect the organization in a new direction.
The faster an organization can do this, the more agile it becomes. A competitive advantage in itself.
In a study performed by the Economist Intelligence Unit, it was found that most executives want their organizations to be more agile:
“Organisational agility is a core differentiator in today’s rapidly changing business environment. Nearly 90% of executives surveyed by the Economist Intelligence Unit believe that organisational agility is critical for business success. One-half of all chief executive officers (CEOs) and chief information officers (CIOs) polled agree that rapid decision-making and execution are not only important, but essential to a company’s competitive standing. Agility may also be linked to profitable growth: research conducted at the Massachusetts Institute of Technology (MIT) suggests that agile firms grow revenue 37% faster and generate 30% higher profits than non-agile companies.
…Yet most companies admit they are not flexible enough to compete successfully. While the overwhelming majority of executives view organisational agility as a competitive necessity, actual business readiness is more mixed. More than one-quarter (27%) of respondents say that their organisation is at a competitive disadvantage because it is not agile enough to anticipate fundamental marketplace shifts.”
What are no longer priorities as part of your new strategy?
#1 | Are you learning and adapting?
In a famous case study, Richard Pascale shares how Honda planned to sell its large motorcycles and compete with Harley Davidson to breach the American market, only to find success with its much smaller Supercub bikes.
The original strategy didn’t pan out, but the team changed plans to exploit new opportunities after the fact.
Mr. Kawashima, who led Honda’s entry into the U.S., describes how:
“We had no strategy other than the idea of seeing if we could sell something in the United States.” They faced another surprise after realizing “…the retailers who wanted to sell [the Supercubs] weren’t motorcycle dealers, they were sporting goods stores.”
For strategy to succeed, it must adapt to realities on the ground. Plans need to be updated.
This puts frontline leaders in an optimal position to provide feedback and update strategy on-the-go. Henry Mintzberg notes in The Rise and Fall of Strategic Planning how…
“…effective strategy making under difficult circumstances requires either that the formulator be the implementor or else that the implementors take personal charge of the formulation… the power over the process must rest with people who have intimate sense of the context in which the strategies have to work. Either the leaders must be able to probe deeply into the organization or else people inside the organization must be able to influence the strategies that are formed.”
Our modern military recognizes the benefits of making each soldier a leader. That soldiers executing the mission know best how to achieve their objectives. Jon R. Katzenbach shares in his research:
“Each Marine rotates through all the positions in a fire team – leader, machine-gunner, assistant machine-gunner, and rifleman.
The marines don’t distinguish between followers and potential leaders; they believe every member of the Corps must be able to lead. Consider the exigencies of battle. The 19-year old lance corporal who suddenly finds himself facing an angry mob … must know when and how to use force. Indeed, the nature of war dictates that Marines must be trained to do more than just take orders. That is why every enlisted Marine learns how to run a fire team – the basic four-person unit of Marine operations – and every officer learns how to run a 40-member rifle platoon.”
Is your plan still relevant?
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