Be who you are, especially in business

Strategy must solve for the core before testing boundaries.

Geoff Wilson

Remember when Michael Jordan left basketball to be a professional baseball player? The topic was covered by an ESPN “30 for 30” documentary, “Jordan Rides the Bus“. It wasn’t a total disaster, but it does make you cringe to think about. The greatest basketball player of all time took significant time off from his main sport to play baseball. Jordan was basketball. Basketball was Jordan.

Google, a company that is fantastically sound in its core business of search-targeted advertising, has spent millions (perhaps billions) looking for the next big thing. Nevertheless, a huge portion of Google’s revenue and profit comes from its AdWords platform. AdWords is what Google “is.”

While my home state’s Birmingham Barons loved the spectacle that Jordan offered them by testing the baseball waters, and though Google has doubtless made many millionaires by dipping its toes into new venture areas, both of these anecdotes offer lessons for those of us who focus on strategy. Strategy, in so many ways, is about being who you are, first—then testing the boundaries.

I have the pleasure of serving many companies on strategic issues. I’ve now consulted with well over 50 companies at the top management level. Without a doubt, the biggest strategic blunder management teams commit is chasing shiny new things at the cost of their core business.

Loss of focus on the core is the critical risk for a business in transition. Companies have core assets. Those may be people, machinery, locations, patents, or products. A strategy that ignores the core is likely to fail.

Why? It comes down to risk. Let’s use Jordan as an example. When he played basketball in the 1992 Olympics for the United States’ famed “Dream Team,” he had to adapt to a new style of play. There were different rules, a differently shaped key on the court, and the 3-point line was at a different distance. He even had to watch out for being called for traveling, which is rarely enforced in the NBA. But it was the same ball. It was the same dribble, drive, shoot he’d mastered for years as a pro, and he was successful while the Dream Team dominated its way to a gold medal.

What about Jordan’s foray into baseball? Well, that was a different story. Baseball was, literally, a whole new ballgame. Different ball, different skill set, different rules, and different player mentality. It was a whole new world. Jordan hit for just a .200 average in the minor leagues. The whole scenario basically proved he was a fairly flexible athlete, but a very average baseball player.

See the issue? New ball, new rules, new skills, new mindset? Jordan tried to enter a change of pace that had too many degrees of uncertainty. Companies do this all the time. They seek to enter arenas with new technologies, new customers, new channels, or all three—and they commit resources that should probably be focused on their core businesses.

Combining the risky trifecta of new customers, technologies, and routes to market with your existing skills is a recipe for disaster. Doing it at the expense of your core business is just plain obtuse.

I once served a diversified firm whose explicit, vociferous strategic focus was on new product development within a very narrow set of businesses, but whose bread and butter was really in driving cost reduction within a vast core business that wasn’t pursuing a cost-leadership strategy. You get that? To be clear: Driving cost reduction as the key strategic move while not pursuing a cost-leadership strategy is, in itself, a strategic blunder.

Though this company’s new product-development areas were promising, they were also extremely long cycle. And they ate a tremendous amount of resources (as those things sometimes can). Still, management treated the core business as if it were on autopilot while suckling away at the cost-reduction teat without a discernible cost-leadership end point.

The issue with this is that strategies have to be focused against end games, and this particular company had a vast core whose strategic end game left the company itself out of the mix. It would not be a cost leader in its market, but was depending on cost reduction to ensure its financial performance. Meanwhile, new initiatives focused on new technologies, customers, and channels—not to mention new skills—were front and center, resourced heavily but not exclusively, and extremely long cycle to maturity.

The end result of such a quasi-strategic scheme is predictable: a stumbling core and an immature periphery. Why? Because the core business in such a scenario has such mass that a trip up in the core overwhelms any “big” wins in the new, new thing. The core would eventually trip, and the periphery would not be significant enough to save it. It’s the industrial equivalent of the savings and loan crisis: savings and loan institutions borrowed from depositors’ short-term funds and lent long term, automatically setting up a liquidity crisis somewhere down the line.

You have to focus on the core, no matter how ugly it is. The core is your short and intermediate term. You have to be who you are.

The lesson is this: Your core has to have a strategy, and that strategy must reflect who you are in terms of strengths, skills, and competences. You can (nay, must) look for the new, new thing—but you must do it with a core strategy that is effective, extensive, and sound.

Now, none of this matters if you are fat and happy. If you’re a multi-millionaire athlete who has millions upon millions of dollars in endorsements (like Jordan did), or if you’re a high-margin juggernaut like Google (excuse me, Alphabet, Inc.), you can afford to emabark on a diversion that is totally against your strengths.

But if you’re like most of the world, you have strengths, and you only have a finite amount of time to exploit them. You also have a finite amount of time and resources to commit outside your strengths. Be careful with those.

Be sure to form a strategy for who you are first, and then keep a little margin to test who you might be. It can be a liberating thing.

What do you think?

A business strategy that’s everywhere is actually nowhere

If you define your strategic focus too broadly, you don’t have a strategic focus.

Geoff Wilson

Remember when Steve Jobs returned to Apple in the late 1990s—more than a decade after being fired from the company he co-founded? Apple lore says one of the first things he did was cut through all the diverse initiatives and products to establish four focus areas with a very simple matrix. On one axis was “Pro vs. Consumer” and on the other was “Portable vs. Desktop.” By doing this, Jobs created a relentless focus for a relatively large organization around only four possible core products.

What are you relentlessly focused on?

That question is a good test of your strategy. If you can answer it honestly, you probably find that “focus” can be a hard thing to pin down. Many business strategies start with goal-based focus areas: grow revenue, reduce cost, improve delivery time, etc. The problem with goal-based focus areas is they rarely constrain the scope of activity enough to create real focus. You end up “focusing” on something that actually can drive a lack of focus.

Focusing on sales growth is a great example. If you’re focused on sales growth, any sale might seem like a good sale. You might take that really complex deal that promises a lot of revenue at the expense of working to develop a customer base that is both simpler and more profitable over the long term. Your sales “focus” creates strategic diffusion.

And there’s the rub. Your relentless focus shouldn’t necessarily be on a goal, but rather on an outcome that creates sustainable advantage. Who cares if you grew sales 20 percent last year when the way you did it isn’t profitably replicable over time? The Steve Jobs example above is actually pretty vague: We are going to focus on four product types. But it created focus on being great in four areas, and four areas only, on the way to broader success on the metrics. The rest is history with Apple.

This post is not to denigrate tactical wins. If you have the capacity and can afford the distraction, by all means, take the money or invest in the new thing. Apple certainly has. But all too often a distraction breeds more distraction. It also creates confusion for those who don’t know the difference between a tactical decision (“Sure, we’ll take that complex project.”) and a strategic aim (“We aren’t strategically focused on complex projects.”).

The takeaway from this one is simple: If you define your strategic focus too broadly, you don’t have a strategic focus.

What do you think? Share your thoughts in the comments section below.

May the Force be with your business strategy

How do you create change? Move. How do you overcome inferior mass? Move faster.

Geoff Wilson

Strategy is a combination of direction and applied force. It’s the force of assets deployed, talent assigned, new products launched, or new initiatives driven. In short, strategy is applying what you have to achieve what you want.

But wait a minute. What if what you have isn’t enough? What if your assets, talent, products, and other “things” are inferior? What if you just think they might be inferior? Well, I have news for you.

The laws of physics teach us about force. Newton’s second law states that force—the “thing” that creates change in the motion of an object—is derived via mass and acceleration. That is to say, if you want to create a change in something, you have to use a mass and move it at some rate over time.

So what does that mean for a business strategy? It means two things:

1. If you have a mass of assets to apply, you need to move them in order to create change.

You can’t just sit on your laurels and expect change to happen. This is a key issue when it comes to critical strategic moments in a company’s life. Need to change the basis of competition in your market? Better get moving, redeploy assets in a new configuration, and do something rather than do nothing. (And no, I’m not imploring you to just “do something.” Think first.)

When we look at well-worn examples of companies that shape and reshape industry segments, we see constant motion. Walmart stores look nothing like they did 25 years ago. Walmart has led all these years not by sitting still, but by shaping and reshaping a set of retail concepts around a juggernaut of a supply chain. They created force by maintaining a massive base of assets in a constant state of acceleration.

2. If your mass of assets is inferior, you have to move faster than the competition.

That’s right, you can overcome inferior mass with superior acceleration of the mass. What this means in business is that you can, in fact, outwork the other person. You can move faster than the competition.

Some might say this is exactly what Samsung is currently doing to Apple. Samsung has settled into a device product-launch velocity that is a multiple of Apple’s. While Samsung may not have Apple’s brand and market weight, the velocity of what it does have is applying real force to change the market.

So, if a strategic direction is known, here’s the question that should come to mind next for the management strategist: How are you applying force? Are you relying on massive assets moved at a steady pace, or are you counting on a rifle shot—a bullet fired at high velocity—to achieve change?

How do you create change? Move. How do you overcome inferior mass? Move faster.

Don’t just take it from me. Take it from one of the most brilliant military strategists in history:

The strength of an army, like the momentum in mechanics, is estimated by the weight multiplied by the velocity. A rapid march exerts a beneficial moral influence on the army and increases its means of victory. – Napoleon Bonaparte

What do you think? Is the force with your strategy?

Strategic planning means knowing how to deal with uncertainty

It’s crucial to know when your need more data and when you need more action.

Geoff Wilson

When it comes to business strategy, it can be tough to know precisely where you are and where you are going, so be sure to cycle between the two constantly. Here’s another post that speaks to the value of fast cycles to your strategic plan.

Renowned physicist Werner Heisenberg’s uncertainty principle states (roughly, folks) that the more you measure one property of a particle (its velocity, for instance), the less precise you will be when it comes to measuring another property (its position, for example). Extended to the world of business strategy, this principle lends some fascinating insights.

Let me list five:

  1. The basic knowledge that there is a tradeoff to measuring multiple things at once in a complex system. You have to measure, but you also must know the limits of your ability to measure.
  2. The more you try to measure one thing, the less precise you fundamentally become on the others, all else equal. This is true of companies that spend too much time on employee engagement and drop the ball on operations. And it’s true of the operator who focuses too much on throughput and not enough on quality.
  3. The more you focus on where you are, the less you can know about how fast you’re going. Information you gather that tells you where you are is already old by the time you absorb it. Think about analysis paralysis. It’s real.
  4. The reciprocal is true as well: The more you focus on action, the less you can know about current position. The fog of war is real, too.
  5. This last one is probably the kicker for me: The better you understand your current position, the more you should know you’re probably not focused enough on momentum and action. If you’re working the financials two places to the right of the decimal point, and you aren’t a hedge fund or a bond trader, your inaction is probably showing.

And here’s a bonus insight: Your organization is not subject to the laws of quantum mechanics, so know when you need more data and when you need more action. The best answer to this tends to be finding the right “loop lengths” for different processes in your strategic management approach. And cycling through them faster than the competition.

If these things are true, then let me ask you: Why do you allow yourself to try to measure so many things so precisely?

I’m interested in your thoughts on how to trade off measurement of position with measurement of action. What do you think? 

Who’s your customer, really?

In a “customer-centric” world, we too often lose sight of the customer.

“But I paid no attention to what mattered most”

— Ty Herndon, “What Mattered Most”

Geoff Wilson

I’ll level with you: I espouse a professional-services ethic that is decidedly “client first.” It’s frustrating to some who have worked alongside me, and perhaps edifying to others. I’ll write on where it comes from one of these days.

What “client first” means for me is this: If you’re working for or with me in serving a client on a project, the only productive discussion is one that reasonably focuses on the client mission within the defined scope.

However, I’m also experienced enough to know that not all service providers are bought into this mentality. WGP has at least once engaged specialist consultants who simply can’t step outside of their own rate structure to figure out what is best for the end client (or even WGP as their own client). The “job” is to spend time on an account and to bill fees.

What a boring mission. What a boring definition of “customer.”

In that mode of consulting, the product is hours or days of work, and the customer is actually the consultant, who seeks ways to serve herself through development of fees. The true client—the “Big C” client paying the bills—is incidental to the process.

If you employ consultants or employees who focus more on their time, their process, and their rights than on your problem to solve, you are incidental to the process. You’re like Facebook users—important to the business model because you make it go, but incidental to the business.

If you’re an executive, you have multiple customers: likely a boss, board, shareholders, and the Big C customer. And you have yourself. If you find yourself trouncing Big C in order to please your other customers or pad your income, you’re probably doing it wrong.

Some of the best consultants and executives I know make income, fees, and work nearly incidental to the client relationship. Good service is well compensated, unless you do work for bad clients (or bad bosses). But then again, why would you want to help them?

The “client first” model that we work hard to champion at WGP is simple: Listen, bring something new, do real work. Too many in professional services do too little of each of these, and then wonder why they look and act self-centered.

The key is in knowing who the customer is. Do you know yours? Is it the Big C customer, or some other customer you’re serving.

What do you think?

To succeed at strategy, you have to move fast … AND slow

The key to strategic management lies in balancing fast decision loops with slow decision loops.

Geoff Wilson

The longer I live, the more I realize that life is all about the pace at which you make decisions. But that doesn’t always mean really fast is best.

I’ll use the concept of the “OODA loop,” made famous by Air Force Col. John Boyd. The idea is that strategic action depends on establishing and executing on decision loops that run from observation to action and back again. OODA stands for: observe, orient, decide, act. A strategic actor needs to establish and execute this loop in order to act effectively within a competitive environment. And cycling faster than the competition creates an advantage.

But (and this is important), the pace at which a manager must “loop back” to ingoing assumptions about a strategic variable changes drastically based on the factor and the business environment. You can think about this practically by envisioning the difference between the fuel gauge and the throttle position in a race car. The race car driver likely assigns the fuel gauge a decision loop that runs minutes or longer during most of the race—the driver looks at the gauge and establishes an action plan at least every few minutes. The throttle has decision loop that is drastically shorter—fractions of a second at times.

Different variables mean different loop lengths. This is a crucial concept in business management and strategy. I’ve been in the middle of discussions at technology companies that involve planning for growth in a specific, established product line that exceeds 100 percent per quarter. And I’ve spent much of my career amid product lines that do well to eek out a couple of percentage points of growth above GDP. Both circumstances had something in common: They required sets of very deliberate strategic decisions, and they required sets of very rapid ones. They had long loops and short loops.

The loops didn’t look the same in both instances, but there were fast ones and slow ones. And the same is the case with your business. You not only need to know the variables to manage, but also the loop lengths you handle them within. In strategic management, there are short loops and long loops. You have to know the difference.

Short-loop strategic variables might include:

  • Staffing
  • Marketing and sales plans
  • Account plans
  • Flexible capacities (shift structures)
  • Customer feedback cycles
  • Product enhancements

These items have loop lengths that range from days to weeks—or, in some businesses, maybe a quarter. They are highly strategic (being resource allocations and positions), but many people think they are tactics.

Long-loop strategic variables might include:

  • Workforce planning
  • Technology roadmaps
  • Asset footprints
  • Market assessments
  • Statements of strategic intent
  • Overall organization structures or operating systems

These items have loop lengths that, in most businesses, last at least a year. Management “OODAs” on them on an annual basis (in the case of strategic intent, often much longer).

They key to strategic management, then, just might be establishing the variables and loop lengths that matter for your business. A business in the semiconductor space likely can’t afford to wait for annual strategic planning if the industry moves in six-month cycles. Likewise, pushing a regulated utility to do monthly strategy updates might be a waste of time—the world just doesn’t move that fast.

Where this gets really useful is when you start to see your day-to-day activities get out of sync with your expected loop lengths. Perhaps you know it’s time to act on that staffing problem you’ve had for months now, but you just don’t have the energy to do it—you are “off loop” and likely off strategy, as it were.

One thing is for sure: You have to establish what fast and slow are, know what variables fall into the two categories for your business, and learn to lead them both.

I’ll continue to develop this further, and would love your thoughts on this one.

Welcome to the real, messy world

Like the real world, real business isn’t as simple as you’d like it to be.

Geoff Wilson

I’ll confess, I’m a bit of a strategy junkie. You don’t have to be one to do what I do, but it helps. However, if you read my writing much, I hope you come away with a sense of the practical bent that I bring to the topic. The real world is the real world. Just as any engineer will tell you that lab scale processes rarely translate directly to production facilities, financial and strategic models rarely reflect reality—at all.

The below image was shown at a recent annual meeting of a private equity firm we have the privilege to serve. It shows indexed revenue and EBITDA performance over the life of a fund’s portfolio. Each line is a portfolio company. Lines that trend upward are green. Downward lines are red.

Keep in mind, this is a top-performing private equity fund. Returns for this portfolio were excellent. What do you see? The real world.

Each of those lines depicts the outcome of an actual business. It’s the result of some management team’s hopes and dreams. Those businesses were probably planned using relatively linear models and margins. But what you get is actual sausage making. And I’ll say it again: This is a top-performing portfolio.

The real world is sausage making. Real business comes with randomness, particularly in companies that are working to make things happen.

If you consider it failure that some parts of your portfolio might not stay in lockstep with your linear growth expectations, you probably don’t understand the nature of risk taking and enterprise building. You might be more comfortable investing in CDs.

The real world is messy. This is good to keep in mind when you’re futzing with a financial model that implies a precision that your business outcomes will never achieve.

What do you think?

The danger of “only winning” in business

Only beating the competition isn’t strategy.

Geoff Wilson

What a week it’s been on the political scene. We saw U.S. Senate Republicans almost (thanks to John McCain’s last-second “no” vote) pass an absurd bill to effect the “skinny repeal” of Obamacare. The bill would have stripped the economically rational parts of Obamacare (the mandates) and left the rest.

The bill was so ridiculous that Senate Republicans actually didn’t want it to be passed by the House and sent to President Trump for signature. Some just wanted to make a symbolic move in the name of winning something on healthcare.

The bill was an act that focused on “winning” against a foe, but it was ultimately grounded in no vision whatsoever for the future health of the country (literally and figuratively).

Strategy focused only on winning against the competition may not be enough

“We won the battle but lost the war.” You’ve heard that plenty, I’m sure. It’s a tired adage. The problem is that modern organizations are rife with battles yet extremely light on defining of the war. A case in point would be your functional organizations, which may define winning in ways that have nothing to do with the mission of the greater company. Your human resources team wants to hire and train, your supply chain team wants to source cheap raw materials, and your engineering team wants to create a better mousetrap. Which of these three investments make the most sense for the company? Who knows.

The same is true for business managers. So many business strategies are built on beating the competition that doing so has come to define strategy. But what if the competition is playing the same tired game? Who’s out there looking for ways to deliver value to customers that the competition hasn’t thought of yet? One of the reasons the book Blue Ocean Strategy by Chan Kim and Renée Mauborgne has captured so many imaginations is that it has exhorted us to look for ways to deliver value that others have not figured out. The concept is literally “find out where the competition isn’t,” but in a way that implies innovation in that void, not mere presence.

But doing so requires vision

The major issue with applying this “more than winning” approach to strategy is that it takes time and expertise—it requires vision. You need to have the time to think of strategy as avoiding the competition and focusing on the vision for the customer. And you have to have the expertise to actually figure out how to do it. Chances are there aren’t many people in your company who have both the time and the expertise.

The U.S. Senate nearly taught us this week that only focusing on winning against a foe can lead to really stupid outcomes. Absent a compelling vision for how to deliver stable, cost-effective health care to citizens via regulatory boundaries and mandates (an admittedly hard thing to do), the Senate simply aspired to do something to beat the competition. May your own strategy avoid such a ditch.

Now it’s your turn:  How have you seen this sort of thing play out in your career?

Assumption, what’s your strategic function?

The journey to real insight lies in debating assumptions, not outcomes.

Geoff Wilson

You know what happens when you assume? Well, the classical answer to that question involves something unsavory that happens to you and me. But that’s not what I had in mind.

What I meant is what happens when you make assumptions about the future of your business, your competition, and your market. It’s something all strategists have to do. They can’t tell the future, but they can test assumptions about it. And testing assumptions about the future is far more rewarding and sound than testing guesses about future outcomes.

Imagine you’re trying to set a business strategy for entry into a market. Let’s say it’s the market for insulated coffee mugs. You might start your business on the notion that the outcome you seek is to sell 1,000 mugs the first year, 5,000 the second, and 10,000 the third. You reach nirvana that way.

But what matters is the assumptions you make about the market and your product in order to build to the outcome. If you’re targeting coffee mugs for truckers, you must estimate the number of truckers you need to reach in order to sell those first 1,000 mugs, and then determine the number of places that you need to carry your mugs in order to reach that many truckers (which leads to an assessment of how many mugs you should have on how many racks in how many truck stops, all driving your assumptions about working capital, how many competitive mugs are on the same racks, your price point, etc.).

Before you know it, you’ve had to make assumptions about many variables that actually matter in building up to that outcome of 1,000 mugs in the first year. And assumptions (or estimates, if you will) can be debated far better than any blanket statement about sales forecasts or market share gains.

Assumptions are where the rubber meets the road for strategy. Assumptions are testable propositions.

Too many strategic-planning exercises go sideways in the gap between “We have to grow sales by 7 percent next year” and “We can’t figure a set of assumptions that allows it.” This is especially true when a decidedly top-down view of the world (“grow by 7 percent”) collides with the reality of the bottom-up assumptions (“The market is shrinking and our competition is getting stronger.”).

Something has to give, and it’s usually either the top-down whim (in the case of sound strategic planning processes) or the bottom-up assumption (in the case of personality-driven planning processes). You’ve probably witnessed both cases.

When you make strategic assumptions, you create little test tubes that can be individually experimented with far better than strategic predictions about the overall environment. You can test a proposition about the market, but you can’t really test a statement about the market’s outcome.

When seeking to build a better strategy, you should debate assumptions about what drives reality around you, not mere statements on that reality.

What do you think? 

Why your people need to mesh for your business to move

Identifying ideal mesh points within your organization is vital to strategic execution.

Geoff Wilson

Your organization is the gearbox of your strategy. It’s the structure through which the energy of people and ideas gets channeled toward the strategic intent of the company’s leadership team. An effective organization structure is priceless. It fosters contact and collaboration among people who are best positioned to capture opportunity and manage risk en route to delivering the company’s mission.

But if the organization is the gearbox, a leader’s ability to fine tune the meshing of the gears within the box becomes a key determinant of whether strategy can be executed at all. Perhaps your strategy calls for an operation to be migrated from one geography to another—maybe to capture a cost advantage or to better serve a customer.

Such a move typically requires many disparate parts of a company to mesh with one another in ways that aren’t always natural.

How so? Imagine that the operation’s leaders are focused on delivering on cost and inventory performance at the start and end of the move. Then, imagine that the very act of moving will naturally impact production costs (as one facility is ramped down and another is ramped up) and inventory levels (as inventory is built up on one side for the move, and built on the other to achieve future service levels).

What is likely to happen if the operational leaders aren’t appropriately meshed with strategic and financial leaders to reset goals and expectations? Chaos, that’s what. Customer service suffers, transitions from the one location to another take twice as long (as cost levels are over-managed), and nearly everyone wonders why this was so darn hard.

It’s necessary during times of strategic change to over-invest in organizational mesh points that ensure ideas and energy are correctly driven. These can often be artificial and temporary—program management offices provide this function for large-change programs. But sometimes, strategic organization mesh points simply need to be matters of daily business. The emergence of sales and operational-planning processes and meetings the world over reflects the value of strategic mesh points in organizations.

Maybe you have a strategy that requires an unnatural coordination across your sales and product development teams. Perhaps your strategy requires your supply chain to interact differently with your marketing team. It’s important to know this.

Be sure to consider where your organization needs to mesh in order to achieve the change you’re seeking.

What do you think?