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The elephant in the strategic planning room is often an 800-pound gorilla

A world-beating competitive advantage doesn’t make you smart, it makes you lucky; so don’t try to emulate people who have one.

Perusing my “clutter” folder today, I came across a post on the Harvard Business Review that highlights how “The Best Companies Know How to Balance Strategy and Purpose.”

It’s not a bad read, other than the fact that it introduced me to the jargon-ized notion of “corporate plasticity.”  Seriously, folks, we very well might need another term for the overused and tired notion of “agility” at this point, but…plasticity?  Good grief.

However, I digress.

In developing the thesis that purpose has to be dominant over strategy, the authors–a couple of A.T. Kearney partners and a Senior Advisor–choose a set of companies to serve as exemplars.  The names?

Apple

SpaceX

Nestlé

Unilever

Lego

You notice anything interesting about these companies?  I do.  They are the 800-pound gorillas of the markets they serve.

And there is the rub.  Management thinking that is guided by what the best companies do is fine…to a point. That point is that such thinking has to be careful about what “best” really is. If the company you aspire to be really derives all of its value creation mojo from a competitive advantage that is singular, then you might want to look elsewhere.  Or you might want to at least acknowledge that to be the next Apple, you have to build the brand- and customer experience-driven loyalty that Apple has built over the past couple of decades, rather than trying to “innovate like Apple” as so many misguided management teams have tried.

Once you recognize that the companies you compare your own company to have competitive advantages that you simply don’t have, you will have identified a really big elephant in the strategic planning room.  Then, you can get busy building your own competitive advantage vs. trying to be someone you are not.

What do you think?

What Monty Hall taught us about strategy

New information is always valuable to your strategy in life, business, and the occasional game show.

Note: I woke up this morning and found an obituary to game show host Monty Hall of Let’s Make a Deal fame.  This is a draft that was buried deep in my queue that I thought might be a sort of mini-tribute to Mr. Hall.  RIP Monty.

Geoff Wilson

The famous game show host Monty Hall used to rule the airwaves with Let’s Make a Deal.  He left some lessons that matter a lot for your thinking on business (or career) strategy.

The Monty Hall problem

One of the most memorable aspects of the Let’s Make a Deal show was the “three doors” scenario.  In that scenario, Mr. Hall would show the contestant three doors with the promise of a fabulous prize behind one of them, and then have the contestant pick one. After the contestant picked, Monty would reveal what was behind one of the other two doors–usually some funny item like a goat…and then give the contestant a chance to change their original choice to the remaining (third, and unrevealed) door.

This little game, as simple as it is, has left us with what is known as the “Monty Hall Problem.” The correct solution to the little game is for the contestant to always switch doors to the remaining door (more on that in a second). The “problem” is that this solution is entirely counter-intuitive to even highly experienced and educated people. These people see the original choice as completely independent of the subsequent revelation and proffered opportunity to switch doors.  The say “the odds of winning were 1 in 3 at the start, and that didn’t change just because ol’ Monty revealed what was behind one of the other doors.”

And, they are wrong.

The answer is to always switch, and while the explanation of that answer can be done quantitatively through multiple means (that link above has plenty of them), the simplest explanation that I have encountered is this: Imagine that instead of three doors, Monty presents 100 doors, still with only one of them containing a fabulous prize.  Then, the contestant chooses one. Monty then opens 98 of the remaining 99 doors to reveal that each one is worthless, leaving one unopened door.  What should the contestant do now?

It’s much clearer now that Monty has presented very valuable information by revealing 98 doors as worthless. So the one door Monty hasn’t revealed becomes very likely the one with the prize.  The contestant goes from a choice that had a 1% chance of success to one that is nearly certain to win by switching.

All this is well and good, but why does it matter?

It matters because you are faced with opportunities to make choices based on updated information all the time.  And, sticking with your prior choices when new information says that doing so is a bad idea makes you…un-smart. I’ve written on the value of this kind of thinking before, in one of my earliest posts.  But the “three doors” as a specific case plays out more often than you think.

You might be making choices about what markets to emphasize and settle on two of them because you think that your product is competitive. Then, you find out one of them is no longer a good fit.  Maybe the competition launched a killer app.  What do you do?  You switch.  That might mean you develop your own product, but it definitely means you update, you adjust.

One that hits close to home for me relates to career choices. Perhaps you’ve cast your lot with a boss who looked interesting and visionary at the start when you took the job, but who after a few years of exposure is revealed to be a tyrant and schemer. What do you do?  Do you stick with your original boss choice because you already chose?  Not at all.  Ol’ Monty taught you something:  Switch!!!

Just remember, when you’ve picked door number 1, it doesn’t mean you are stuck with it.  Your experience provides you with some additional valuable information, and sometimes it makes sense to switch your choice.

Thank you Monty Hall!

What do you think? 

Business strategy and big brother

Sure, you know big brother is watching you, but is your business strategy watching big brother?

Geoff Wilson

Bombardier woke up this week to a 220 percent tariff on its high end planes, courtesy of the U.S. Department of Commerce.  The news was a blow to the company’s share price, and probably a bigger blow to those who depend on the company as suppliers and workers.  The background and justification for the tariff are beyond the scope of this post, but it brings to mind a question:

How does your business strategy take into account moves by big brother? You know, big brother…that’s shorthand for the all seeing, all knowing State with a capital S that encompasses all the regulatory regimes your business has to contend with at any point.

Capital intensive industries seem to be the recipients of constant regulatory scrutiny because, well, they are capital intensive–marginal revenue makes a LOT of difference there.  It takes a lot of time and money to bring a new airplane to market, or a new car, and it usually costs very little to make an incremental plane or car compared to the development costs.  Examples are everywhere.

China has been very clear on impending goals for electric cars within its borders.  California is getting in on the game, too.  The Trump administration has been unabashed in its willingness to push for new tariffs on lumber, steel, solar, and the aforementioned airplanes, among other things.

You may look at this and think “thank goodness I’m not competing in these markets,” but you probably are.  You just don’t know it. That steel maker buys machinery, parts, labor, and other things on many of the same markets you do.  It may be your customer if you sell software, services, or other goods.  The changing regulatory environment for one company or sector has knock-on effects in others.  The business–and regulatory reality–of your customer is very often and very much your business, whether you like it or not.

So, you are not in a vacuum. Your local car wash operator has regulatory burdens that can change over time. So do you.

I have focused on trade regulation here, but taxation and business practice regulations (a good place to start with that one is the Foreign Corrupt Practices Act) matter a lot as well.

How does your business strategy take into account the regulatory pressures that big brother can bring?  Where are there opportunities or risks in those pressures?  How do you prepare for them?

What do you think?  Does your strategy account for the whims of big brother?

 

To build a fully-aware business strategy, you need a dose of meta

A fully aware business strategy must consider the trend behind the trend. Finding meta trends can accelerate and sharpen your thinking.

Geoff Wilson

Great business strategy is–to put it simply–aware. It is aware of the market, it is aware of capabilities, it is aware of trends: both micro and mega trends.  But I’m going to go out on a limb and say that while most deliberately built business strategies are aware of micro-trends–trends that drive choices on customers, products, etc.–and plenty of those strategies are aware of mega-trends–trends that drive choices based on overarching facts are driving overall opportunity, risk, and performance–far too many strategic plans are ignorant of meta trends.

Meta trends are the higher order effects of known trends. They are the trends behind the trend, if you will. These are the things that ensure enduring success or crushing failure.

Meta trends are the trends that managers wave away when thinking about strategy because they don’t fit the framework. Higher order impacts of known trends need to be considered for a strategy to be truly aware. Things like increasing frustration with change programs, disengagement due to poor decision making approaches, or customer angst that is just below the surface and that can’t be surveyed are perhaps acknowledged, but they often don’t get built into the plan as worthy trends.

So, you have to ask yourself: what is meta in your organization? An example of a meta trend at the micro level might be a lack of confidence in a specific manager, team, or organization to carry out a mission that is critical to the business strategy. Plenty of highly skilled managers have dropped the ball enough for those around them to lose confidence.  You may know that you need to shore up delivery in that person or organization as a part of your strategy, but what if the “meta” reality is the organization just doesn’t have any confidence? 

Another example might be a higher order impact of a known demographic change. Your workforce is going from young to middle-aged. Does the shift in quantitative age portend a shift in willingness to sacrifice for the organization?  Some regard a workforce that is entering maturity as a clear strength, but a meta trend might be that the workforce won’t work like it used to. That’s important to know. You might think differently if you know your workforce’s values are changing even as the names on the roster are not.

A final example, and a significant meta trend for your organization, might be secondary impacts from known changes in the way people are working. We love the capabilities that come with digital transformations, but do we realize the meta trend of analysis paralysis that can come from the ubiquity of data?  Are we fighting it? Similarly, connectivity is a plus, but what are the productivity implications of a workforce that is constantly fighting distractions?  These are real “meta” issues that come from commonly understood “mega” trends.

The bottom line to this thought is that we often invest time to understand first order trends.  These trends are worthy of consideration. But, to build a fully aware strategy we have to get better at looking at the higher order effects of known trends.

Try it out. Be “meta” for a while and see what happens.

I would love to have your thoughts on this one, including any examples of missed meta trends. 

Strategy requires naming your organization’s elephants

You know there’s an elephant in the room. You don’t have a strategic plan until you’ve been unreasonable enough to name it.

Geoff Wilson

Imagine a corporation’s strategic plan that has all the check-the-box elements required of it. It has a market definition, a strong fact-based trend analysis, a good view of where the business competes and against whom, a nice vision for the future, and even a neatly tailored set of strategic actions to get there.

The plan leverages all the disruptive, innovative, differentiated, mindful, action-oriented, blue-ocean, globalized, core-competence-on-steroids buzzwords and frameworks that the executives and their underlings could find.

It’s beautiful. The board eats it up. And … it’s entirely incomplete and insufficient, to the point of being dangerous. It will not only be in the dustbin in a matter of a year or so (in some cases right after the board meeting), but it will also become a subtle punchline that denigrates the notion of strategic planning for those who are its victims.

OK, that’s the scenario. If you’re an executive of any significant seasoning, you’ve seen this movie before. Let’s look at why this happens.

Why strategy is all too often left incomplete

Strategy of any type—from checkers to chess and football to financial engineering—requires a brutal assessment of the problem at hand. That problem may be definable in broad terms like “growth,” “profitability,” and “market share,” but I doubt it.

The strategic problem is, more often, just a tad more subtle. It revolves around specific, granular realities in the business and competitive landscape. Often, the realities are directly known—even quantified—but they may not be discussed.

To be sure, some executive teams surface problems easily. The problem may look like a cost disadvantage, an aging workforce, a competitor’s new product, slowing salesforce productivity, or any number of other specific issues that when placed in the blinding flame of the corporation’s or business unit’s tidy grand strategy will extinguish it. These teams, typically through lots of practice, talk plainly. They spot the elephant in the room, and they name it.

Other executive teams like to nurture their elephants. They see issues like new-program and M&A failures as things to punish soundly in the hierarchy while excluding from high-level strategic discussions. They find scapegoats at a moment’s notice (and even sometimes name their scapegoats before things turn bad). They very often know there’s a problem, but they lack the courage (or, perhaps more often, have too many competing incentives) to name the elephant. The elephant goes on living, breathing, and sucking the life out of the company’s strategy with its prodigious trunk.

That’s why strategies are incomplete. In the midst of tidy stories of leverage, innovation, and creative competition is an elephant sucking the life out of performance and sustainability. It’s the elephant without a name.

So, what to do? 

Let me put this simply: Name your elephants. Get help if possible.

Ideally, you identify them with names and numbers. Most business problems can be stated in quantitative terms. Think you have a capital-allocation issue? Check whether your return on invested capital is too low (or too high!). Think you have a salesforce issue? Selling opportunities per rep can lead you to the answer. Worried about an aging workforce? The numbers don’t lie. Competition eating your lunch? Look at the numbers for market share or Net Promoter Score to see what the market says.

I’m being simple here because naming your elephants doesn’t require a full-blown study.

But there’s a catch: Senior management must be open to discussing elephants. If naming elephants runs counter to incentive plans or egos, you’re likely pushing the proverbial rope up a hill. Motivated board members sometimes fail to name elephants when faced with management who won’t play along. And if that’s the case, you can imagine what happens in the same circumstances to people lower in the hierarchy.

A practical view of how to do it

In our work at Wilson Growth Partners, we focus intensely on establishing fact-based views of our clients’ strategic elephants. It’s our goal to name the elephants alongside management in order to build a complete view of corporate and business-unit strategy. One method I’m fond of is working with senior leaders to establish expectations for performance alongside capabilities required, and forcing (yes, forcing) a candid discussion on the gaps in both. Many elephants reside in those gaps.

Elephant hunting has to be done deliberately and early in the process. And even in the best-resourced organizations, it’s the one action that often can’t be done by internal resources in a strategic-planning process. An independent, objective advisor can name elephants that management and boards simply can’t. Outsiders can be just unreasonable enough to bring up the hard stuff (as they should).

Now it’s your turn: What examples of destructive elephants have you seen? How have you seen teams name their elephants (or not)?

Stop waiting for Han Solo

Relying on unidentified heroics is great for movies, but bad for business strategy.

This article contains a spoiler for the 1977 movie “Star Wars: Episode IV: A New Hope”. If you’ve never seen it, you’ve missed an important and largely wholesome artifact of modern popular culture, so please don’t read on until you watch it.

Geoff Wilson

Picture it. It’s a long time ago, in a galaxy far, far away. You’re Luke Skywalker. It’s the final battle of “Star Wars: Episode IV: A New Hope”. In your X-sing starfighter, you’re bearing down on the small exhaust port that is the Death Star’s only known weakness. Your strategy says a proton torpedo or two delivered into that port will be all she wrote for the evil Empire’s new toy.

But Darth Vader and two henchmen are closing in on you in their roaring, menacing TIE fighters. You only need a minute more to triumphantly blow apart the Death Star as per the battle’s strategy—but Vader is seconds from destroying you instead.

As he locks his TIE fighter’s weapons on you, Vader unleashes a sinister, foreshadowing boast in James Earl Jones’ deep voice:

“I have you now …”

And he does. All appears lost. Your strategy isn’t going to make it. But then, out of nowhere, Han Solo and the Millennium Falcon blast Vader and his entourage out of the picture and into outer space. Solo exclaims those classic words:

“You’re all clear, kid. Now let’s blow this thing and go home.”

You are. You do. And you all go. Everyone gets a medal. The galaxy is safe—for now.

Now, back to the real world.

Exhale …

I’ve got news for you: Han Solo won’t save your business (or life) strategy. So don’t plan like he will.

Business strategy, like an excellent motion picture, is a narrative acted out. It’s supported by facts and demonstrated through action. Any good narrative—and many sound business strategies—can use all manner of plot devices. Cliffhangers, climaxes, twists, bluffs, foreshadowing, flashbacks, and feints are all in bounds.

But the one plot device that should never penetrate the documented realm of any strategy is called deus ex machina. Literally translated as “god from the machine,” it is “… a plot device whereby a seemingly unsolvable problem is suddenly and abruptly resolved by the contrived and unexpected intervention of some new event, character, ability or object.”

You see? Han Solo shows up out of nowhere and saves the day.

Examples of deus ex machina in business strategy are legion. Any time you review (or, God forbid, develop) a strategy that goes from point A to point Z, but you can’t find the connecting points between, you’re seeing this problematic plot device.

You’re probably part of a company today that has at least one business unit that plans for growth to rescue margins, acquisition to rescue growth, new products to rescue customer loyalty, or an expert new hire (his or her initials: TBD) to drive a new level of performance and engagement. But its done without growth plans, without an acquisition map, without articulating which products will unveil the promised land, and without the budget, candidates, or even value proposition to fill the open spot.

People who operate like this are waiting for Han Solo. Don’t wait for Han Solo. It’s dangerous. Here’s why.

Most long-term business strategies start with goals given by senior management, boards, or CEOs without more than vague notions of how to achieve them. The best of those goals constitute true “commander’s intent,” with end states in mind bounded by sets of values—definitions of what you won’t resort to in pursuit of excellence. Others are simply budget targets. We hit “budget as strategy” in another post; they can and do coexist, but tenuously.

Let’s assume the commander’s intent is your starting point. A beautiful strategic objective is therefore put in place, with an understanding of what we won’t do to achieve it. Own a market segment, grow at top quartile rates, be excellent to your customers. Be the most aggressive and the most admired simultaneously. Have it all.

But what if the strategy drawn up to get there relies on too many unidentified elements to succeed? It lacks specificity and shape. It is written as though the answer is “Trust us, we’ll figure it out.” In short, it is amorphous–not simply flexible, but in reality unbounded. “Han Solo will rescue us.”

Amorphous strategy creates at least three hazards that are brutally deleterious to an organization, your standing as a leader, and your own decision making:

  1. Creates confusion where there should be cohesion. All things are possible as long as they are even obliquely oriented toward the end objective. A thousand flowers bloom and quickly die due to shallow roots. In the end, scope creeps toward what is nearby and comfortable. Incrementalism abounds because it’s the least confusing option.
  2. Makes you, as the strategic leader, look like a short-term thinker. It leads organizations to believe that leaders are solely focused on the near term. Because there is no connective tissue between now and the future state, long-term strategies are viewed as mere window dressing. They are something you put on PowerPoint slides and show off at conferences, but don’t really believe in. More of the same, piled high and deep. All the advanced degrees. You get the picture.
  3. Confounds good decision making. Because the means and methods are undefined, principled decisions are hard to come by. Anything and everything can be “on strategy” and the same can be “off strategy.” Pet projects, politics, and personal peccadilloes can grow to dominate decision making vs. principled protection of proper perspective.

So what?

What are you to do? Here are a few practical ideas:

Believe in belief* – Yes, that’s right. Have a point of view and share it. The fog of war is no excuse. Practice the art of saying “I don’t know, but my hypothesis is …” vs. just artfully dodging the issue. If your business (or life) strategy isn’t built on a set of beliefs about yourself, your organization, your competitors, and the world around you, then you are, my friend, a sucker. Always have a hypothesis about what the savior will be and how you cultivate it. Test the hypothesis frequently.

Apply your beliefs to “Step 2” – If you have a strategy that is big and audacious (including a strategy for your career), it’s not sufficient to plan for incremental moves. Think of strategy as the often-quoted three-step framework. Step 1 in many, if not most, strategies is “Do what we are doing, only better.” Step 3 is usually some variant of the Jack Welch theme: “Be number one or number two in our market segment.”

You have to know at least the silhouette of what Step 2 is—especially if Step 3 requires a step-change in performance. Who would you acquire? What kind of product would you need to bring to market? What customer would you have to reach? What does your footprint need to look like? What capabilities should you build now?

If you can’t bridge the gap between Step 1 and Step 3, even conceptually, then you are now in possession of a powerful insight about the objective itself.

Pack for the journey – posted previously on the importance of answering the question “Have you packed for the journey?” If your strategy has a Step 1, 2, and 3, then ask yourself if you have resourced it and made the real risk/resourcing/return decisions necessary to go the distance. Many strategies founder on the rocks of stretched resources or capabilities—especially in today’s age of management by spreadsheet.

Pressure test the means – If you’re in a leadership or board position (or one that looks like it), be sure to ask about Step 2. Trust, but verify. A leader who demonstrates a grand strategy but cannot outline a practical step to get there is telling you something. Getting excited about an end objective is a good thing, but it shouldn’t crowd out sober assessment of the path to the objective.

You must ruthlessly eliminate the white knight, Prince Charming, Han Solo—pick your metaphor—from strategic planning. Using them as plot devices—or their relatives the unfunded mandate, growth by hockey stick, cost reduction by benchmark, and the unidentified acquisition—is strategy based on faith. It’s strategy by fairy tale.

A more direct appraisal is that it’s not strategy at all.

Han Solo doesn’t work on your team, so don’t plan as though he’ll save the day—or your strategy.

What do you think?

* I borrowed this adage as a direct homage to the late, legendary swimming coach Richard Quick. I’m glad to have known him. It was his motto, and it’s a good one.

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?

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?