Do you have any interest in strategy, strategic thinking, strategy making? Have you wondered what strategy is, what it involves, how to go about it? Do you consider yourself a rational/analytical person? If you have answered yes then you might just want to consider reading The Strategy Book by Max McKeown. In this post I want simply to share some of what I found interesting/useful.
What is strategy about and why is it so important?
“Strategy is about shaping the future…… Your strategy will craft a response to external waves, needs of customers and the actions of competitors.”
That pretty much says it all. The future is not simply a continuation of the past. We, collectively, co-create the future and that means that the future is open to being shaped. Most important those that shape the future are the ones that are most likely to prosper from how the future turns out. Furthermore, the essence of the world is flow/change – that is to say that the world is dynamic and as such the external environment, customers and competitors will present your organisation with opportunities and threats.
If you are not open to detecting and responding to these then you are likely to find yourself in the same space as RIM or Nokia. And RIM and Nokia are the living embodiments of what happens when you focus solely on operational excellence – doing the existing things better/faster/smarter. No execution is not enough for a business to flourish: execution is necessary yet not sufficient, strategy is required.
What does strategy require/involve?
“Strategy is about outthinking your competition. Its about vision first and planing second. That’s why it is so important that you think before you plan. And that the thinking part of what you do is given priority….Thinking like a strategist is demanding intellectual work…”
I qualified as a chartered accountant many years ago and was heavily involved in business planning and analysis. Which is another way of saying that I have hands on experience in strategic planning. What did I experience? Lots of planning and a dearth of the kind of thinking that can be called strategic. It occurs to me that most of the organisations that I have worked in/consulted for do not create a clearing for strategic thinking to show up / take place.
Yet, I am not in complete agreement with Max. Kenichi Ohmae, a strategist, pointed out a long time ago that too many companies focus too much on their competitors and not enough on customers – in particular creating superior value for customers and potential customers. Interestingly, Max is aware of this because he mentions it later in the book.
Central to strategy is thinking like a strategist: what does this involve?
“Becoming a strategic thinker is about opening your mind to possibilities. It’s about seeing the bigger picture. It’s about understanding the various parts of your business, taking them apart, and then putting them back together again in a more powerful way. It’s about insight, invention, emotion and imagination focused on reshaping some part of the world.”
Now you know why great strategy is rare. Great strategy requires strategists with a sound understanding of the business along with a combination of competencies that are rare in one individual: imagination and creative thinking; systems (holistic) thinking; and critical/analytical thinking. Which kind of suggests to me that perhaps it is better to ‘play the strategy game’ as a team, preferably the entire organisation, rather than leave it to one or two individuals.
Thinking like a strategist: 4 tips
In part two (thinking like a strategist) of The Strategy Book, Max gives four tips.
Reacting is as important as planning
“Unplanned opportunities may be your best chance of creating a great strategy, so you need to be constantly looking for them…… the greatest opportunities come from unplanned events.”
Ingvar Kamprad, IKEA founder, lived near furniture makers so he started selling furniture. He reacted to a boycott from local rivals by making his own furniture. He reacted to excessive customer demand by coming up with self-service. Then there is the ‘Honda Effect’ – Honda made a successful entry into the US market despite the original strategy being a failure. This approach to strategy is in line with Mintzberg’s view on how strategy comes about in the real world.
“All decisions are about the future. Since the future is uncertain, all of your decisions will have an uncertain outcome. But because you’re trying to shape the future you still have to make decisions…..”
The point is that risk is inherent in strategy making and the course of action (strategy) that is chosen to be implemented. One source of risk is that we have finite minds seeking to grasp/comprehend an infinite world. Another source of risk is simply the ‘butterfly effect’ a tiny change, changes everything and renders our strategy ineffective. Then there is the risk of choosing a strategy that the organisation is simply not fit to implement….. Then there is the risk of doing nothing.
Risk cannot be avoided the challenge for the strategist is to know what risks are involved and have a correct grasp of these risks: how likely is it that the risk will turn into actuality and what is the most likely impact. With this understanding sensible choices can be made.
Looking over your shoulder
“Strategies compete with strategies…….. You need to be aware of the competition is doing. You need to know what customers are doing. Paranoid adaptation is part of the strategy game. Look up, down, back and ahead.”
I believe that Andy Grove said it best with his book Only The Paranoid Survive. Or as I told one of my clients, the bomb is ticking the only question is when it will explode and your business will be blown out of the water.
Knowing where grass (really) is greener
“It’s a fair bet that at some point what made your company money in the past will stop making money. New products replace old products, Entirely new services replace old services. The best places to sell your products will change. And customers who mattered so much will stop (or start) buying. You need to know when (and how) to switch focus.”
The key point is that one has to be constantly open to and looking for new markets. Are there customers who are not buying your products yet would love to buy your products? What can you do about that? Are there segments of the market that are growing faster than others? Are there new entrants to the market? Clayton Christensen says be wary of the new entrants that you are most likely to ignore – those that make inferior versions of your products and who sell them cheaper to a segment you are happy to walk away from. Remember Toyota and the crappy cars it made/sold and eventually it went on to compete with Mercedes in the luxury market!
If you would like a free copy of The Strategy Book then drop me an email. The first person to email me will receive the book.
The future of most customer efforts has already been written: take a look at your culture
“I came to see, in my time at IBM, that culture isn’t just one aspect of the game – it is the game.” Lou Gerstner
Many large companies are playing the Customer game and most of them will fail. They may succeed in improving marketing campaign ROI and reducing churn through customer analytics. They may succeed in reducing customer service costs by implementing making it harder for customer to contact the call centres and by replacing people with self-service systems. Yes, they may win a ‘battle’ here and their. Nonetheless, at the strategic level (‘war’) they will fail: they will fail to build customer loyalty and reap the rewards of that loyalty. Why?
Culture. If you scratch the surface you find the culture within many large established companies is one of “do whatever it takes to make the numbers!” Why is that? Because the Tops are judged by only one thing: making the numbers. In general, Tops do not care about people – not the flesh and blood ‘employees’, nor the flesh and blood suppliers/partner, nor the flesh and blood ‘customers’. Nor do they care about or have an intimate understanding of operations. How can they?
They are embedded in a structure (‘system’) which views customers as objects to be manipulated and wallets to be emptied; employees are simply resources which inconveniently come in a human form and are costly hence the focus on replacing them with technology; suppliers are also resources and the objective is to pay the lowest price; laws are simply inconvenient hurdles that one can find ways around; and the rightful role of the Tops is generalship (‘strategy’). In the world of the Tops (business or politics) the only thing that matters is making the ‘numbers’: the end justifies the means.
This grim picture is mostly hidden from view. It is the elephant in the room that no-one wants to acknowledge as it is too threatening – it conflicts with our espoused words and values. Yet, occasionally this elephant burst on to the world stage in a dramatic fashion: in the USA there was Worldcom, Enron, Andersen and recently the financial crisis; and in the UK we had the MPs expenses scandal, the financial crisis and recently the News of the World phone hacking scandal.
When you exit the ‘matrix of customer babble’ you will tend to find that the real agenda and system structure can best be described as “extracting maximum value at the expense of the customer” – to borrow Fred Reicheld’s words. Large companies and the people within them resort to any manner of tactics to pry open the customer’s wallet and get as much out of it as possible right now in this transaction, in this quarter, in this year – to make the numbers. You can see it in the marketing dept where marketers are busy devising all kinds of ‘bait and switch’ tactics. You can also see it in the love of ‘neuromarketing’ using insight into the human mind to manipulate customers to do what we want them to do. You can see it in the relentless dumbing down and depersonalising of customer service…….
What is usually missing is any genuine interest in the flesh and blood customers (or employees, suppliers and partners). And this is obvious to many of us customers and that is why we use TripAdvisor or Epinions or turn to our social networks to get at the ‘truth’ rather than the marketing claptrap.
What is often missing is any sense of fair play: honesty and integrity between words and actions. Who is best placed to know the reality of organisational life? The employees. In one large publicly quoted company the Tops forced all the Middles and Bottoms to sign an ethics policy. The following week I learned that these honorable Tops had devised a way to get around the law by using a Greek smuggler to do the dirty work and thus distance themselves from any risk. Does that sound remarkably similar to the News of the World where policeman and private detectives were used to the dirty work.
Is my experience unique? Not according to employee surveys, one survey that springs to mind highlighted the following:
- 49% of employees (who responded to the survey) do not have “trust and confidence” in their company’s senior management;
- Only 36% of employees believe that their leaders “act with honesty and integrity”;
- 76% of employees stated that, during a recent one year period, they have personally illegal or unethical behaviours at their companies.
How can you build any kind of meaningful relationship with customers with a culture like that? I will examine that question in part II of this post – coming soon.