Is Strategy Purely An Exercising In Thinking?
Is strategy an analytical exercise where one collects useful data, crunches this data, finds where the opportunities lie, and then selects the most promising opportunity? Is it merely a matter of ‘scanning the landscape of opportunity’ and selecting the most suitable opportunity? Put differently, is the job of the strategist to select which table to play at?
It occurs to me that this is pretty much the view articulated by Michael Porter – the person who really put strategy on the corporate landscape. Arguably, it is also what Tony Hsieh is getting at when he writes the following in his book Delivering Happiness (bolding mine):
I noticed so many similarities between poker and business that I started making a list of the lessons I learned from playing poker that could also be applied to business:
Evaluating Market Opportunities
- Table selection is the most important decision you can make.
- It’s okay to switch tables if you discover it’s too hard to win at your table.
- If there are too many competitors (some irrational or inexperienced), even if you’re the best it’s a lot harder to win.
Is There More To Strategy Than Table Selection?
There might be. It may not be as simple at selecting the right table. Let’s get back to Tony Hsieh, he writes (bolding mine):
- Don’t play games that you don’t understand, even if you see lots of other people making money from them.
- Figure out the game when the stakes aren’t high.
This is great as far as it goes. As a strategist you can sit in your ‘war-room’ crunch the ‘big data’, create a map of the opportunity landscape. And then select the right table to play at based on the consideration of two factors: the opportunity potential at a specific table, and your competence in playing the game that is played at that table.
Is this all there is to the game of strategy making? Put differently, now that the table has been selected, can the strategist/s hand over the baton to those who excel at execution-implementation: playing the game that is played at the chosen table? For me the answer is “No”. Why?
I invite you to consider that what is so is always in flux: change/flow/becoming/birth-death-birth characterise the world in which we find ourselves. One of the central assertions of complexity science is that a small intervention at the right place at the right time can move a stable system over the change and into a radically different state. If you grasp this then you get that there is space to act, to shape the game so as to increase your likelihood of winning.
The Work of Strategy Includes The Work Involved in ‘Tilting The Table’
If the first part of strategy can be likened to ‘selecting the right table’, then I say the second and vital part of strategy involves the work that is involved in ’tilting the table’. What do I mean by ’tilting the table’? I mean acting on the world – orchestrating the elements of a situation – so as to generate the desired outcome. Notice, here we are in the realms of implementation (execution).
So what levers are available to the strategist who seeks to ’tilt the table’? Let’s answer that question by imagining a scenario. Let’s assume that as the strategist you have selected the digital table to play at. How might you go about ’tilting the table’ so as to increase the odds of success? I can think of the following levers:
- Actions that destabilise the existing power structure in your organisation e.g. making people changes and shifting the balance of power between business units, functions, products etc;
- Actions you take to ‘de-stabilise’ your key competitor/s e.g. luring away their key people;
- Who you choose to lead the digital transformation programme;
- Governance structure and rules of engagement;
- Resources (money, people, information, tools) that you make available to the digital transformation programme;
- The timescale you set for the shift to digital to occur and the associated metrics for gauging movement along the digital path; and
- Actions you take to make the shift toward digital necessary and attractive e.g. making promotion dependent on digital skills-expertise-projects, and funding digital education-training.
You get the idea. The levers that you can identify are limited only by your imagination, your creativity. And some will have more leverage than others.
As a strategist, is your work finished once you have done that which you can to ’tilt the table’ in favour of your team, your organisation? It occurs to me that the answer, again, is no.
Strategy Involves An Ongoing Attunement-Adjustment to The Facts On The Ground
Given the dynamic nature of the world in which we live and in which the game of business is played out, it occurs to me that strategy making cannot be a one-off exercise. It occurs to me that effective strategy, in a dynamic context, is alive. What do I mean by that? What is the core characteristic of living organisms? They are attuned to their environment. Why? Because attainment is essential for timely adjustment to occur; adjustment promotes survival.
What does this mean for the strategist? Here are the words of Tony Hsieh in Delivering Happiness (bolding is mine):
- You need to adjust your style of play throughout the night as the dynamics of the game change. Be flexible.
I leave you with the following thought: the effective strategist is one who not only has experience of the arena but is in the arena where the game is being played. And it is this involvement and mastery of the game, along with reflection and creativity, that allows him/her to be effective in strategising. I get that this is unconventional.
Thanks for listening, I invite you to share your thoughts-experience on the matter.
I find myself interested and caring for the human. So the following slogan caught my attention: “There is no more b2b or b2c: It’s human to human”. This got me wondering: What does it take for us to show up and operate as ‘human to human’?
If we are to do business in a ‘human to human’ way then it helps to have a good grasp of what the defining characteristic of human is. In Being and Time, Heidegger asserts that ‘Care (Sorge) is the being of dasein’. For the purposes of this conversation dasein = human being. What does Heidegger mean by this? I take it to mean that I do not find myself indifferent: to myself and my experience of living, to the world in which I find myself in, to my fellow human beings. It matters (to me) how I live and how my life turns out. It matters (to me) how my fellow human beings live and how their lives turn out. And it matters (to me) how this world is and is not. I care as I am aware that I am being-in-the-world-with-others-towards death.
If we are going to show up and operate from a ‘human to human’ way of doing business then we must genuinely care for ourselves, the people we work with, the people we sell to, the people we buy from, the people whose lives are touched by us and our way of showing up and operating in the world. How best to illustrate this? Allow me to share a story the following story with you (bolding is my work):
Harry, an emergency physician …. One evening on his shift in a busy emergency room, a woman was brought in about to give birth…….. Harry was going to deliver this baby himself. He likes delivering babies, and he was pleased…… The baby was born almost immediately.
Whilst the little girl was still attached to her mother, Harry laid her along his left arm. Holding the back of her head in his left hand, he took a suction bulb in his right and began to clear her mouth and nose of mucus. Suddenly, the baby opened her eyes and looked directly at him. In that moment, Harry stepped past his technical role and realised a very simple thing: that he was the very first human being this baby girl had ever seen. He felt his heart to go out to her in welcome ….
Harry has delivered hundred of babies. He has always enjoyed the challenges of delivery, the excitement of making rapid decisions and feeling his own competency, but he says that he had never let himself experience the meaning of what he was doing before. He feels that in a certain sense this was the first baby he ever delivered. He’s says that in the past he would have been so preoccupied with the technical aspects of delivery, assessing and responding to needs and dangers, the he doubts he would have noticed the baby open her eyes or have registered what her look meant. He would have been there as a physician but not as a human being. It was possible, now to be both…
-Rachel Naomi Remen, Kitchen Table Wisdom
This is what I notice about the whole Customer thing: the focus is almost exclusively on the technical stuff (metrics, data, analytics, technology, processes) and almost no recognition of the human. Does this matter? Yes. Why? I leave you with these words of wisdom:
Quality matters when quantity is an inadequate substitute. If a building contractors finds that her two-ton truck is on another job, she may easily substitute two on-ton trucks to carry the landfill. On the other hand if a three star chef is ill, no number of short-order cooks is an adequate replacement. One hundred mediocre singers are not the equal of one top-notch singer…
- Richard Rumelt, Good Strategy Bad Strategy
We may not be able to define-measure-calculate quality. Yet we are present to it when we experience it. The quality that you/i/we experience from the people we interact with, work with, sell to, buy from, makes a huge difference to our experience of living. This quality of caring cannot be faked, though many folks make the attempt to fake it.
Interestingly, in our age, it is easier to build this caring into the ‘product’ itself (Apple) or the digital interface (Amazon) than it is in human to human conversation-encounters. Why? Because we have become so wrapped up in the technical that we have lost touch with the human – including our own humanity. Yet, it is possible to get in touch with this humanity and give it expression: to show up as a CEO and as a human being; to show up as a CMO and as a human being; to show up as CFO and as a human being; a sales person and as a human being; to show up as call-centre agent and as a human being……
Please note: I am about to go on vacation and will be out of touch for several weeks. I wish you well and look forward to being in communication after the holiday.
What Is The Achilles Heel of Strategy?
My colleague and I put our whole selves into our work talking with folks in the business, listening to customer conversations, reviewing research, looking at competitors and trends, looking at various approaches, evaluating these approaches and coming up with optimal course of action for our client and our client’s customers.
To our delight the strategy was accepted-approved by management. A month or so later we got busy on implementation planning. It was during the implementation planning when hard decisions had to be made that the commitment to the digital strategy unravelled. Our clients got the value of pursuing the digital strategy and they found themselves in a particular situation which called forth and drove a different set of choice and actions.
This is the Achilles Heel of strategy, every executive finds himself in a particular situation. And every situation has its own ‘logic’ and a momentum. As such it really it takes something to alter course and make any significant headway. It takes resolve – fierce resolve, the kind of resolve that grabs you and keeps hold of you. It is not the kind of resolve that is created through the intellect.
Why Don’t We Do What We Know We Should Do?
Have you wondered why your organisation sucks at being authentically customer-centric: practicing relationship marketing, client centred selling, pleasing customer service? Have you wondered why it is that your organisation sucks at calling forth the best from your people?
Now and then someone speaks and their speaking is wisdom. Today, I share with you the wisdom of David Maister as articulated in his great book ‘Strategy and the Fat Smoker‘:
“In business, strategic plans are also stuffed with familiar goals: build client relationships, act like team players, and provide fulfilling motivating careers. We want the benefits of these things. We know what to do, we know why we should do it, and we know how to do it. Yet most businesses and individuals don’t do what’s good for them….
The primary reason we do not work at behaviours which we know we need to improve is that the rewards … are in the future; the disruption, discomfort and discipline needed to get their are immediate…..
Our default pattern and why it doesn’t work
When it comes to improving performance at the individual, team or organisational level we tend to follow a self-defeating pattern. I have seen this pattern played out again and again over the last 10+ years as organisations have grappled with relationship marketing, CRM, customer experience, employee engagement, digital. Here’s what David Maister says:
We start self-improvement programs with good intentions, but if they don’t pay off immediately, or if a temptation to depart from the program arises, we abandon our efforts completely – until the next time we pretend to be on the program.
That’s our pattern. Try a little, succumb to temptation, and give up. Repeat until totally frustrated. Unfortunately, there is rarely, if ever, a benefit from dabbling or trying only a little. You can’t get half the benefits of a better marriage by cutting out half your affairs, cure half the problems of alcoholism by cutting out half the drinks or reduce the risks of lung cancer by cutting out half the cigarettes.
You can’t achieve competitive differentiation through things you do “reasonably well most of the time.” You not only cannot dabble, but you also cannot have short-term strategies ….. The pursuit of short-term goals is inherently anti-strategic and self-defeating.
You are either seriously on the program, really living what you have chosen, or you are wasting your time.
Why strategic analysis and listening to customers is not the answer
I worked in an organisation which expended considerably time-effort-cost in doing NPS quarterly. We had access to the voice of the customer. And the voice tended to speak the same tune quarter after quarter. Why? Because the people in the organisation were not willing to change behaviour in any significant way.
Is it possible that setting up VoC listening programs are a ruse? A way of saying to yourself and others that you are serious about improving the customer experience so that you hide your unwillingness to change your behaviour, the behaviour of your team, your organisation? What does David Maister say?
Improving the quality of the analysis is not where the problem lies. The necessary outcome of strategic planning is not analytical insight but resolve.
What are the essential questions of strategy?
If we know the why-what-how of employee engagement, meaningful customer relationships, and customer loyalty then what are the strategic question? Here’s what David Maister says:
The essential questions of strategy are these:
 Which of our habits are we really prepared to change, permanently and forever?
 Which lifestyle changes are we really prepared to make?
 What issues are we really ready to tackle?
Now that’s a different tone of conversation and discussion (and the reason that real debate is so often avoided).
What am I getting at here?
To come up with products that enrich the lives of customers requires resolve, analysis is insufficient. To create-deliver truly personalised-relevent marketing requires resolve, analysis and marketing technology are insufficient. To call forth the kind of service that generates gratitude from customers and makes them feel good about doing business with your organisation requires resolve, analysis-outsourcing-technology are insufficient. To orchestrate an end to end customer experience that calls forth customer loyalty requires formidable resolve, VoC and customer journey mapping are insufficient. Put different, dabbling won’t do; it occurs to me that most are merely dabbling.
I say, it is worth listening to David Maister once more:
There is no shame in aiming for competence if you are unwilling to pay the price for excellence. But don’t try to mislead clients, staff, colleagues or yourself with time-wasting, demoralising attempts to convince them that you are actually committed to pursuing the goal.
Relax, it’s ok to be just ok
As I get present to the world of business as it is and as it is not, I get present to the following and contradicts all the evangelising about customer focus, customer service, customer experience, customer relationships and customer-centricity:
1. Almost all businesses are unexceptional. They provide ok products (that do the job well enough). They provide OK digital real estate (websites, social media, apps, mobile). They provide OK stores. They hire OK people. They provide OK customer service – whether in stores or via the call-centres. And they generate an OK end to end customer experience, by default. As a result they do OK – they survive and make OK profits.
2. It is only against this background of OKness that the exceptional can and does show up. It is because almost all banks and insurance companies are ok that USAA glow so brig and htly. It is because most digital retailers are OK that Amazon shines brightly. It is because most high street retailers are OK that John Lewis and Waitrose (part of the John Lewis Partnership) shine brightly. It is because most organisations provide OK customer service that Zappos and Zane’s Cycles shine brightly.
Is purpose the vital access to performance and the starting point of strategy?
What explains the variability in performance – revenues, profits, share prices – across firms who compete in the same industry? Why, for example, does IKEA do so well in the furniture industry when many other players struggle or have to accept modest performance? Is the answer that IKEA is customer-centric and the other players are not? Is it that IKEA delivers a superior customer experience?
Cynthia Montgomery in her book The Strategist explores this question and shares her answer. She says:
Purpose is where performance differences start. Nothing else is more important to the survival and success of a firm than why it exists, and what otherwise unmet needs it intends to fill. It is the first and most important a strategist must answer. Every concept of strategy …… flows from purpose.
Will any kind of purpose do the job? Is the purpose of making mountains of profit and enriching shareholders enough? Is the purpose of letting the lean folks loose so that all the processes can be streamlined and any joy, the comes with being social human beings, driven out of existence, enough? Is it enough to simply be great at interacting with customers at the touchpoints that matter? No, according to Cynthia Montgomery.
We hunger for purpose that lifts us up from the harshness and banality of the dog-eat-dog world of competition. And this includes the Tops:
Many of them want to feel that what they do matters in some context larger than themselves and larger even than their companies….
So is an inspiring, uplifting, purpose enough? Not according to Cynthia Montgomery. She says that purpose needs to do much more than inspire.
1. A good purpose ennobles
You and I are are spiritual beings manifested in physical form. Whether we like it or not, in our quiet moments, we find ourselves called to answer questions concerned with meaning. What is life about? What is my life about? Am I leading a meaningful life? Is this organisation and its mission worthy of me and all that I have to contribute?
In an age where 80% of employees are disengaged at work you can see the value of a noble purpose. A noble purpose inspires people in the organisation, it literally elevates and energizes. Talking of IKEA, Cynthia Montgomery says:
The people at IKEA don’t believe they’re flogging cheap furniture. They believe they’re creating a “better everyday life” for the many people who can’t afford top-end furnishings.
Cynthia goes on to say that we should not overlook the vital role of purpose in calling forth and fostering the care and commitment that lead people to play full-out and generate good results.
I say that a good purpose ennobles more than the people inside your organisation. I say that a good purpose ennobles customers, ennobles distribution partners, ennobles suppliers, ennobles the community in which your organisation operates.
2. A good purpose forces choice and puts a stake in the ground
A good purpose forces choice: to stand for one set of values and not others; to do X and not Y; to be this and not be that. Choosing is painful because it means letting go of some options. Choice is also critical because it enables focus. Here is what Cynthia says:
If your purpose does not preclude you from undertaking certain kinds of work, then it’s not a good purpose. Purpose, like strategy, is about choice, and real choice contains …… both positive (“We do this”) and negative )”By implication, then, we don’t do something else”) elements.
3. A good purpose sets you apart; it makes you distinct
A good purpose is not generic, it does not lead you to say “We are a training company” or “We are a telecommunications company” or “We are a marketing agency”. A good purpose spells out the reasons for your existence, the people (customers) you have chosen to serve, the needs you have set out to meet, the contribution that you committed to making. It is in these specifics that the purpose comes alive. Cynthia shares how IKEA describes its difference:
From the beginning, IKEA has taken a different path ….. It’s not difficult to manufacture expensive furniture. Just spend the money and let customers pay. To manufacture beautiful, durable furniture at low prices is not easy. It requires a different approach. Finding simple solutions, scrimping and saving in every direction. Except on ideas.
There is a lot of talk about innovation and how rare it is in larger organisations. Yet, IKEA continues to innovate. What does Cynthia say:
IKEA’s experience illustrates a key advantage of a good purpose. A clear sense of what a company is striving to do can serve as a focal point or a core organising principle around which a whole set of innovations and distinctive features can coalesce.
4. A good purpose sets the stage for creating and capturing value
Whilst I can and do come across as an idealist, I am also a pragmatist. After all I qualified as a chartered accountant, as such I get the critical importance of profits and cash-flow. So does Cynthia, she writes:
Whatever your purpose, it must mean something to others in ways that produce good economic outcomes for you. What made IKEA’s purpose so powerful was not just that it was distinctive or well-defined, or that it made people feel part of something bigger and more important. It also drove IKEA’s superior performance in its industry.
The acid test, then of purpose is this: Will it give you a difference that matters in your industry? Not all differences are equal. You need a difference with real consequences….. Even a legitimate difference such as “best-in-class quality” is often rendered meaningless by companies that trumpet the words but don’t make the investments or tough trade-offs such a goal requires.
If you are doing “Customer Experience” stuff ask yourself this question “This stuff that we are doing will this give us a difference that matters with our customers and in our industry?” I say that much of what is showing up under the Customer Experience banner fails this test. And I have been wrong many times before.
If you have any interest in strategy, purpose, and organisational effectiveness then I throughly recommend getting hold of a copy of Cynthia Montgomery’s book The Strategist. It is both easy to read and it is a great read. I swear she is versed in existential philosophy as her book is imbued with existential tones: purpose, choice, courage, being and becoming….
Does strategy matter?
If you do not think that it matters then you are in good company. There are many who question the value of strategy. And I see many companies where there is no formal strategy; the informal strategy is to keep doing what has worked in the past or to chase what is fashionable today.
Strategy v Execution
When it comes to questioning strategy there are two schools that are particularly prominent. First, there is the school of execution. The execution school which says that strategy is waste of time. Why? Because strategies are generic-obvious and what matters is execution. The ability to turn strategy into the daily live of the organisation. Clearly, there is some truth in this school. Strategy which cannot be operationalised is waste of time-resource.
Strategy v Culture
Then there is the school that says “culture eats strategy for breakfast”. Yes, culture is powerful. Culture determines what gets done and how it gets done. A strategy that does not take into account the fit with culture will meet lots of resistance. Getting people to enact such a strategy will be like fighting a guerilla war with an enemy who is patient and cunning. What is forgotten is that culture can be and is influenced-shaped-shifted through strategy.
To see strategy and culture as being separate and distinct is a gross misunderstanding. This misunderstanding arises due to our reductionist-analytical thinking. Strategy and culture are interlinked. Put differently, if you change strategy, you will take actions that will influence the culture. And if you change culture it will eventually influence the strategy.
HBOS: strategy shapes culture and leads to downfall?
If you still have doubts over the importance/significance of strategy then I say let’s consider the case of HBOS bank and the latest report on how this bank was brought to its knees. The HBOS bank was rescued, after significant arm twisting and sweeteners by the UK Govt, in 2008 by Lloyds bank. Why did a bank that was valued at £30bn when it was created in 2001 need to be rescued? Because it racked up £47bn of losses on bad loans.
Who were the architects of the HBOS downfall?
Three Tops have been singled out in the report published by the parliamentary commission:
The primary responsibility for the downfall of HBOS should rest with the Sir James Crosby, architect of the strategy that set the course for disaster, with Andy Hornby, who proved unable or unwilling to change course, and Lord Stevenson, who presided over the bank’s board from it’s birth to its death.
How was strategy responsible for the downfall of HBOS?
Here is what the parliamentary report says:
The strategy set by the Board from the creation of the new Group sowed the seeds of its destruction. HBOS set a strategy for aggressive, asset-led growth across divisions over a sustained period. This involved accepting more risk across all divisions of the Group. Although many of the strengths of the two brands within HBOS largely persisted at branch level, the strategy created a new culture in the higher echelons of the bank. This culture was brash, underpinned by a belief that the growing market share was due to a special set of skills which HBOS possessed and which its competitors lacked. The effects of the culture were all the more corrosive when coupled with a lack of corporate self-knowledge at the top of the organisation, enabling the bank’s leaders to persist in the belief, in some cases to this day, that HBOS was a conservative institution when in fact it was the very opposite. :
The growth of HBOS’s Corporate Division was not the result of superior performance but of its high-risk strategy. The nature of its activities did not alter after the creation of HBOS, although the pace of growth accelerated and the scale significantly increased. When the Division later incurred huge losses, these too were due to the particular nature of its business and resulted directly from its high-risk strategy. Its losses were on a larger proportionate scale than those incurred by any other major UK bank. This was caused specifically by its distinctive loan book, including concentration in commercial real estate and leveraged loans, high exposure to single names, a high proportion of non-investment grade or unrated credit and holdings of equity and junior debt instruments. The loan book was therefore significantly more exposed to the domestic downturn than that of any other large UK corporate banking businesses.
The acceleration in loan growth, in part caused by the Division’s neglect of the storm signals of 2007 and 2008, is likely to have exacerbated the scale of the subsequent losses. However, even without this acceleration, the Division would still have incurred disastrous losses. The roots of all these mistakes can be traced to a culture of perilously high risk lending. The picture that emerges is of a corporate bank that found it hard to say ‘no’.
In view of the reckless lending policies pursued by HBOS Corporate Division, we are extremely disappointed by the attempts of the most senior leaders of HBOS at the time to attribute the scale of the consequent losses principally, or in significant measure, to the temporary closure of wholesale markets. The lending approach of the Corporate Division would have been bad lending in any market. The crisis in financial markets was merely the catalyst to expose it. Losses in the Corporate Division did not prove temporary. Indeed, we estimate that the HBOS Corporate loan book has continued to incur significant impairments in every year since 2008, demonstrating that the losses were the result of incompetent lending and not caused solely by the events of 2008. Furthermore, HBOS’s Corporate Division was significantly more exposed than other banks to the downturn in the economy due to the nature of its loan book.