The Strategy Book: strategy is about shaping the future and other useful tips

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.

Taking risks

“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!

And finally

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.

Do you know the difference between a good strategy and a bad strategy? (Part I)

“All too much of what is put forward as strategy is not.  The basic problem is confusion between strategy and strategic goals.” Richard Rumelt

So much talk about strategy and so little understanding of what it is, what it involves, and the difference between a good strategy and a bad strategy.  You can call me a little touchy (or a lot touchy) when it comes to strategy and strategy making.  I encountered strategy only after being heavily involved in the operational stuff – getting my hands dirty making the ‘trains run on time’.  Being new to strategy I made the time and put in the effort (lots of it) to study  strategy and strategy making.  I do wish more people would do the same then we would not have tons of rubbish being written on strategy by people.  Yes, this paragraph is a rant.  Now lets move forward and doing something constructive: learn the difference between good strategy and bad strategy.  If you don’t care then I suggest you stop reading right now.

What Paul Hagen of Forrester says on strategy

As you might have noticed (if you follow me on Twitter) I make time to keep up with the domains that impact the Customer.  During the course of this process I came across a post on the 1to1 Blog by Paul Hagen (“principal analyst, Forrester Research, serving Customer Experience professionals”). Step 2 – Define key of a strategy – got my interest, here it is:

2) Define key elements of a strategy. There are many different kinds of experiences that companies can deliver…all of which are valid. Witness USAA and Costco, both of which score high marks on Forrester’s Customer Experience Index. A strategy should provide a vision for the kind of experience to deliver, derived from a core value proposition inherent in a company strategy and key attributes of the brand promise that are most meaningful to customers. This “intended experience” should provide guidance about the kinds of activities the company can start (and stop) doing to achieve the end-state. The strategy also needs to articulate the company’s aim for how good the experience should be…does the firm seek to be the best in its own industry or across all industries, or is it merely trying to maintain parity with other firms? This will guide the kind of resources that the firm may need to dedicate to reaching this objective.

Design the Customer Experience to be in alignment with the Value Proposition

I am in total agreement with the first sentence of Paul’s statement.  What he is saying is that there is no such thing as a homogenous customer experience.  The customer experience that you design and deliver has to be in alignment with the value proposition that you have communicated to your customers. This is why, in the model below which I developed and use, the Value Proposition feeds into the Customer Experience; the third pillar is Customer Insight – it feeds the creation/refinement of the Value Proposition and the Customer Experience. 

The sequence goes like this.  Generate insight into customers (Customer Insight).  Use this insight to craft a Value Proposition that a customer/market segment finds attractive enough to sign-up for.  And deliver a Customer Experience that is in alignment with the promise (implicit, explicit) made through the Value Proposition.  Do that and you have happy, even delighted, customers – which is why both USAA and CostCo can score high marks even though the Value Propositions and associated Customer Experience is radically different.

So far Paul and I are in agreement.

Does anyone understand what a real strategy is?

Then he goes on and ruins it for me:

He writes “A strategy should provide a vision for the kind of experience to deliver, derived from a core value proposition inherent in a company strategy and key attributes of the brand promise that are most meaningful to customers……”  Hello, anyone at home?  A vision is a vision – it is picture of the ‘future’ that you want to bring about.  So, I might have a vision of living in Rio and spending my days surrounded by Brazilian beauties, soaking up the sunshine, waited hand and foot, swimming in clear blue waters…. A vision is not a strategy and a strategy does not include a vision.

He continues with “The strategy also needs to articulate the company’s aim for how good the experience should be…does the firm seek to be the best in its own industry or across all industries, or is it merely trying to maintain parity with other firms? This will guide the kind of resources that the firm may need to dedicate to reaching this objective.”  Now that sounds awfully like objective setting to me.  Maybe I am a little simple and being simple, in my world objectives are objectives and they in turn drive the formulation of the strategy.  Continuing with my analogy, if my objective is to be waited hand and foot on the beautiful beaches of Rio, all my needs catered for, then I have to formulate a strategy that allows me to get hold of the money/power that I need to realise my objective.  Notice that the objective comes first.

Continuing with my Brazilian (Rio) analogy, let me ask the question: “Why do I need a strategy?” Perhaps the challenge is that I live in the UK, I am penniless and I do not have a passport.  Now if that is so then I need a strategy that addresses these challenges – the challenges that prevent me from being in Rio surrounded by Brazilian beauties and being waited on hand and foot.  Let’s continue and explore this further.

What are we talking about when we talk about strategy?

The issue at hand is that ‘strategy’ has becoming a meaningless phrase bandied about by all of us (including myself) to mean anything that we want it to mean.  In my simplest way of thinking, one needs a strategy in order to outwit intelligent opponents and/or address an important challenge which if not faced ‘promises’ an exit from the game of business.  Does that sound like Kodak to you?  Which is why monopolists who control valuable resources, that people cannot easily do without, do not need to formulate a strategy: they just have to make sure that they continue to be the monopoly supplier.

The components that feed into and drive the strategy making process include: Challenge (the pain that requires a strategy to be developed); Vision (the future state that you wish to create / bring about); Objectives (the specific, measurable, outcomes that you want); Resources (what resources are ready at hand); and Constraints (these can take many forms political, legal, technological, values that cannot be sacrificed….).  If you want a deeper understanding of strategy and strategy making then read this post.

What are the hallmarks of a bad strategy?

Richard Rumelt has written one of the best books (Good Strategy Bad Strategy) I have read on strategy (and I have ready many of them).  He says that there are 4 hallmarks that we can look out for when detect a bad strategy.  Can you guess what they are? Here are the 4 the hallmarks:

Fluff/  Fluff is gibberish that masquerades as strategic concepts and arguments .  It uses “Sunday” words  (words that are abstruse / inflated)  and esoteric (I call them ambiguous, unnecessarily complex) concepts that create the illusion of high-level thinking.

Failure to face the challenge. Bad strategy fails to recognise and clearly set-out the challenge.  Richard points out that if you fail to clearly set-out the challenge (in concrete terms) one cannot evaluate a strategy or improve it.

Mistaking goals for strategy.  Richard says that many strategies are just statements of desire (the vision) rather than plans for overcoming obstacles and addressing the challenge.

Bad strategic objectives.  Strategic objectives are bad when they fail to address critical issues or when they are impracticable.

I will go into these in more detail in forthcoming posts.  In the meantime I wish to leave you with the following statement by Richard Rumelt which, in my view, goes to the heart of the matter:  “All too much of what is put forward as strategy is not.  The basic problem is confusion between strategy and strategic goals.” Do you think Paul Hagen has fallen into the same trap?