Managers ask strategy questions
Had a great strategy session with 30+ senior managers and directors recently. Some of the Q&A that came through the chat (yes, John loves chat during remote sessions):
1. Defining a strategy?
Q: What are some key steps to take to define a new strategy?
A: On some level, we need to define a) where you want to play and b) what winning looks like c) what core competencies do you already have (what makes you awesome in a proprietary way). This all might sound easier than it is because:
- Where you want to play may evolve over time, as you grow
- Winning may mean different things to founders, CMO, CTO, CFO, employees, investors
- Core competencies (resources and capabilities) should be VRIO (valuable, rare, hard to imitate, truly yours)
- Your customers and competitors get a vote; be ready to adapt, tweak, dive, and swerve to meet the needs
2. Strong strategy skills?
Q: What are the characteristics of people with strong strategy skills?
A: Quite a few, and not necessarily in this order:
- Discerning the difference between strategy and planning; both important, not the same thing
- Willingness to make trade-offs between two “good alternatives”; can’t be all things to all people
- Ability to communicate strategy simply, consistently, get followers “on-board”
- Intellectual humility to hear, vet, think about opposing views; farming dissent
- Future-orientation; imaging what the customer MIGHT want, not just what they ask for
- Positioning; willing to be different, stand for something specific, not sum of averages
- Logical structuring; putting together the “mess of information” into a mental model of reality
- Stubbornness; resisting the siren song temptation of what the competition is doing
- Patience; strategy is the long-game; “every overnight success takes 15 years”
- Embracing some risk; no one wants to disrupt themselves, and sometimes you need to
3. Acknowledging your disadvantages?
Q: Can strategy also be acknowledging where you have competitive disadvantage?
A: Heck yes. Cannot be all thing to all people. Double down on your strengths and neutralize your weakness.
4. When to pivot?
Q: How do you know when it’s time to pivot your strategy?
A: This is a crazy important and (I don’t know) difficult question. We see this all the time: a) Kodak missing digital b) Blockbuster missing streaming c) Intel missing mobile chips d) General Motors missing EV
One some level, I guess we are talking about “leading indicators”, things that give you a sense of a change in direction. What early warning signs could we see, that gives us concern about our strategy?
- Your economic moat is weakening; you are losing market share; you are competing on price (even though you are not the structural cost leader)
- Disruptive innovation; as an incumbent you keep ignoring the low end of the market
- PESTEL; seismic shifts in customer preferences, behaviors (read: Covid 19) and you’re not adapting
- Confusion from inside the organization; people don’t know where we’re head, what to do
- Continuous leadership turnover because no one is getting traction on change
Let’s remember, “pivot” has a LOT of different definitions. Are we talking about closing down a subsidiary that is 10% of revenues, or are we “getting out of oil and gas business” like General Electric. Think of it like surgery, are we getting a few stitches (minor) or open-heart surgery (major)?
5. Strategy, too simple?
Q: Can strategy be too simple and lose its way?
A: Hmm. I have two opposing thoughts on this. Simple is good. Simple is clear. Simple is actionable. Chick-Fil-A sells chicken. Apple designs products that make technology invisible. Southwest flies 1 type of plane and competes with the car. Simple is good.
Too simple = maybe it’s easy to copy. Maybe this is a best practice that anyone can do. Your strategy needs to play to your “unfair advantage.” It’s something other’s cannot easily copy.
So, YES, it should be simple AND difficult for others to copy.
Great add on from a reader (AV):
Strategy (including the one designed by consultants) is not very differentiating between a set of competitors, reasons for that: a) the performance is driven by a set of common factors for everyone, eg in retail it’s real estate costs + product range b) if you want a distinctive strategy, you must take risks – not many clients and consultants like risks… c) Therefore, most of the performance comes from execution skills within an organization vs its competitors
Could not agree more. Consultants can listen, provide options, offer advice, but they cannot dictate how much risk to take or MAKE the client do anything. So of business is the same, but everything is in the implementation.
6. If some people are skeptical
Q: What if your leaders are not convinced of your strategy?
Q: Is it important to reinforce the difference between strategy and tactics?
A: This is a problem because strategy without implementation is just a hopeful idea. In this Strategy& video here, they comment that 80% of executives don’t have faith in their company’s strategy. Whoa, big problem.
On some level, you need to ask, where does the problem sit:
- Head (analysis, problem set up, data quality)
- Heart (fear, pride, laziness)
- Hands (too complex, too lengthy, too cross-functional?)
Management consultants excel and getting things done. Scope the problem into something doable. Get the key executives onboard. Collect and create the necessary data to persuade stakeholders. Break the problem into smaller parts. Build the business case. Transfer ownership to the hard-working grinders who can put the ball into the net. Push decision making down, empower people. Less bureaucracy, more action, more winning.
7. Combine strategies?
Q: How do you effectively combine multiple strategies?
A: Strategy is difficult because it requires massive coordination. If you think of a global company with $10 billion in sales, and 50,000 employees, it’s complex. No really, getting things done is hard work. Also, each executive is very competent at her job. The COO, CFO, CMO, CTO, CIO, CHRO, CSO are all smart, ambitious, thoughtful people. They have goals. They have incentives. They have stakeholders. They have projects.
Do all of those align all the time? No way. So, yes, the corporate strategy and the supply chain strategy and the market strategy need to link up. And yes, this is hard work.
In an ideal world, the individual business unit strategies (e.g., personal hygiene, food products), and functional strategies (e.g., sourcing, manufacturing, IT, finance) roll up nicely into the corporate strategy (where to compete)
C’est très difficile.
8. Protect your moat
Q: How can the strategy be protected from being copied and improved by others?
A: Yes, this is the inevitable capitalist rule of the jungle; if you are doing a great job (and making customers happy and making profits) your competition wants to take some of that pie too. This is what makes capitalism so great = customers win. Suppliers (you and me) struggle, kick, fight, try, fail, create, so that customers will love us more. So how can you keep it special? How can you maintain your differentiation?
- Barrier to entry – Make it difficult for new people to get into the game (e.g., patents, unique resources)
- Network effects – Connect users so they get more value from product/services as they use it (e.g., YouTube)
- Switching costs – Dissuade customers from dating other companies (e.g., cell phone contracts)
- Proprietary access – Gain access to awesome suppliers or distributors, not available to others
- Economies of scale – Use size and scale to your advantage, lowering your per-unit cost
Culture, yes, I believe this can be a differentiator – hard to imitate by others. AND this is difficult to do, fragile to keep, and super hard to define. Does culture matter? Yes. Is this a panacea? No.
9. Too much focus on competition?
Q: Why do we spend so much time on the competition and allow it to derail our most creative ideas.
A: Yes, this is super common. You get FOMO (fear of missing out). I get FOMO. Executives get FOMO. Wall Street analysts are always comparing publicly traded companies and driving companies to conformity.
Should we use the best practices that work? Of course. No reason to “reinvent the wheel.” Of course, you should learn from other people’s mistakes. Of course, we should work smart and lazy.
Are best practices strategy? No way. This is just getting us to average – like everyone else.
10. Where does strategy come from?
Q: Does the strategy come from you (Manager) or above (VP)? Or do levels have different strategies?
Q: if strategy is not just one thing…then who is the right person to build a strategy?
A: The answer is YES, AND. Yes, it comes from the top, and also bottom of the organization.
Yes, there should be a unifying effort from leadership to set the vision, mission, guiding principles, rules of engagement, and daily enforcement of culture and norms. Yes, there should be clear decision rights so we know who gets to make the final call. AND there should be a culture of entrepreneurialism so great ideas can bubble up (think: emerging strategy) like a Starbucks Frappuccino. AND there should be enough creative tension between the functions that the best decisions are getting made (finance, manufacturing, marketing, sales, and quality will butt-heads eventually). AND the leaders needs to be humble enough to continually be learning from their customers and direct reports.
Cynical note: It appears to me that too often executives outsource the best parts of the job (thinking, strategy) to management consultants. While consultants can definitely help structure the choices, the strategy needs to come from the company itself to be sustainable. Don’t outsource the important stuff.
11. How to drive alignment?
Q: What if everyone is not on the same page of what strategy actually is and how to approach it.. how do we drive alignment the appropriate way?
Q: Tips for approaching situations where strategy (between stakeholders) conflicts
A: Yes, alignment is work. One-third of consulting is corporate marriage counseling. A few ideas come to mind:
- Simplify your message: Can you put your key message (WHAT, SO WHAT, THEN WHAT) on a single PPT?
- Persuade with data: Without data, your are sharing your opinion
- WIIFM? What’s in it for them? Too often your strategy is someone else’s homework
- Build trust: Get relational equity by doing great work (and favors) before you ask for help
- Draft (like a cyclist) behind larger corporate initiatives: Is this in the slipstream of where the company is going?
12. “Strategy” and “strategic” is over-used
Q: When the word “strategy” is over used, what ways does it show up?
A: Yes, “strategy” and “strategic” are over-used all the time. Just open up a 10K, and <CTRL> + F the words. You will see used as a substitute for vague-ish words like LARGE, RISKY, OPPORTUNISTIC, PROFITABLE, LONG-TERM.
A few ways to vet this thinking, could be asking these questions:
- So What? What does this mean we will do differently?
- What are the trade-offs? What are we willing to NOT DO?
- Is this something the competition would have a hard time doing?
13. How do you know if you’re winning?
Q: How do you know your unique value has fiscal value over the competition?
Q: Can a strategy be called “Good” / “Bad” when forming / implementation ? Or is it only in hind sight ?
A: Yes, strategy is about creating a sustainable competitive advantage. Are you consistently more profitable than your competition? What’s your net margin % ? What’s your return on equity?
Strategy is evergreen. It’s the operating system of the organization; it’s a way to prioritize work, make difficult decisions. It’s contextual – yes, it depends on yourself AND the customer AND the competitors. It’s fluid and fun.
