Playing To Win
Asking Great Strategy Questions
I frequently get asked a question about questions: What questions should I ask when I am reviewing a strategy? Because of that consistent interest, I am dedicating my 36th Playing to Win/Practitioner Insights (PTW/PI) piece to Asking Great Strategy Questions. (Links for the rest of the PTW/PI series can be found here.)
Three Categories of Questions
I am often asked to evaluate strategies, whether for clients, students, or friends. Rather than focus primarily on whether the strategy is good or bad, I focus on asking questions with the intention of guiding the authors toward their goal of creating great strategies. To provide that help, I ask strategy questions in three broad categories: logic, fit, and distinctiveness. The questions aren’t entirely distinct from one another. There is overlap. But I think that a bit of overlap isn’t a problem if it ensures I don’t miss anything.
With no further ado, here are questions to help hone and refine any strategy…
I typically start by exploring the logical structure of the overall cascade of choices before diving into narrower areas of questioning. The key question for testing the logic of a strategy is what I refer to as the most important question in strategy: what would have to be true (WWHTBT) for this to be a robust strategy? The most important WWHTBT questions pertain to the logic of customers, capabilities, costs, and competitors.
To be successful, all strategies need to appeal to the needs and desires of customers, so I want to understand and evaluate what the strategy assumes about those needs and desires. Hence, I ask what does the strategy assume would have to be true about about customer needs for it to be an effective strategy? Does, for example, the strategy assume they care most about breadth of product line or speed of delivery or taste, etc. If there is both a distribution channel and an end-customer to consider, I would ask the WWBTBT question relative to each.
To be successful, a strategy needs to be backed by capabilities that meet the needs of customers. So, I ask what does the strategy assume would have to be true about our capabilities for the strategy to be effective? For example, does it assume that our capabilities would have to be equal to competitors or superior to theirs?
To be successful, a strategy needs to be underpinned by a cost structure incurred to meet the needs of customers. So, I ask what does the strategy assume would have to be true about our cost structure for the chosen strategy to be effective? For example, does it assume our costs would have to be equal to competitors or superior to theirs?
To be successful, a strategy needs to be robust in the face of reactions by competitors. So, I ask what does the strategy assume would have to be true about competitor response to our strategy for the chosen strategy to be effective? Is the assumption that they will respond but their response will be ineffective in undermining the effectiveness of our strategy? Or is the assumption that they won’t respond to our strategy?
I accumulate the WWHTBT assumptions across these four categories to ask the follow-up strategy question: Of all the WWHTBT assumptions, which are the ones that are so heroic that I would not be willing to make a bet on them if it was my strategy? And for those heroic assumptions, what tweaks could be made to the choices across the choice cascade that would result in WWHTBT assumptions that are more prudent?
Together, these WWHTBT questions help to hone and refine the overarching strategic logic of the choices across the strategy choice cascade.
I also pay attention to and question the degree to which the individual elements of the choice cascade fit together as elegantly as they can.
For the proposed How-to-Win (HTW), is the Where-to-Play (WTP) as perfect as possible? If we narrowed our WTP, would we be better able to focus our resources to win more decisively? What we might contemplate in terms of different narrowing moves: segments served, product/service varieties, vertical scope, or geographies? If instead, we broadened our WTP along one or more of those dimensions, could we be better able to generate the resources to win more decisively? If so, with what broadening move?
For our proposed HTW, do we currently possess the required Must-Have Capabilities (MHC)? If not, can we build them quickly enough for the strategy to work? If that is unlikely, how might we modify the HTW in a way that better aligns the MHC with our current (or readily realizable) capabilities.
For our proposed MHC, do we currently possess the Enabling Management Systems (EMS) to build and maintain them? If not, can we create EMS quickly enough to build the MHC for the strategy to work? If that is unlikely, how might we modify the HTW in a way that requires only MHC for which we have or can create the EMS that will build and maintain them.
Finally, does our Winning Aspiration (WA) fit in a way that provides positive guidance for our WTP/HTW/MHC/EMS choices and inspires customers, employees, channel partners and suppliers to support our strategy? If not, in what ways could we adjust the WA to better fit with and reinforce the other four choices?
Together, these fit questions help ensure that the choices in each of the five areas not only avert contradictions, but they also fit with one another and reinforce the strength of each.
The final area is distinctiveness. A strategy could do a good job of exhibiting fit and logical coherence, but not have sufficient distinctiveness to produce great results. That is where the question of whether the opposite is stupid on its face comes in. If the opposite of one of your ‘strategy choices’ (e.g., WTP or HTW) is stupid on its face, then every competitor will make the same choice and your choice will provide no distinctiveness whatsoever. I remember facilitating a strategy session for a Swiss private bank once and it made what it thought to be a strategic WTP choice: to serve wealthy customers. I pointed out that for a private bank to serve customers lacking wealth was stupid on its face so that its choice would be identical to every other private bank. But they insisted — and unsurprisingly, that ‘choice’ didn’t produce the wonderful outcomes that they expected.
If the opposite not only is not stupid on its face, but in fact another competitor is doing the opposite (or something distinctly different), then the choice has the promise of distinctiveness. It must pass the other tests above, but at least it has a chance of resulting in a winning strategy. By asking whether the opposite is stupid on its face, you can push the choice to one that is more distinctive from the common choice of competitors.
The other key distinctiveness question is the can’t/won’t test. That is, what leads us to believe that a key competitor either can’t or won’t replicate our set of strategy choices and therefore eliminate our distinctiveness? Typically, they can’t because they don’t have our MHC and EMS, and it would be difficult for them to build them. Typically, they won’tbecause they prefer playing in their current WTP/HTW combination. If one of those two is the answer to the can’t/won’t question, the strategy is likely to be sufficiently distinctive so that if it has strong logic and fit it is likely to be an excellent strategy. If the answer to the can’t/won’t question is that they can/will, then the strategy needs more work on distinctiveness.
Together, the is the opposite stupid question and can’t/won’t test will help alert you to the need to tweak your strategy choice to enhance its distinctiveness.
It is important to remember that strategy is not an exercise in perfection — getting ‘the right strategy’ that is sure to succeed. Given that nobody knows the future until it happens, the best that a set of strategy choices can do for you is improve your odds of success. You can improve those odds by evaluating your strategy and tweaking it to improve the logic, fit and distinctiveness. I think of that exercise as lopping off the left tail of the distribution of likely outcomes. If you can avoid choices that aren’t logically sound, don’t have the internal consistency of good fit, and aren’t even aiming at distinctiveness, then you will avoid strategies that are designed to fail. And by lopping off that tail, you improve the likely value of your strategy.
One way to perform the evaluation is for you to ask the above questions of logic, fit and distinctiveness. An even better way is to get outside your own head and ask someone else to quiz you on your strategy. As is always the case, they will see things you don’t see and provide avenues for you to strengthen the logic, tighten the fit, and accentuate the distinctiveness of your strategy.