Playing To Win
How to Compel Customer Action
Use Strategy to Drive the Dependent Variable
A big disappointment of mine is that the overwhelming majority of person-hours spent notionally on strategy aren’t actually spent on it. They are spent on planning, which is a crying shame. I have only had limited success in helping folks gain actionable understanding of the distinction between the two, but I came up with a new way that seemed to generate more traction. So, I decided to write my 36th Year II Playing to Win/Practitioner Insights (PTW/PI) piece on How to Compel Customer Action: Use Strategy to Drive the Dependent Variable. You can find the previous 88 PTW/PI here.
A Little Background
I have written about the distinction between strategy and planning twice before in this series. The first was From Laudable List to How to Really Win, which argued that what typically poses as strategy is in fact a list of initiatives. The initiatives tend to be laudable — ones for which the opposite is stupid on its face. These initiatives are each generally referred to individually as ‘strategies,’ which itself is prima facie evidence of the lack of understanding of what strategy is. Because of that, there is no overall theory of advantage and no strategy — just a laudable list.
The second was Strategy vs. Planning: Complements not Substitutes. It argued that “strategy is the act of making an integrated set of choices, which positions the organization to win; while planning is the act of laying out projects with timelines, deliverables, budgets, and responsibilities.” Both are important and helpful to the cause, but the latter is not a substitute for the former.
More recently I did a Harvard Business School video the subject of Strategy vs Planning, which is the subject of a chapter (#9) of my new book, A New Way to Think.
I think all three have helped, but planning is still dominantly viewed as a substitute for strategy and is manifested in the form of a laudable list of initiatives.
Another Way to Think about It
So, I have come up with another way to think about the distinction that may be more helpful. Think about the question in terms of how we run experiments to determine cause and effect.
We have things we control, which are called the independent variables. Because we control them, we can conduct experiments in which we vary the independent variables in an attempt to produce desired results on the dependent variable — the variable we don’t control.
For example, let’s say our goal is to enable children to learn better. And let’s assume that we have a clear definition of better learning — i.e., they will be able to better retain and more effectively utilize the knowledge that we have taught them — and we have a way of objectively measuring outcomes on that front.
We don’t have control over the learning of children. We can force them to sit in classrooms where they are taught. But we can’t force children to learn. Therefore, children’s learning is the dependent variable. However, as educators, we control a great number of things, for example, how we train their teachers, what class size we utilize, how long the children are in class, how much technology children have access to, etc. These are some of the many independent variables that are under our control.
By utilizing these features that we control, we can run experiments in which we vary one or more of the independent variables to see whether we can produce the learning outcomes we seek on the dependent variable.
Application to Strategy
Customers are the ultimate dependent variable. We don’t control them at all. They make their own decisions. We control all sorts of company assets — people, capital, physical assets, technologies, brands, patents, etc. They are the independent variables. We can utilize them to invest in initiatives of all sorts with the intention of influencing the dependent variable — customer behavior — in the way we want.
I believe that planners do not understand the difference between dependent and independent variables. As a consequence, they don’t think about how their initiatives in combination will compel customers to do the things they wish. Planners are not lacking intelligence. Their initiatives tend to be sensible — or laudable as I have described them. Planners work hard and spend the corporation’s resources at their disposal in an attempt to produce the outcomes they desire. But since they lack an understanding of how independent and dependent variables work, they assume that if they put together enough laudable initiatives, things will work out the way they hope.
The methodology of planners tends to be to ask various constituencies to come up with the initiatives each desires. For example, what Asia wants, what Supply Chain wants, what HR wants, what the widget business wants, etc.? It is very much like the academic world. When the granting counsels, like the National Science Foundation (NSF) or the National Endowment for the Arts (NEA), get a new infusion of cash, they call for proposals and award funding to the most meritorious proposals until they have spent all their funding. That is classic planning and the absence of strategy.
This causes me to reflect on a personal sorrow of mine. I ran the Rotman School for 15 years and around the halfway point our beloved benefactor gave the school his second large donation (the first preceded my time at the school). I spent it all with a clear, strategic purpose, which helped in the transformation of the school from an also-ran to a leading business school. After I stepped down as Dean, our benefactor tragically passed away and the school was given a substantially bigger donation in his will. That has and continues to be given to professors and staff in a wide assortment of grants by way of proposals submitted to various rounds of competition. It is an object lesson in strategy versus planning. Our late, wonderful benefactor was extremely strategic, which is one reason he had the means to make huge donations to his chosen causes. I can’t help wonder what he would think about the current approach. But I digress…
Planners are quite disappointed when all their investments/initiatives don’t produce the outcomes they want. They tend to feel it is unfair. They feel that they invested all their resources and used objective and equitable processes to distribute them. To them, that approach deserves to work. When it almost inevitably doesn’t, they rationalize the failure as a product of chance outside events.
Strategists, on the other hand, fully understand and appreciate that customers are the ultimate dependent variable. They know that only an artfully integrated set of choices has the chance of compelling customers to act in a fashion that is consistent with the strategist’s aspirations.
As a consequence, they seek to create a strategy — not a list of initiatives. Strategists make an integrated set of choices that positions their company to win. They also understand that the set of choices is made under uncertainty and competition, so their choices guarantee nothing. They realize that the key to success is the quality of their theory of advantage — not the thoroughness of their list of initiatives
Planning is all about the illusion of control. Planning is underpinned by the view that if you generate a list of initiatives through a thorough and inclusive process, that will get the job done.
Don’t fall prey to the illusion. Recognize that the customer is the dependent variable and is outside your control. The only way that you have a chance to have them do what you would wish is to have a thoughtful theory of how you can assemble the independent variables under your control to produce an offering that compels customers to choose your offering over those of competitors.
That is strategy and that is not planning.