Playing to Win
Is the Opposite of Your Choice Stupid on its Face?
If it is, it is not Really a Strategy Choice
I ask one question when I try to assess whether a choice is a real and powerful strategy choice. I am dedicating my 2nd Playing to Win Practitioner Insights (PTW/PI) piece to Is the Opposite of Your Strategy Choice Stupid on its Face?(Links for the rest of the PTW/PI series can be found here.)
It isn’t a Strategy Choice
We have all seen countless strategic plans asserting that the organization’s strategy is to be ‘customer-centric’ or to be ‘operationally effective’ or to ‘invest in its talent.’ But these don’t meet my test for strategic choices — even though they may actually be the most frequently proffered choices in the world of strategic plans. My test for whether a stated choice is actually a strategic choice is whether or not the opposite of the choice is stupid on its face.
For example, the opposite of the choice to be customer-centric is to ignore customers entirely, which is stupid on its face. Only a regulated monopoly — like the Department of Motor Vehicles — can ignore its customers entirely and survive. Similarly, either being operationally pathetic or disinvesting in talent is also stupid on its face. The only positive thing that can be said about those choices is that they aren’t stupid. And as such, you can be highly confident that all your consequential competitors will be making that same choice — i.e. to be customer-centric, operationally effective and to invest in their talent.
Since strategy is the act of making distinctive choices that position your organization uniquely to win, by definition a choice the opposite of which is stupid on its face is not a strategy choice. That does not mean it is a bad choice — just not a strategy choice. The opposite of filing your corporate tax returns on time is stupid on its face; but you better file your corporate tax returns on time or you are in big trouble. Organizations have to make innumerable choices where the opposite is stupid on its face, they just aren’t choices that rise to the level of a strategy choice. They are necessary to compete but don’t enable you to win.
The Value of Making Strategy Choices
When an organization makes a choice for which the opposite is not stupid — and in fact a competitor is doing the opposite and succeeding — it has the possibility of having distinctive strategy. Some other competitors might be making a similar choice, so it isn’t by definition distinctive; but at least it will place your organization in a smaller competitive set. The goal, of course, is a competitive set of one with a fully distinctive choice.
Think of mutual fund giant Vanguard. When Jack Bogle founded Vanguard, he made a choice to offer only passively managed index mutual funds (and later index exchange-traded funds). The opposite was to offer actively managed mutual funds, which wasn’t stupid on its face. It was what every other fund company on the planet chose, including Fidelity, which is the other global giant in the industry. Vanguard definitively made a strategy choice because the opposite was a successful strategy for Fidelity and others. In fact, arguably, Vanguard helped make Fidelity’s choice to compete as active management provider a real strategy choice because it proved that the opposite was anything but stupid on its face. Fidelity then had to make other strategy choices to separate itself from the pack of other active management mutual fund providers.
Vanguard and Fidelity illustrate the value of making real strategy choices. Consider who benefits from the making of real strategy choices. Customers do. They get variety of offerings. If they believe Vanguard founder, Jack Bogle, that fund managers don’t pay for their costs in terms of enhanced returns, then they can invest in a Vanguard fund. If they believe Fidelity founder, Ned Johnson, that fund managers are critical to providing exceptional returns of the specific sort desired by the investor, then they can invest in a Fidelity fund. Shareholders do. The Johnson family is one of the richest families in the world thanks to the growth and success of Fidelity. Bogle set up Vanguard as a mutual company, so fund investors have benefited from the success of Vanguard. Employees do. Both companies have grown continuously from the time of inception to nearly 70,000 employees between them today. Communities do. Valley Forge, PA and Boston, MA are thrilled to have Vanguard and Fidelity in their jurisdiction, creating jobs and paying taxes.
In this way, real strategy choices make the world a better place: they are good for customers, shareholders, employees and communities.
The Downside of Not Making Real Strategy Choices
When organizations fail to make real strategy choices, they make the world a worse place. This happens when competitors in an industry begin to imagine that there is only one set of choices that make sense for their industry — essentially believing that the opposite of that dominant set of choices is stupid on its face. When most or all converge on that set of choices, the industry commoditizes. Think of the PC industry when it converged on selling Wintel boxes, or when the large US airline carriers converged on identical service and operations models, or when the Big 8 accounting firms converged on nearly identical auditing models, or now the smartphone industry converging on phones based on the Android operating system. These industries (or substantial parts of them) commoditize because with similar choices, the competitors produce an output that looks and feels nearly identical for customers. And when customers feel that way, they look for the lowest price from any one of the competitors.
With commoditization comes less customer choice, downward pressure on profits, and downward pressure on all costs, including wages. It makes it is less attractive place for customers, shareholders and employees — and often the communities in which they operate and work.
Of course, the convergence on a set of non-strategic choices provides a great opportunity for others to utilize that bland backdrop to forge a distinctive strategy, like Vanguard creating an entirely new and now gigantic category of index funds or Southwest entering the US scheduled air service industry with a completely different model and becoming the most successful airline in the industry. In other cases, one player, as with Apple in personal computers and smartphones, keeps making a distinctive set of strategy choices in the face of the entire rest of the industry coalescing on one set of choices — and by staying distinctive prospers disproportionately.
But Isn’t it Good to be Customer-Centric?
When I say that being customer-centric isn’t a strategy choice, people always ask: but you write all about design and deep user understanding, isn’t that a contradiction? It is not; in fact, these ideas are complementary. Customer-centricity is stated at level of generality that makes both the opposite stupid on its face and negates the value of deep user understanding. It is only a strategic choice to be customer-centric in a way that is distinctive from the way competitors are being customer-centric. That means pushing customer-centricity to a much more specific level — and that is a key strategy choice discipline.
For example, in the luxury hotel category, all the successful competitors are customer-centric — guest-centric in their nomenclature. It is not at all distinctive to be guest-centric; it is a necessary feature of playing in the luxury hotel space. But for most luxury hotel chains, the guest-centricity is manifested in grand architecture and décor as well as what could be characterized as obsequious service (Yes sir, yes madame, whatever you want). In contrast, at Four Seasons, whose deep guest understanding found that they would rather be at home or at the office than in yet another hotel room, and thus features a guest environment designed to make up for what the guest misses from being home or at the office. Here the choice is pushed to a level of specificity that the opposite (grand architecture and décor) is not stupid on its face: rather, it is common among competitors.
P&G is not distinctive because it has chosen to invest in talent. Many of its competitors also do. But it is distinctive because it has chosen a promote-from-within system that enables a distinctive form of investment in its talent.
Southwest is not distinctive because it has chosen to pursue operational effectiveness. Virtually all of its competitors pursue it in some form. But it is distinctive because it has made myriad operational choices (one kind of aircraft, no seat selection, point-to-point route structures, cross-trained staff, etc.) that are utterly distinctive.
The Practitioner Insight
Test every prototype choice with the question: is the opposite stupid on its face? If the answer is yes, then chances are that the choice is stated at such a level of generality that it isn’t a powerful choice at all. If that is the case, drive the choice to a greater and greater level of specificity until such time as you can say with confidence that the opposite is not stupid on its face: in fact, somebody else is doing the opposite successfully. Then you will have made a real strategy choice.