Playing To Win
What Were They Thinking?
Last week, I had a truly striking experience on a trip to a client offsite in Manhattan. It compelled me to return to a topic that I have touched on before — epic fails in strategy logic — in my 40th Year III Playing to Win/Practitioner Insights piece What Were They Thinking: Too Clever by Half. You can find the previous 150 PTW/PI here.
Returning to a Topic
I have written on this topic before, but I want to step back from the individual examples and provide more generalizable advice. The topic is failures in strategy logic that produce zero chance that an initiative will succeed — which can be predicted in advance.
I wrote about the logical misfire of the AT&T/Time Warner merger, the failure of which I predicted at the time of the announcement (not years later like pretty much everyone else). However, that piece focused more on the lunacy of the concept of ‘owner economics,’ and less on the general strategy logic principles. In many ways, it was a reprise of a piece that I had written over a decade earlier on the pre-ordained demise of the AOL/Time Warner merger. (It kind of begs the question: what is it about Time Warner that puts it in the center of such epic fails? It reminds me of the following riddle. Question: What is the best way to make a small fortune? Answer: Make a large fortune and then invest it in Hollywood.)
I also touched on the question of flawed logic in the context of acquiring critical talent in my piece on The Impossibility Theorem. In that piece I argued that the design of certain jobs, bond raters for instance, makes it impossible that anyone with the desired skillset would choose to take that job. Shown graphically above, while the job designer hopes for the left — i.e., an overlap between those capable of doing the job with those desirous of taking the job — the actual situation is as on the right — no overlap.
In this piece, I want to draw a line that connects these context-specific strategy logic failures and provide a generalizable way of thinking about them. The impetus was a Manhattan hotel experience.
The Hyatt Centric Wall Street
I was booked by a client into a room at the Hyatt Centric Wall Street for a two-day offsite with its executive leadership team. I had been to the Wall Street area numerous times before but never stayed at that specific hotel. In fact, I had never stayed in a ‘Hyatt Centric’ hotel before. It struck me as a bit odd. Shouldn’t all Hyatt hotels be Hyatt-centric in nature? To figure out the meaning, I looked it up and found that Hyatt Centric is one of Hyatt’s 28 sub-brands described as “centrally located so you can explore your destination’s hot spots, hidden gems, and local sounds.” Who knew?
In any event, after I checked in at the first-floor front desk and was given room #712, I walked to the elevator and was greeted with this control panel:
It didn’t strike me as at all unusual that the floor numbers skipped from R (which was labeled R because the restaurant was on floor 2) to floor 7. In the modern world of hotels many split their space with office space (often on the lower floors) and condos (often on the top floors). So, I happily pressed the ‘7’ button, assuming that 3–6 were offices and having no idea whether there were more non-hotel floors above floor 17, not that it mattered.
My mind was otherwise occupied during the elevator ride, so didn’t notice that the ride was pretty short. I came out of the elevator and was greeted by a huge mural that confirmed that indeed this was floor 7:
Then I got to my room, I found all the blinds down and I thought I would check out the view. I found myself somewhat incongruously staring directly across at the third floor of a smallish building across the street:
The traffic on the street, including a truck unloading something below my window, was very much in my face. I thought that was weird: the room number and the mural say this is the 7th floor but it sure isn’t. I had to go back down to the front desk because my TV didn’t work and the phone in my room was absolutely dead (I guess the ‘centric’ doesn’t modify ‘guest’), so I checked the elevator panel (which is when I took the first photo above) more closely and paid more attention to the elevator ride.
It confirmed my suspicion. The reason that I was at approximately the same level as the 3rd floor in the building across the street was that my room was indeed on the 3rd floor of this building. That was a truly unique experience for me — Lobby, R, then floor 7, even though it was definitively, unquestionably floor 3.
Which got me asking the question: What were they thinking? What was the fifth highest revenue hotel chain in the world thinking?
I can only surmise that they don’t want guests to feel badly about having no view and being in the middle of street noise, so they named the 3rd floor, floor 7 instead. But, by implication, they assume those guests will never notice that they are on the 3rd floor. This thinking illustrates the Impossibility Theorem to which I referred above.
With respect to guests, they exist in one of two mutually exclusive segments. First is the segment of guests who don’t care about the floor-level of their room. Second is the segment of guests who really don’t want to be on a low floor — which we will define as floors 3 through 6 in this scenario. The phony buttons are completely wasted on guests in the first segment because they just don’t care. Guests in the second segment will be momentarily placated by the phony elevator buttons. But since they care, when they see the low floor, they will be at least as unhappy as they would have been had the phony buttons not been deployed. More likely, they will be more unhappy still because they will feel tricked by the profound dishonesty of the hotel.
Hence, there is zero overlap between guests who care about floor level and guests for whom the phony ‘7’ button is a solution. Either they don’t care, and the solution is useless, or they do care, and the ‘solution’ is dreadful. They are on the right side of the above graphic — the Impossibility Theorem in action.
So, what were they thinking? Hyatt had to have made a conscious choice because buttons don’t number themselves and murals don’t paint themselves. Some Hyatt architect/designer said: “We are going to go 100% against building numbering convention and have buttons that don’t match the actual floor — and that will be superior to standard operating procedure.” They only thing they could have possibly been thinking is that their guests are stupid and can be fooled by phony elevator buttons.
But I don’t think that is the case. I didn’t really care, and I still noticed the deception. The more likely explanation is that they were ‘too clever by half’ — though I employ that expression in a different way than usual in this case.
The Problem and Remedy
In this case ‘too clever by half’ means thinking only halfway around the logical circle. Hyatt thought about the pleasant feeling of guests being on a higher floor. But stopped right there, rather than thinking around the other half of the logical circle — but if they value being on a higher floor, they will notice that the value is not being delivered, and it will be worse than nothing.
To think systematically around the circle of strategic logic, you need to use the What Would Have to be True (WWHTBT) tool. Whatever strategic lever on which you are working — e.g., guest satisfaction, or cost structure of content (AT&T/Time Warner), or access to proprietary content (AOL/Time Warner), ask what else would have to be true for your lever-pull to work?
WWHTBT for guest satisfaction to be positively influenced by your clever idea of phony buttons? They would have to care about their floor level — some will, and some won’t. So, it might be helpful to the segment that cares about floor level because the phony buttons will convince them they are on a higher floor than they really are. Oops — that WWHTBT is hard to believe. If they really care about floor level, won’t they look out the window and/or hear the street noise? Yes, they would. Thus, there is no overlap between the guests who care about the floor of their room and the guests who won’t notice they were deceived. That is thinking all the way around the logical circle.
For AT&T/Time Warner, the ‘owner economics’ argument was that AT&T will get content more cheaply by owning Time Warner and AT&T’s content distribution businesses will be more therefore be more competitive. That is halfway around the logical circle. What else? WWHTBT is that Time Warner can continue to earn the profit level that justified the $85 billion purchase price while selling its expensive content cheaply to its internal customer. Oops, not possible. Therefore, owner economics doesn’t exist and the strategic logic for the merger was dead-on-arrival, a mistake that cost AT&T shareholders at least $42 billion.
In all above cases, the initial motivation is meritorious — satisfy guests more fully, get competitive advantage on content costs, access proprietary content for our customers, hire the perfect person for a critical job. You should always attempt to think of strategy choices that will enhance your competitive advantage. But your strategic logic needs to be vetted all the way around the circle — not just halfway.
Use the WWHTBT tool to ask what else needs to be true. Focus on the strategic lever you propose pulling and channel Toyota’s Five Why technique to keep asking successive WWHTBT questions. Ask yourself what five successive things would have to be true — about customers if this is about customers, about cost position if this is about costs, about competitors if this is about competitors.
To give an example, in the late 1980s, after US long distance telephony was deregulated in 1984 and former monopolist AT&T was battling with upstarts MCI and Sprint, someone came up with the concept of giving large initial discounts to new customers to promote customer acquisition. Consumer testing showed that it would encourage switching — and it most certainly did.
But WWHTBT for this to be successful for (say) AT&T? MCI and Sprint customers would switch, but AT&T customers wouldn’t. Why wouldn’t AT&T customers switch? Because MCI and Sprint wouldn’t offer matching discounts to new customers. Why would that be the case? It couldn’t possibly — in this case, you get there with only three why’s.
It is another illustration of the Impossibility Theorem. Either it wouldn’t work at all, or it would work. If it wouldn’t, it is a stupid idea. If it would, there is 100% probability that competitors would respond in kind. All it would accomplish is create a tit-for-tat escalation in which switching would accelerate and no one would come out ahead, which is exactly what happened. Churn rates escalated to a disastrous level and the competitors realized this was the stupidest idea that anyone had thought of in some time (though every decade or so, the lesson is forgotten, and they do it again).
When contemplating any strategy move, commit to thinking all the way around the circle, not just halfway. Don’t fall prey to the Impossibility Theorem — you can avoid that fate if you use the WWHTBT tool thoroughly.