Playing To Win
Where to Start with Strategy?
Focus on Betterment
There is a goodly amount of confusion on the question of where to start on strategy. The most common view is: “we don’t have a strategy, so we need to develop one.” I see it differently and that has implications for how to embark on strategy. I explain in the Playing to Win/Practitioner Insights piece, Where to Start with Strategy: Focus on Betterment.
Do versus Say in Strategy
As I have written before, every company (or organization or person, for that matter) has a strategy. Often a company’s strategy has little or nothing to do with what its strategic planning document says, which is typically full of platitudinous statements, flowery prose, and mind-numbing charts and graphs. These documents are great for board retreats and for corporate planning types — but little else.
A company’s strategy is what it does. Its strategy is the set of choices that it has put into action over time. Like the expression “you are what you eat;” you are your choices — regardless of how or why they were made. That is the case even if those choices are not written down anywhere. That is why all entrepreneurs have strategies — even if they deny that they do, which is often the case. They spend on some things and not others. They choose to serve some customers and not others. They operate in some geographies and not others.
My entrepreneur father would deny that he even knew what strategy was (until later in his life when I started writing books on strategy, which he read as a dutiful father). But he chose to spend zero on his own office — he was CEO and 100% shareholder — and used whatever salesperson’s office was empty because there was always at least one who was on the road — because him having an office created zero value for customers. However, he chose to spend heavily on frequently washing the trucks that delivered the company’s animal feed to his farmer customers because it gave them confidence that their feed would always be delivered by these well-maintained, pristine trucks — and that confidence made a real difference to customers. He refused to ever deviate from the published price list because he wanted each farmer to be confident that no other farmer would get a better deal from his company — and his salespeople could focus on selling quality and service not negotiating on price. Those, and many others, were profound strategy choices — even though none was ever written down or seen as ‘strategy’ by my father.
So What?
At least 92% of companies have a strategy because they have been in operation for a year or more. (According to government statistics (here and here) only 8% of US companies are in their first year of operation.) Until it starts operation, a brand-new company does not have a strategy because it hasn’t done anything yet. It may have a strategic intent, but it doesn’t have a strategy. And since many of those first-year companies haven’t established a consistent set of choices yet, I will concede that some fraction of the 8% don’t have a strategy yet. But any company that is already in operation has a strategy because it has been doing some things and not other things. These companies don’t have a strategic blank state. Even if a company hires a new CEO, that CEO can’t start from scratch in creating a strategy: there is a strategy in place whether written down or not, whether good, bad, or indifferent.
That notwithstanding, many new CEOs (whether internal or external hires) assume — sometimes explicitly, sometimes implicitly — that they are starting with a strategic blank slate. I often get told that: “Roger, we have no strategy. Help me create one.”
In my experience, that plays directly into the hand of the greatest enemy of strategy: the stranglehold of the status quo — which is the product of all prior choices intersecting with the competitive environment. Starting with that assumption is unhelpful, even dangerous. As with most things in life, possession is nine-tenths of the law. The current set of strategy choices — regardless of how they were made and whether or not they are written down — has possession. Because it reflects what the organization currently does, it is the most familiar, the most comfortable, the most habitual. And familiarity, comfort and habit are magnets for human action. Human beings instinctively want to continue behaviors that are familiar and comfortable, which engrains habits, which, in turn, increase familiarity and comfort, and so on.
The status quo couldn’t care less what the company claims is its ‘new strategy.’ It will strive to keep doing what it is currently doing.
The Power of Betterment
Instead of creating a strategy as if you don’t have one, think betterment. Is the ultimate goal a great strategy? For sure. As I argue, strategy is an integrated set of choices that compels desired customer action. But the best way to start is with a pareto chart. What are the biggest gaps between what you wish was happening and what is happening?
Start with the biggest one and ask: ‘what different choices could we make to cause the gap to go away?’ If you can make a different set of choices that makes that gap disappear, chances are that is the best possible thing you could do strategically. That is betterment — starting with the current situation and making it better.
But before you put those choices into action, go to the second biggest gap and ask what different choices you could make to cause that gap to go away. Then consider those choices in the context of the choices you are contemplating to work on the first gap. If the two sets of choices are consistent, terrific! Then move on to the third choice. But if the choices relative to the second gap are inconsistent or conflictual with the choices relative to the first gap, then do the hard work of revisiting the choices for the two gaps to create a new set of choices that are compatible and address both the biggest and next biggest gap.
Then, whether you have or have not needed to rework choices on the biggest two gaps, go on to the third challenge to determine what choices you could make to cause that gap to go away. Identify those choices, and check compatibility. If incompatible, revisit the three sets of choices in concert and modify the choices to make them compatible and consistent.
If you knock off the three biggest gaps with an integrated set of choices, you won’t regret it. You will have made your strategy dramatically better. And it sets you up for further betterment by going on to tackle the next most important gap and so on.
Betterment over Perfection
This approach will not please strategy perfectionists. They want to act as if strategy formulation is an exercise that has the goal of transforming from a state of bad strategy to a perfect strategy — and for these folks, one subset of having a bad strategy is the delusion of having no strategy.
The downside of this view is that it tends to cause the status quo to fade into the background as the mind focuses on the object of the perfect strategy. The assumption (whether explicit or implicit) is that if we create a perfect strategy, it will become a reality. That is to say, we will choose a new strategy and it will replace whatever the old strategy was — and all we know about it is that it is bad. That helps the power of the status quo to undermine the pursuit of the perfect strategy — and maintain its stranglehold.
In contrast, the mindset of betterment focuses on the journey from the choices producing the current painful gap to enacting a set of choices that eliminates the gap. The current choices, the gap, the journey, and the desired strategic outcome are all front of mind.
In addition, by focusing on one gap at a time, betterment makes the strategy problem more tractable, and tractability is often a challenge in strategy. Executive teams can get overwhelmed by the task of creating from scratch a perfect overall strategy. That often feels too daunting and too abstract. Betterment is a more concrete task that makes it easier for executive teams to stay engaged and power through.
However, betterment isn’t a free lunch. As I have said over and over, in the end the company needs one integrated set of choices. If you stop after the set of choices to eliminate the most painful gap, you won’t have an integrated set of choices for the company. You will have simply solved one big problem. Furthermore, if you don’t revisit the first (and then the second) choice to make sure that the choices to make the top two (and then three) gaps go away are consistent and reinforcing, you will end up with a strategy mess of conflicting choices — and that will help the status quo maintain its stranglehold. And if you stop after three gaps, don’t do another pareto assessment of the next most important gaps, and get to work on them, you will never get close to anything resembling a perfect strategy. Continuous improvement is the practice that has to prevail in strategy by way of betterment.
Practitioner Insights
The siren call in strategy is perfection. ‘Our strategy is terrible,’ or ‘we don’t have a strategy.’ ‘We need to develop a strategy’ — a perfect strategy. It is time to get to work. This sounds eminently sensible and noble. Who wouldn’t want a perfect strategy?
But this is one of those cases where wishing for something and heading off in the direction of that wish is not likely to result in what you wish. It is not impossible, just not likely because it makes the task as hard as possible.
The superior mindset and approach is betterment. Start by deeply understanding the choices that have produced the most painful gaps between what we wish was happening and what is happening. Start with the first gap and make a new set of choices. But don’t forget the current choices that have produced the gap. Pay close attention to how to migrate from that current set of choices to the new set of choices.
Then proceed gap by gap to make new sets of choices. Recognize that they are not necessarily going to fit with and reinforce each other. That is OK. Since you have done the hard work to think through the choices for each gap, you will be in a better position to modify them to fit tightly and reinforce powerfully.
In my experience, successfully tackling the three most painful gaps gets you the proverbial 80%-for-the-20% and encourages you to focus on and make the most important strategic choices. But don’t stop there. Once you have accomplished that, do a new pareto chart and start on the next three most painful gaps — and so on, and so on.
While this might feel like a circuitous route to perfection, what appears to be the more direct route isn’t as feasible or available as folks think. So, be patient but resolute in your pursuit of awesome strategy by way of betterment.
