The Power of Conviction

People often say "The missing link in strategy is implementation". What they mean is that the new strategy simply sits on the shelf and nothing changes.

I have always found this to be most intriguing. I would have thought that people in organizations would be particularly strong on implementation. Entrepreneurs tend to be "doers". They employ smart people with practical skills. They pay these employees to do what they are asked to do, and if they don't do it, they are at risk of being fired. There are plenty of project managers who have the skills to plan and manage the implementation of projects.

If you are going to install a new computer system, you tell all your employees what they are required to do. If they don't do it, they are in trouble. No one has a choice. Everyone has their own part to play, to reach the point where the new system is functioning properly.

So, when it comes to strategy, why is implementation such a problem?

For one thing, a strategy is not an action plan. First you have to define the strategy. Then you work out a plan to achieve it.

Secondly, it's been said that a failure to execute is always due to one of three things:


1. You don't know what to do,

2. You don't know how to do it, or

3. Someone or something is standing in the way.

I believe that with strategy, the first point is usually the main problem. If your strategy is empty rhetoric; just fine-sounding words, it won't have any substance and won't generate any action. If, however, you have a clear conviction that you've come up with the right strategy, you will know what you have to do. You will work out how to do it. Nothing and no one will stand in the way. But if you're not entirely sure about the strategy you've formulated, if you haven't developed a clear vision, if you haven't thought deeply enough about your specific value proposition and how you will differentiate, you won't have sufficient drive to mobilise the people around you to take action on it. You'll have a nagging concern that something's not quite right. A strategy has to feel right. It's partly a logical and partly intuitive decision.

If the thinking is done thoroughly and well, then the doing will follow easily.

Without strong conviction, you're just stuck in precedent.

Let it bubble

Creating a new strategy requires original thinking. It requires new perspectives on the environment in which the business currently operates, the resources of the business, the needs that the business can serve, ways in which the business can out-perform its competitors, and future trends. Without reconceptualising one or more of these elements, you will end up with a strategy of "last year, plus a bit".

Ordered, disciplined thinking is not usually enough to achieve such a reconceptualization. You also need to harness the power of unconscious thought processes. To produce new insights, the brain needs time to reflect.

Developing new ways of thinking requires breaking with habitual ways of thinking, and this is what happens during sleep. You've probably had the experience of having a difficult problem to solve, you thrash at it during the day, your thoughts continue to bubble around, and in the morning you discover a fresh perspective on the issue. Sleep allows previously unconnected thoughts to come together to produce new insights. The same thing can happen while you are thinking about issues unrelated to the problem to be solved.

As Louis Pasteur said "Fortune favours the prepared mind". First, work on the problem consciously, then keep it in your mind so that unconscious processes can do their work. History is full of discoveries which appeared as "flashes of insight" - but only because the discoverer had been agitating the problem.

One of my favourite books is "The Act of Creation" by Arthur Koestler (1964). I regard him as the true pioneer of creative thinking skills, pre-dating Edward De Bono. He discusses the story of Archimedes, who was asked by the King to assess the gold content of an intricately-worked crown. Archimedes knew he needed to measure the volume of the crown, but could not think of a way to do this without melting it down (which clearly was not an option). Then one day as he climbed into his bath, he noticed that the water level rose, displacing the volume of his body. In his famous "Eureka!" moment, he connected the two ideas and solved the problem. Koestler points out that Archimedes would have seen the water level rise every time he had a bath, but would not have taken any notice of it unless he was agitating the problem of the crown.

Companies differ widely in the processes they use to develop strategy. Some spend half a day; others work on it for many months. Whatever the scale of your process, you can utilize the power of unconscious thought. New insights on an issue are unlikely to be appear during a single session. Leave the question open and come back to it, and see what new thinking has emerged. If you are holding only a half-day session, send out a questionnaire beforehand, to get people thinking about key issues in the lead-up to the discussion. If you have a two-day event, canvas as many issues as possible on the first day, so sleep can do its work overnight.

To get an innovative strategy, let it bubble.

Ingredients for Strategy Pie

When you're developing your competitive strategy, it's important to make sure you have all the ingredients in the mix. Omitting one of them would be like putting your cake in the oven and then finding the requisite cup of sugar still on the counter (which is something that has actually happened to me).

Here's what you need to bake Strategy Pie:

Ingredients

Definition of your industry and market

Strategic assets, e.g core competencies

SWOT analysis (Strengths, Weaknesses, Opportunities and Threats)

Environmental scan - global, national, local

Competitor analysis

Customer base, segmented

Method

Slice and dice the customer base to produce additional segments.

Layer the competitor analysis over the SWOT, so you can see how your strengths and weaknesses compare with those of your competitor.

Add all the other ingredients.

Leave to bubble in cauldron.

Shake and stir with questions.

Leaven with laughter.

Allow to rise.

Chill for a while.

Find the sweet spot where you can work in your strengths and create maximum value for your target market.

Bake.

Feel free to vary your method, but make sure you don't leave out any of the ingredients.

How to Bake Strategy Pie

I’m a fan of the “Masterchef” cooking show. I like to relax on the couch with a glass of wine and a take-away meal and watch other people slaving in the kitchen.

Developing a strategy for your business is a bit like a Masterchef team challenge. The contestants come onto the set in the morning and they have no idea what they will have created by the end of the day. The teams are given a challenge such as “You'll be making lunch for a law firm” or “You’re doing dinner for the Dalai Lama”. For a moment they stand around in shock, and it is evident that they have no idea how they are going to achieve this. There’s no picture of the finished product for them to follow. Subject to a few parameters, they have free choice as to what they will cook. They find themselves with a basket of ingredients, some of which are unfamiliar to them. They know one thing: by the appointed hour, they must have produced something to “plate up”. As a team they combine their ideas and expertise. Usually they rise to the occasion, and by the end of the day (apart from the occasional culinary disaster), they have produced a delectable meal that they can all be proud of.

Similarly, when you are baking a strategy, you are dealing with inherent uncertainty. At the start of the process, no one knows what the end result will look like. And it’s actually best if no one thinks they know the answer. Everyone has a different perspective to offer. It’s an opportunity to consider many possible futures and directions, and to set the organization on a unique path where it can compete on its own terms. No one knows what the future will hold, but you can make some educated assumptions on which strategic decisions can be based.

The Strategy Pie challenge is to combine the available ingredients so as to make the most of the organization’s resources and “put value on the plate” for your customers.

A Strategy is not a Document

Everyone's looking for quicker, easier ways to do things in business.

People want to get things done quickly so they can move on with the next thing. This leads to a quest for the automation of tasks. Standard forms and templates are developed to make the work easier. Standard letters provide appropriate wording for various different purposes and commonly-encountered situations, so there is no need to "reinvent the wheel".

Sometimes strategy is treated as a task to be completed as quickly as possible, so that everyone can proceed to action.

I once purchased an electronic "Build A Business Strategy" program, which promised much but delivered very little. It offered a template containing fields to insert "Vision"; "Mission"; "Values"; "Present market share"; "Desired market share"; "Goals" etc. This "paint-by-numbers" offered nothing in terms of guidance as to how to think about these issues.

With strategy, there tends to be an emphasis on completing a strategy document, so we can say that the strategy is "done". People focus on developing words and phrases that look and sound good, but which are too general to have any real meaning and are really "empty rhetoric"*. It's as if the goal is to fill every field of a template with text, then the job is done.

The aim is not to produce a document, but to produce a strategy which can then be documented. These are two different things. It's not enough to fill in the "blanks". Each of the "blanks" requires comprehensive thinking, not jargon and ready-made phrases.

Just having words doesn't mean you have a strategy. Work on developing a strategy, not a document.

"Best-Practice" is Not Strategy

When developing a strategy, it is important to recognize the difference between strategic and operational decisions.

Strategy is the choice of how and where to compete. Strategy determines what business the organization is in, its target market, identifies its particular strengths and how it is differentiated from its competitors. Strategic decisions establish the direction in which the organization will travel. Conversely, operational decisions determine how the organization will get there.

Operational tasks include market research, product and service development, pricing, promotion and sales, budgeting, staffing, setting key performance indicators, and measurement of results. These are functional specialties. Usually there is someone in the organization with the right expertise to get results in these areas, or it is possible to bring in an expert on a short-term contract who knows what needs to be done. Operational decisions are informed by "best practices". You look at what other people have done, and either copy them or learn from their mistakes.

When it comes to developing a new strategy, however, there is no "best practice". By definition, you are pioneering. Strategy requires reconceptualizing the organization's purpose, conceiving a new vision, to redefining your target market(s), recognizing strengths that were not previously identified, and segmenting your customer base in a new way, to identify new sources of competitive advantage. This requires challenging all your assumptions about the correctness of what is, and focusing instead on what could be.

Another distinction could be this. An operational issue is one where someone knows the answer. The expertise is available, either within the organization, or externally. A strategic issue is one where no one knows the answer, because a new path is being forged. No one really knows how your business should compete. You make a choice and then build an implementation plan based on this choice.

You don't get competitive advantage by copying someone else's strategy. Your strategy should be unique, based on the current environment, the needs of your chosen target market and the organization's unique strengths.

When you are building a strategy, the question "What are other people doing?" should sound alarm bells. Marketing guru Seth Godin says "By the time there is a case study in your specific industry, it's going to be way too late for you to catch up." Competitive advantage goes to those who choose a unique path and commit to its success.

The first step in formulating a new strategy is to accept that no one knows the answer. The complexity of this task should never be underestimated. Everyone involved needs to be willing to suspend judgment, explore the questions and resist the temptation to supply the "answers" from their own expert point of view.

A Strategy or a Plan?

A strategy isn’t a plan and a plan isn’t a strategy.

A strategy is a like a compass for your business. It points to the direction in which you will travel, and it also tells you where you are __not__ going. A plan, on the other hand, is like a map showing how you will get there.

A lot of people get impatient with the strategy and head straight for the plan. But without a clear strategy, the plan is destined to be generic and bland, and will not produce competitive advantage. You end up doing work that you don’t want to do, competing on price and losing market share to larger, more powerful competitors.

As Lewis Carroll wrote in Alice in Wonderland, “If you don't know where you are going, any road will take you there.” Your plan may be very creative, but if it is not pointed in the right direction, that’s all it is – creative.

To have a competitive strategy, you need to be able to state:
*Which target market(s) you choose,
*How you serve that market differently from your competitors, and
*What strategic assets you have that underpin these choices.

These questions can be really hard to answer, and even harder to answer innovatively. It’s no wonder a lot of people give up on strategy.

The strategy is often confused with the plan. The result is a catalogue of operational action items such as:
*”Hire marketing staff”
*”Develop branding”
*”Build relationships with customers”
*”Increase sales”
*”Upgrade the computer system”
*”Build a new web site”
*”Introduce KPI’s”
*”Improve internal and external communications”
*”Introduce customer satisfaction surveys”
*”Implement systems”
*”Advertise more widely”
*”Seek new customers”
*”Undertake market research”
*”Start viral marketing campaign”

These could all be valuable steps but none of it is strategy (even if you made them more specific). Without a strategy it’s just a grab-bag of scattergun actions.

Further, because each of these activities resides in some area of functional specialty, they tend to become the responsibility of the relevant “expert”. This tends to dampen any wide-ranging discussion of the possibilities. Either everyone looks to the expert for the answer, or the expert protects their “turf” by taking the lead and defending their position.

With strategy, you are all on neutral territory, because no one knows the answer. By definition, when you create strategy you are pioneering and forging a new path.

Strategy is not action. It is an exercise in conceptualization and articulation. It requires the expenditure of mental energy, and time for reflection and incubation. It can drive action-oriented people crazy. They will not find the answers because they are not even asking themselves the questions.

However, patient people who persevere will be rewarded with an original strategy which provides focus and enables the business to compete on its own terms.

Are you making a strategy or a plan?

Got a strategy or a Strategy?

The term "strategy" has a variety of different meanings. "Strategic" can be used as a synonym for "important" or "sensible". You can have a "marketing strategy", a "recruitment strategy", a "succession strategy" a "success strategy"; a strategy for installing the new computer system or a strategy for getting the staff to reduce their number of sick days.

None of that is what I am talking about when I refer to Strategy (with a capital S). When I refer to Strategy I mean "Competitive Strategy", and it has a very specific meaning.

Competitive Strategy is "the choice of how and where to compete". It's like a recipe for how you plan to achieve competitive advantage.

The three components of a Competitive Strategy are:


1. The market in which you choose to compete

2. The way in which you intend to differentiate your offerings from those of your competitors, and

3. The identification of the strategic assets which you possess and which support the approach you have chosen.

How often does your organization analyse or review these matters? Does the discussion lead to a genuine exploration or is it a perfunctory "covering-off" of these points? The questions required to formulate an original strategy are the "dumb questions" that are often avoided, because the answers can appear obvious and no one wants to look stupid. They can't be answered comprehensively in one afternoon. Many people are impatient with such discussions and gloss over the issues, fast-forwarding to the action items.

Your Competitive Strategy is the compass which should guide all your other business decisions and activities.

Your "big S" Strategy is what makes your business unique. Can you afford not to have one?

Utilize your unique ingredients

In the latest Fast Company magazine, there’s a story about the “The Top 50 Innovative Companies”. I bought it excitedly, but found it quite disappointing. The story focuses on the latest products or initiatives of these companies. It should be called “The Top 50 Innovations”. It tells us nothing about the companies and what has enabled them to produce these innovations.

You won’t get competitive advantage by copying what these companies have done. They probably have a completely different set of ingredients from the ones you have to work with.

When setting your strategy it’s important to understand your strengths. Today I'm going to talk about culture.

It’s been said that “Culture eats strategy for breakfast” – suggesting that it’s more important to work on your organizational culture than on your strategy.

Sure, if you have a toxic work culture, work to improve it as a priority, because if you don’t, you’ll lose your staff. But to suggest that you should choose between strategy and culture makes no sense. Culture is an ingredient of strategy.

Your organizational culture is one of those “strategic assets” I wrote about last time. It’s unique to your firm and difficult for your competitors to replicate. The question is: what does your culture enable your organization to do better than your competitors can?

It’s important to be honest about what kind of culture you have. If your culture is truly conducive to innovation, then base your strategy on being innovative, and invest in maintaining and heightening your capabilities in that area. If not, don’t pretend. Differentiate on some other basis. In time, you could perhaps create a culture of innovation, but it won’t happen overnight, or by proclaiming it on your web site. Perhaps there is something else about your culture, or some other strategic asset, that gives you an advantage over your competitors. Nurture and develop that instead.

Focusing on what competing companies have done is a way of getting stuck in precedent. Utilize your unique ingredients to create your own path.

Strategy is Like Job-Seeking

Competitive advantage comes from a combination of:
1. what you have, plus
2. how you choose to use it,
to create value for your chosen market.

The phrase “what you have” is a reference to your “strategic assets”. These are not what we normally think of as assets – land, buildings, equipment or “Our people are our greatest asset”.

Strategic assets are unique to the organization and are usually intangible things. They include:

• Intellectual property

• Acquired consumer information

• Lines of capital

• Core competencies (those that are embedded in the organization, not individual staff skills)

• Operational, monitoring, planning, communication or decision systems

• Organizational culture

• Brand awareness

• Brand image and reputation

• Secured distribution

• Relationships with suppliers, customers and intermediaries

Strategic assets are:
• Costly or difficult for competitors to acquire or copy,

• Path dependent – they result from the experience of your business and

• Firm specific – they cannot readily leave with departing staff members or be sold

Whatever strategy you choose must be underpinned by strategic assets which equip you to out-perform your competitors.

Therefore, identifying your strategic assets is a crucial step in developing a strategy.

__Strategic assets often go unrecognized. Innovative strategy depends on your ability to conceptualize your strategic assets in a creative way.__

Here's why strategy is like job-seeking. Most people looking for a job don’t recognize their own strengths. In their resume they provide a list of generic skills and qualities. Mostly, these are bland and superficially-expressed. They do not differentiate the individual from other job-seekers. It is not until they analyse the unique path they have taken and what they have gained as a result, that they can truly describe what they uniquely have to offer an employer.

Don’t get stuck in old ways of conceptualizing “what you have”. Break free from that precedent.

Strategy Sets the Scene for Growth

As the world economy improves, businesses will again aspire to grow.

During the recession, businesses have been in survival mode, grabbing revenue from wherever they can, to make sure they can meet their overheads. Clearly, it's crucial to maintain cash flow and remain solvent, or there won't be a business to run when the recession is over.

But this approach is reactive, not strategic. Taking whatever business is available does nothing for your strategic positioning. The business loses focus. It becomes bland and loses its competitive edge because it is not clearly differentiated from other suppliers. As businesses become more alike, the need to compete on price becomes greater. And the result of this is a downward spiral.

Strategy is your choice of how and where to compete. It determines the identity of your business and the direction in which it is headed. Strategy enables your business to compete on its own terms instead of being dragged into a price war by its competitors. Your strategy defines what you won't do as well as what you will do.

A strategy should be original, not a replica of someone else's approach. Your business achieves competitive advantage through a combination of (1) its unique strengths and (2) how it decides to use them. To really differentiate, you need to think creatively about both parts of this equation.

Your strategy establishes criteria for all of the business decisions which are to follow. A new strategy forces a break from entrenched habits and old ways of thinking.

If you're ready for growth, don't get stuck in precedent; get a strategy.

Use Precedent Purposefully

When people are discussing future strategic directions, there is a tendency to default to what has been done in the past. The conversation goes something like this: "What should we do?" "Let's brainstorm some alternatives" "Well, what did we do last time?" "What are other people doing?" "What is best practice in this arena?"

Why does this happen? The people may want to think more innovatively, but something is preventing them. That thing is the human brain. Throughout your life, your brain takes in pieces of information and arranges them in patterns in your memory. As new information comes in, your brain does a search to see how it might fit with other information already stored in your memory. When you look for an idea, your brain goes straight to its store of similar ideas and retrieves those. The "shelves" of your brain are stocked with examples of things you've seen or done or heard of before.*

Your brain offers you a selection of "templates" (or "precedents" in lawyer-language).

This explains why many people find it difficult to think laterally, and why a brainstorm often produces little in the way of novel suggestions.

To make the most of the brain's liking for precedents, search for examples that are "broadly similar" rather than "narrowly similar". You can do this by stating the challenge from a variety of different perspectives, and by experimenting with different levels of abstraction (by expressing the question in a more general or a more specific way).

New ideas often come from unconsciously combining elements of existing ideas. To maximize the likelihood of such a brainwave, you need plenty of examples to work with. Don't just go with the first idea that seems to be workable - map out a whole range of options, and examine the best aspects of each.

Have patience with the process, because new ideas take time to develop.

When creating your business strategy, don't simply default to precedent. But if you are going to use precedent, use it purposefully.

Don't implement the wrong strategy

The first two ingredients in a business vision were “imagination” and “worldview”.

The third one is “possibility thinking”.

This is about your willingness to move beyond the first acceptable idea, to generate multiple ideas from which you can select and combine. Many people feel uncomfortable and impatient with this process. They latch on to the first viable suggestion, however superficial and unoriginal, so they can move straight to implementation, and feel as though they are doing something. However, implementing the wrong business strategy can be a disaster.

Creating a unique strategy, one that capitalizes on the organization’s strengths and caters to the needs of its customers, whilst also taking into account what is happening in the world around you, is not easy or quick. It requires the input of many and varied suggestions. Most will eventually be “redundant” and “surplus to requirements”, but they form an essential part of the process.

Much has been written about the importance of not shooting other people’s ideas down. Just as important is not shooting down your own ideas. Most ideas are never voiced at all. It takes time and confidence for a thought to develop to the point where it can be put forward as a suggestion. Mostly, we have “glimmers” which pass through our minds but never really form into an idea. Only if we let these glimmers grow can we exercise our originality and create a truly new strategy.

Recently I took part in a five-day Cabaret Summer School. During the week each of us was required to create an original solo mini-cabaret show of 10-15 minutes, consisting of three songs and some patter to connect them. At the end of the week all eleven of us performed our segments to a paying audience in a show held at a beautiful theatre, with professional sound, lighting and grand piano accompaniment. It was quite a challenge. At start of the week, most of us had no idea what our show would be about. The best piece of advice came on Day 1: “Most ideas get rejected before they have time to develop. Give your ideas time to grow”. This gave everyone permission to come up with novel ideas, and to experiment with all sorts of things without worrying too much about whether or not the material would eventually be used.

Obviously there are differences between the creative arts and the corporate world. But both require possibility thinking. You don’t get competitive advantage by copying what your competitors have done. To create a new strategy, we need to overcome the natural tendency to self-edit, and allow the glimmers to grow.

Possibility thinking stops you getting stuck in precedent.

When Worlds Collide

The first ingredient in creating a business vision was “imagination”.

The second ingredient is “worldview”.

As the name implies, your worldview is the way you see the world. It refers to the framework or “filter” of ideas and beliefs through which you interpret the world and interact with it; the assumptions you make about people and things. Your worldview influences the way you think and behave. It’s your philosophy of life.

A worldview is an individual thing. Everyone’s worldview is different, because everyone is the product of a different culture, personality, upbringing, education, employment and other experiences.

A worldview is an unconscious thing – it’s so much a part of you, that you’re unaware of it.

Your belief regarding what is true or possible is largely determined by your worldview. You may think something is impossible, whereas someone else will see the same thing as easily achievable.

To challenge your own worldview, contrast it with the worldviews of other people. The more diverse the group, the more diverse the input to the business vision. The broader the questions and the discussion, the more your worldview will be challenged, and the more innovative the vision will become.

Conversely, the more you live within your own view of the world, the more limited the vision will be.

Involve more people, and more diverse people, in the process for developing a business vision. Allowing your worlds to collide helps you break with precedent, to build a vision for the future.