Your competitive strategy determines what you
will do and what you won't do, and how you will
focus your efforts and resources.
It sets the agenda for all the decisions which
will be made in the course of business. The
question should always be asked "Does this fit
with our strategy?"
Innovation is good - if it's strategic. There's
no point coming up with lots of random ideas -
innovation needs to be in pursuance of the
strategy.
A recent article in Strategy + Business
magazine*, reported that, in a survey of 600
companies globally, about half reported that
their innovation strategy was inadequately
aligned to their overall corporate strategy.
The study found that companies with poor
strategic alignment significantly underperform
their competitors.
Here's an important distinction - "innovation
strategy" is not the same as "competitive
strategy":
• Your competitive strategy is the choice of how
and where to compete, in order to achieve
competitive advantage - choice of markets, how
you will serve those markets differently from
your competitors, and what will enable you to
compete on that basis.
• Your innovation strategy is the choice of how
to innovate in order to carry out the competitive
strategy. The article identified three types of
innovation strategy - "Need Seekers", "Market
Readers" and "Technology Drivers".
The study found no relationship between financial
performance and innovation spending. Success
depended more on how the money was spent.
For innovation to be "strategic", your
competitive strategy must be clear, easy for
everyone to understand and frequently
communicated.
Strategy sets the agenda.
* _The Global Innovation 1000: Why Culture Is
Key_ by Barry Jaruzelski, John Loehr and
Richard Holman, October 25, 2011/Winter
2011/Issue 65
Wednesday, February 22, 2012
Monday, November 21, 2011
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.
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.
Wednesday, September 21, 2011
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.
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.
Monday, August 22, 2011
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.
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.
Monday, August 1, 2011
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.
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.
Wednesday, July 20, 2011
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.
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.
Wednesday, July 6, 2011
"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.
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.
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