Good Strategy, Bad Strategy, No Strategy, What's Yo' Strategy?

Subscribe Now!

Stay on top of all the latest news and trends in banking industry.


Farnam Street recently published A Primer on Strategy which included a few gems (followed by my take in them):

“More and more leaders think they have a strategy when they do not—they have a bad strategy. Bad strategy ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests.”

My take: This is important because when asked what their company’s strategy is, many employees say “we don’t have one.”

But that’s not true, and I learned this the hard way from the managing partner at a consulting firm I worked for. On one project, the team met after collecting data about the client, and the partner asked, “so what’s this firm’s strategy?” We said “they don’t have one.” “Nonsense,” he said, “every firm has a strategy. It may suck, but they have one.”

“The most profitable strategies are strategies that commit companies to positions of either product differentiation or cost leadership.”

My take: This supports the Porter view of strategy, which many people want to dismiss as being outdated and irrelevant in today’s environment. But the reality of strategy — even in 2012 — is that, at the root of it, there really is just one choice: To go low cost or differentiate.

It’s particularly important in a banking context, where many folks in the industry accuse banking of being a “commodity” or “utility,” but then talk about how to survive, banks and credit unions need to differentiate.

The reality is that creating a sustainable position as the low-cost (not necessarily lowest-price) provider is differentiating. If you don’t believe, take a look at ING Direct.

“A leader’s most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.”

My take: The third point is notable because it implies that companies need to look within — and not necessarily to the market, consumers, or the competition — to identify the challenges to forward progress. Every firm is dealing with changing consumers and technology. But it’s the internal issues — of structure, processes, and policies — that determine how, and how fast, a company can deal with those changing factors.

Let me tell you a story to highlight how one leader identified the challenges to progress in his organization:

My first job out of b-school was at a 400-bed hospital in San Antonio. I had a nice office in the executive suite with a view of the CEO’s office.

Everyday at about 5:00pm, Aurora from Housekeeping would come into the suite to clean up, empty the trash, etc. And pretty much every day, the CEO would say (in his Alabama drawl) “Aurora! Get in here, close the door, and sit down!” Through the window on the door I could see the two of them as they talked, usually for about 10-15 minutes.

After 3 or 4 months, I worked up the courage to ask him what he and Aurora talked about. Twenty-nine years later, I still remember exactly what he told me. In his Alabama drawl he said:

“Son, you can learn something from everybody in this organization.”

Do the leaders in your company do that?

Even if they do, it’s likely that they do so with blinders on. They probably think they’re being good leaders because they’re “listening to the little people” and trying to help to make the little people’s jobs a little bit easier.

But because they don’t have those conversations with a strategic mindset, they’re oblivious to how the organization, through its structure and incentives, creates barriers that, if removed, would significantly reduce complexity, create better alignment, and — ready for this? — strategically differentiate the organization from the competition. I know you think the problems your organization experiences is unique to your firm, but they’re not — trust me.

Bottom line: Here’s my stake in the ground: The organizations that will experience the greatest success in the next few years will not necessarily be the ones that innovate the most, or do the most with social media, but the ones that eliminate the causes of organization misalignment that prevent the firm from making progress.

And as the Farnam article implies, eliminating the causes of misalignment is as much about strategy as any innovation, and 100 times more so than any Facebook page or Twitter ID.

This article was originally published on . All content © 2022 by The Financial Brand and may not be reproduced by any means without permission.