Your Strategy Sucks

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I want to tell y’all a story.

My first job out of b-school was at a 400-bed hospital in San Antonio. Three months into what was supposed to be a 2-year training program, the CEO fired the Asst Exec Dir and put me in the position. With it, came a nice office in the executive suite with a view of the Executive Director’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, Jim (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 Aurora sitting across from Jim as they talked, generally for about 10 minutes.

After 3 or 4 months, I worked up the courage to ask Jim 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.”

Fast forward about 10 years to when I worked at a well-respected, Harvard-bred, IT strategy consulting firm. As I was about to manage my first strategy consulting project, I put together the project plan, and presented it to the Managing Partner. He looked at it and asked, “why are you planning to interview so many front-line managers?”

“Because I think they’ll help us understand the real weaknesses and opportunities with the IT infrastructure.”

“No,” he told me, “we’re not going to interview them. Strategy is made by senior executives.”

Roll the clock ahead another 20 years to today, and the mindset reflected in the Managing Partner’s statement hasn’t really changed. In a recent study on strategy in organizations, researchers found that CEOs still see themselves and their senior teams as the creators and keepers of corporate strategy.

Yet study after finds that employees believe that their company doesn’t have a strategy or that they don’t understand what their company’s strategy is.

Problem #1

One aspect of the strategy problem that so many organizations have is the mistaken belief that senior execs are the “creators and keepers” of strategy but in how they talk about strategy in the first place.

Many senior execs talk in terms of “formulating” strategy. Verbs matter, and formulate is not a good one to describe how strategy really comes about.

There’s a body of research that describes strategy as being “emergent.” This is just a pseudo-psycho-academic-consulting term for: Shit happens. What the Emergent Strategy contingent may be missing, however, is that strategy is often “emergent” because attempts to “formulate” strategy fail so miserably.

Problem #2

Part of the problem lies with the (so-called) experts’ advice on how to do strategic planning (with apologies here to someone who may very well read this, and has, from time to time, published blog posts on strategic planning on his blog).

Four, six, seven, nine, or whatever number of steps to strategic planning doesn’t work. Those might be the steps you need to take to run a strategic planning offsite, but setting out a new strategic direction isn’t tidy enough to fit into any specified number of steps.

Problem #3

Another contributing factor to the strategy problem is that your stated strategy might not be your de facto strategy.

Let me give you an example: Saying that I’m smart and good looking doesn’t mean that I am smart and good looking.

It’s the same with corporate strategy. Many execs think they know what the strategy is because it’s what they’ve decided at the offsite meeting, but how the organization actually behaves might not fit that description.

Problem #4

To make it even more complicated, there’s a relative aspect to this that execs overlook. When execs describe their strategy as “To be the leading provider of….” they pretty much kill any chance of defining a coherent strategy. “Leading” is often not measurable, too open to interpretation, and doesn’t provide the organization with any direction about what not to do.

And that’s the key to strategy — what not to do. Drucker said that, not me: “Strategy is just as much about what not to do, as it is about what to do.” The Snarketing 2.0 Corollary to this: Organizations that don’t figure what not to do, find themselves in a lot of doodoo. I can’t for the life of me figure out why my corollary isn’t as widely quoted as Drucker’s statement.

And The Solution To These Problems Is……?

Innovation? Social media? Customer-centricity? [Fill-in-the-blank-with-your-favorite-buzzword]?

There appears to be no shortage of experts claiming that the key to redefining strategic direction lies in innovation.

HBR recently published a blog post titled Free Your Frontline Workers To Innovate. The author describes a positive experience he had at a local supermarket and concludes that “the key was the freedom the chain has given its cashiers to be themselves on the job.” He says the supermarket “enables [cashiers] to improvise and innovate while performing their otherwise rote tasks, encouraging them to relate to customers in individualized and often distinctive ways.”

This is a confusing obfuscation of terms. Improvisation is not innovation. And while I’m inclined to agree with the author’s statement, the improvisation he cites may be “by design” or “by accident.”

If it’s the former, then it might be considered strategy. If it’s the latter, then it ain’t strategy.

There is also no shortage of self-proclaimed social media strategists in the market today. If you’re a social media strategist, eat shit and die. Oh wait, that wasn’t very polite of me. Let me restate that: Eat shit and die, please.

The endless proclamation of how social media is going to create strong relationships, reinvent companies, dramatically improve marketing effectiveness, blah blah blah, doesn’t get to one fundamental thing: A company’s strategy is about how to chooses to (or tries to) make money. Social media might help, it might not. But it and of itself, social media is not strategy.

And therefore, the last thing most companies need is a social media strategist.

Yes, You Have A Strategy

Farnam Street recently published an excellent article called A Primer on Strategy. Some of the key points:

  • “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.”
  • The most profitable strategies are strategies that commit companies to positions of either product differentiation or cost leadership.”
  • “A leader’s most important responsibility is identifying the biggest challenges to forward progress and devising a coherent approach to overcoming them.”

The first point is important because when asked what their company’s strategy is, many employees say “we don’t have one.” Not true. The Managing Partner from my consulting firm taught me that. On one project, the team came back to the office after collecting data about the firm, 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. The problem is that many of them suck.”

The second point validates 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.

The third point is notable because it implies that companies need to look within — and not 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.

What It Means To Financial Services Firms

The three points above describe financial services to a T: Many FIs have a bad strategy that fails to address choice, and ends up pandering to the multitude of conflicting demands and interests. Few FIs have a strategy that commits them to a position of product differentiation or cost leadership. And way too many financial services execs are too focused on fighting fires or on what’s coming down the pike that they’re oblivious to the internal barriers and issues that cause those fires or allow their firms to adapt to and capitalize on future changes.

In short, maybe your strategy sucks and maybe it doesn’t. The strategy might be fine, but maybe your firm isn’t executing on it very well.

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