Strategy. The adjective you use to make everything sound like it was based on serious research. You know, unlike the rest of the stuff that you come up without working them neurons. Let's take "directions" for example. By itself is a rather void and boring word. Put strategy before it ….. and boom …. You get "strategic directions". Such a more inquiry-free language. It works with a lot of words: goals, plans, objectives, initiatives, organization etc. Pretty much anything. It's magic. Just like bacon. Makes everything better. Too bad bacon causes cancer now.
Strategy is so used in the business world that it is starting to lose its meaning. The abuse of the word leads to a lack of scrutiny for everything that you stick it to. Which leads to bad strategy. And bad strategy is often worse than no strategy whatsoever.
Outside of the decorative purpose we discussed above, strategy is not getting much love. It is perceived like an old-fashioned concept that holds little relevance. We now live in a world where decentralization is seen as the future of management. In a world of holacracy and no-management companies ala Zappos why use a relic from the times when war was the only competitive activity? It's an honest question. One that I struggled with for a long, long time. And I came to think that strategy is more important now than ever.
What is strategy after all?
It is true that strategy finds its roots in the military endeavors of our ancestors. It emerged from the realization that a coordinated number of warriors can hold off or defeat larger groups of enemy fighters. The Greeks invented the phalanx, a mass formation of heavy infantry that protected itself by having all the soldiers lock their shields together and attack by having the first rows of soldiers project their long spears out. As the wars became bigger in scope the plans became more complex. Sun Tzu wrote the Art of War, which became the defining strategy book for more than 2000 years. Does any of this still matter? What is strategy after all?
There are many definitions of strategy out there. Michael Porter defined it as a matter of working out an organization's best position relative to all the pressures from your competitive environment. One of my favourite definitions however comes from none other than Tony Robbins. He called strategy "a specific way of winning". These definitions are catchy, but I don't think they will help any of us with creating better strategies.
To guide you through what makes a good strategy I will borrow Richard Rumelt's framework. In his book, Good Strategy, Bad Strategy, he put forward a strategy kernel. A good strategy, he claims, is made up of 3 main components: Diagnosis, Policies & Actions.
I will deviate slightly from his framework by introducing a fourth layer called Insight:
Let's begin. What makes a good strategy?
Diagnosis
When Hannibal emerged from the Alps with his army in 218 BC, his fate looked grim. He marched through the Alps and the harsh weather killed half his warriors and elephants. The remaining warriors were starving and were demoralized. Hannibal believed that Italians were chafing under the Roman yoke and he hoped that his arrival will trigger a broad rebellion that would break Rome's control of the peninsula. However this plan failed to materialize, as very few tribes decided to make the leap of faith and bet on the suicidal plan of a Carthaginian general. The element of surprise was also gone as a Roman army led by one of the consul was preparing to meet him. What was Hannibal to do?
Diagnosis (or Perspective) is about having a very realistic understanding of the battlefield. It's about constantly asking "What's going on?" and synthesizing the information in way that makes the next steps actionable. This question needs to be asked again and again. It’s probably the most important question you can ask as a leader.
It's also the step where most companies and organizations stumble. Diagnosing the problem seemed easier in the military context. Like in chess, your army was facing another army and your troops had to best the others. Back in the day however, getting access to information was very hard. Generals used scouts, locals or spies to gather any information that will help them figure out what's going on. Nowadays, managers have the opposite problem. There is so much information available that making sense of it becomes a big challenge.
Goals
Most organizations skip this step altogether. Goal setting is used instead. Sorry … I meant strategic goals. Unfortunately, no matter how strategic they are, without a clear understanding of the playing field, goals are nothing more than wishful thinking. But most managers seem to think that setting ambitious goals is all that's required to make the troops work 2 times harder. Good strategy marches an organization forward towards a goal, not the other way around.
Vision
The classic way to avoid the work required to get situational perspective is to rely on vision. The prevalent belief is that, in business, correctly mapping the territory is irrelevant because a great leader can anticipate the future. That's why all the plans … sorry, strategic plans …. usually presented with the help of a Powerpoint presentation, have a vision slide. Most of the time the vision is nothing more than a platitude that sounds good, without anything actionable.
It’s easy to explain the performance of Apple by the amazing vision of its founder. However I would like to invite you all to study the significant changes Steve Jobs instituted when he got back in 1997. It’s very easy to discern realism alongside a focus on design, user experience that will make Apple the most successful company today. I am sure Steve Jobs was a visionary but calling it all vision is a lazy explanation.
Insight
Hannibal had a few insights. His father fought the Romans in the first Punic War and hasn't lost a fight. All his life he studied the Romans and knew them better than they knew themselves. He saw the Roman's reliance on infantry as a weakness. He also knew that the Romans were cocky and they would treat the upcoming fight superficially. If he played his cards right he could use this against them too. With the Alps behind him Hannibal took the field in front to the Trebia river.
Insight is all about applying strength to weakness. One can get to these strengths through intuition or through observation. Or both. No matter how profound the research used to get to the them, these insights are hypotheses. They might work or not.
Strength can be a market or customer observation that a competitor is ignoring or can not follow because of it’s size (classical Innovator Dilemma). A new acquisition channel that only you can master can be another one.
These insights should not be complicated. On the contrary. In the 70's Microsoft's insight was that software will be the most important component of the stack. Dell's insight was that computers can be assembled using off-the-shelves components.
“If you find yourself in a fair fight, you didn’t plan your mission properly.”
Unfortunately a lot of organizations use fluff to mask the lack of insight. Words like customer-centric, disintermediation, synergy, cost effective, cutting-edge, scalable, holistic and so on should ring alarm bells. Play with the Mission Statement Generator if you want some training.
Policy
Hannibal's plan was to force the Romans to attack, which meant they would have to march through the cold river, thus tiring them before they could reach the Carthaginians lines. Another tactic would be to use the Numidian cavalry to flank the legionaries and to entrap them by having a small force attack from the rear. This plan built on all the insight that Hannibal had on the Romans.
Policy represent a set of guiding principles that should offer a framework for overcoming obstacles and harvesting opportunities. The goal for these policies is to guide the actions of the team.
The key here is to remember that it is all about choice. Each situation can have many approaches. A good strategy evaluates as many of them as possible and decides to pursue one instead of the others.
The best way to test if some policies are BS or not is to see if the opposite makes sense. If your proposal is to "focus on the client" try the opposite … "not focusing on the client". It does not make any sense thus the original proposal is BS. A good guiding policy should clearly identify the choice. It should inform what the team should focus on. And most importantly what not to do.
Action
Early in the morning, even before the Romans had breakfast, the Numidian cavalry started to harass the Roman camp. The starving Roman soldiers were ordered by their over-confident consul to cross the river and take on the Carthaginians straight on. It was a cold day and the icy water made it hard for the legionaries to hold their weapons. On the other side of the river Hannibal's rested men were waiting. The Romans were also greeted by war elephants and the fierce Numidian cavalry attacked them on the flanks. As the battle became a chaos their retreat was blocked by a mini army led by Hannibal's brother who was hiding in a nearby forest. The battle turned into a massacre and the battle of the Trebia river became on of the many victories that made Hannibal one of the greatest general in history.
Lastly, a good strategy is judged on its actions. Built on top of the guiding principles the actions should help to put everything into perspective. The actions a good strategy puts forward should also be coordinated to offer a bigger punch.
A lot of the areas we've been talking about for now can be pretty abstract and nothing offers better clarity than a set of coherent actions. A change in strategy happens usually when a company is going through some turbulent times. A new management comes in and they start implementing a new strategy. And the only visible part of that strategy is the list of immediate actions. In 1997 Steve Jobs took an investment from Microsoft, canceled a lot of products and terminated almost all distribution deals. He also started to invest heavily in OS X & created a new design team but the benefits of these efforts became evident years later. Twitter is going through some troubles now, Jack Dorsey took over and a new product gets released, the engineering team gets regorged and new APIs are announced in order to fix the company's troubled relationship with developers. What does that mean? It is hard to say for now, but if Twitter starts growing we will look at these actions as part of master plan that all of a sudden makes sense.
We live in simpler times. Unlike Hannibal, our decisions are not about life or death. We fight battles for consumers hearts and pockets. But complexity brought in by the information overload and the need to coordinate large teams makes strategy and strategic thinking more important than ever.