Tag Archives: Strategy
Strategy starts with identifying changes
Pay attention to this McKinsey Quarterly interview of Richard Rumelt, professor of strategy at UCLA’s Anderson School of Management:
The Quarterly: Last year the Quarterly’s survey on strategic planning found an enormous amount of dissatisfaction among executives. Many of them feel that they are wasting a lot of time on strategic planning. What advice would you give them?
Richard Rumelt: Most corporate strategic plans have little to do with strategy. They are simply three-year or five-year rolling resource budgets and some sort of market share projection. Calling this strategic planning creates false expectations that the exercise will somehow produce a coherent strategy.
Look, plans are essential management tools. Take, for example, a rapidly growing retail chain, which needs a plan to guide property acquisition, construction, training, et cetera. This plan coordinates the deployment of resources—but it’s not strategy. These resource budgets simply cannot deliver what senior managers want: a pathway to substantially higher performance.
There are only two ways to get that. One, you can invent your way to success. Unfortunately, you can’t count on that. The second path is to exploit some change in your environment—in technology, consumer tastes, laws, resource prices, or competitive behavior—and ride that change with quickness and skill. This second path is how most successful companies make it. Changes, however, don’t come along in nice annual packages, so the need for strategy work is episodic, not necessarily annual.
Now, lots of people think the solution to the strategic-planning problem is to inject more strategy into the annual process. But I disagree. I think the annual rolling resource budget should be separate from strategy work. So my basic recommendation is to do two things: avoid the label “strategic plan”—call those budgets “long-term resource plans”—and start a separate, nonannual, opportunity-driven process for strategy work.
The Quarterly: So strategy starts with identifying changes?
Richard Rumelt: Right.
Traditional Strategic planning is dead. The purpose of crafting strategy is not to create a detailed plan for where the company is headed 5-10 years into the future: in today’s fast moving environment, it is impossible to predict that far into the future. The objective of strategy work should be focused around learning by shaping strategy moment by moment, day by day as companies learn from their customers and their competitive environment.
What’s needed is real-time vision, where the strategy cycle starts when someone sees something that others haven’t noticed and quickly translates that insight into action. See how Prof. Rumelt describes what Steve Jobs does:
The Quarterly: So how does a company take a good position?
Richard Rumelt: Well, one big factor is a predatory posture focused on going after changes.
in 1998 I had the chance to talk with Steve Jobs after he’d come back and turned Apple around. I was there to help Telecom Italia try to do a deal with Apple, but after that business was completed I couldn’t help asking a question. “Steve,” I said, “this turnaround at Apple has been impressive. But everything we know about the personal-computer business says that Apple will always have a small niche position. The network externalities are just too strong to upset the de facto “Wintel”3 standard. So what are you trying to do? What’s the longer-term strategy?”
He didn’t agree or disagree with my assessment of the market. He just smiled and said, “I am going to wait for the next big thing.”
Jobs didn’t give me a doorknob-polishing answer. He didn’t say, “We’re cutting costs and we’re making alliances.” He was waiting until the right moment for that predatory leap, which for him was Pixar and then, in an even bigger way, the iPod. That very predatory approach of leaping through the window of opportunity and staying focused on those big wins—not on maintenance activities—is what distinguishes a real entrepreneurial strategy.
This sounds a lot like OODA (Observe, Orient, Decide, Act) as the faster you can learn and accumulate new knowledge from your customers and your environment, make sense of that new knowledge, extract insights and then put them into action you’ll be better positioned to outpace competitors.
I left a great portion of the interview out as I just wanted to draw attention to the fact that when we think about strategy, learning as fast as the world is changing is more important than trying to predict it. I encourage you to read the full interview, it’s from 2007 but very much relevant.
Don’t waste people’s time. Help them do more
The gap between what is right now and where others are become very obvious when you go from one extreme to another. This past week I spent a little time with a friend I’ve known since kindergarten as he just opened a restaurant in Mexico and I went over to see how he was doing. This is his second restaurant venture for him, his first one closed after a year and a half.
While I was there he was telling me how he’d just bought a new restaurant management software homemade in Mexico. The incentive for him was that the top Mexican restaurant chains, such as Sanborn’s, also claimed to use the same software to manage their operation so in his eyes it was good decision to buy. Nonetheless he asked me if I could give it a test drive to see if it was worth the buy…
Before I dig in I just want to say that with any kind of business if you have pitiful customer support you are in a whole lot of trouble no matter how great your product or service is. With that in mind, here we go…
What you see in the picture above is restaurant management software made by Nationalsoft. The software is still delivered in a package, the serial number is taped on the inside (post it note inside the CD) which registers a single computer. The software is less than 15 MB and takes less than a minute to install. Feels like you’re back at the end of the 90’s huh? Wait it gets better!
If a user loses their password (which did happen) they have to call support who then has them create a .dat file which they then have to send back to support by email so they can ‘do something to it’ to unblock it. After support does something to the file, they’ll send it back to the customer so he may add it to a folder and overwrite the previous one. Are you kidding me!? What happened to the ‘forgot password’ link that is not a default setting in any kind software?
If these people were doing business in the US they would be out of business. But wait, it gets even better…you have to pay them to get the software unblocked.
A modern software company not only provides support by phone but also provides customers with online resources such as FAQ, forums or wiki with answers to common problems. Seems Nationalsoft forgot to add this to their checklist because they’re nowhere to be found. Ironically they do have a Twitter account and a Facebook Fan page! None of which are used as customer support touch points. Promote first, serve later right?
There’s more but I think I’ve provided you with enough information to see how frustrated I was when I was seeing this happen before my eyes. The way this software company is designed to operate is to deliberately waste their customers time, not to help them get going as fast as possible.
Signs that you’re behind the curve
Businesses in Mexico still operate by the logic of ‘forcing customers to do what I want them to do’ not ‘I make it easier for my customers to do what they want to do’. The result of operating by this logic is that people who may be interested in your product or service have been programmed to expect ‘below average service’, they expect to be treated like crap. They put more obstacles in place for the customer, never taking into account that the customer is a human and therefore ignoring the fact that humans do make mistakes. In a world where software is as ubiquitous as water, the days of bloated software are over. Today every piece of software (including websites) are designed for humans, not robots. As an example see Facebook’s platform, which now 500 million people use, it epitomizes software designed for making social interaction as simple as possible.
Point: Design your operation so that every interaction your customer has with you helps him do more by making it simple. You’ll not only have happy customers but also angry competitors. Here’s how to do it:
Create barriers to entry not barriers to use
Barriers to entry is what you do to make it difficult for competitors to compete with you (like doing everything in your power to make your customers happy). Barriers to use (such as having weak customer support, no online Q&A, making customers pay because they lost their password) is what you do to impede customers from getting on with it and start using your products, and if all goes well they’ll be very happy and tell their friends about it.
Anticipate human stupidity
Humans make mistakes, in the online world it becomes even more obvious because everything they do online has to be done through a digital interface. As software has evolved from being used exclusively used on the desktop to be used on the web, it’s become important to focus on designing your software to anticipate the fact that humans need things to be spelled out for them just like children, therefore making it easier for them to do what they want to do. For example humans will also forget things, including passwords, so make sure you cover the basics.
Learn how Zappos treats it’s customers
No seriously I’m being honest. If you want to make competitors really angry and therefore put them in a disadvantage, focus your efforts on making your customers really happy by actually giving a damn about them. That’s Zappos secret weapon 
What do you think, is making customers happy an unconventional strategy?
Innovation posts of the week: Innovation is not creativity
- Disruptive Thinking: 5 attributes to consider by @jjsviokla
- Top 5 Innovation Trends via @innovate
- Is Innovation a Process or an Outcome? via @ralph_ohr
- Innovation Lessons From Tarzan by @skap5
- How biases, prejudices and ignorance can quietly undermine innovation via @chuckfrey
- The cave model of innovation via @philmccreight
- Innovation is Not Creativity – HBR
- Drive Innovation: Suggest Ideas, Don’t Propose Them via @marketingprofs
- When Innovation Strategies Combine – Forbes
- Who buys what? Research finds clues to marketing innovation – Physorg
Make your own game
Here’s my latest post on @Oninnovation: Make your own game
Enjoy!
The essence of strategy is choosing to perform activities differently than rivals do; and the most vital competitive weapon is not lower price, but new ideas.
Across the border in Mexico, we have a taco shop in every corner. They all sell the same thing and their business name usually starts with the name of someone plus “tacos.” It’s safe to say that their businesses all operate very much the same way; the only difference between them is where they get the meat and ingredients.
We live in a world of sameness, and the only way out of it is to innovate.
There are brave souls who choose to question the dominant logic of competition; who chose to do something entirely different. There is one taco shop in Tijuana which doesn’t follow conventional logic; it doesn’t sell tacos, but rather, art. Tacos Salceados created what is known as the “Quesataco,” which starts with flakes of cheese spread across the flat iron stove. Your choice of cuts are then lined down the middle and then ultimately encased in the crisp golden cheese. The stuffed crisp cheese roll is then placed in a fresh thick tortilla, and topped with house dressings and avocado. The Quesataco later spawned other creations, such as shrimp tacos covered in a sweet tasting sauce.
It is this fresh perspective which makes it stand out among the rest of the taco shops.
The thing people forget when they compete, is that you must stand out in some manner. Too many people copy their competition too much. They assume if it is working for the competitor, then it will work for them. Passion for what you are doing, consistency, and a sprinkle of uniqueness is just the start. Sticking with it and always looking for that unique tweak is key.
Here are 4 ways to help you think about defeating sameness:
Purpose matters
Conventional logic says that businesses exist to make money. Why not exist to deliver meaning? The difference between you and competitors is nothing more than how you answer the ‘why’ of your intentions: Why are you doing this? Online retailer Zappos knows why they are in business; not to sell a lot of shoes, but rather to deliver the best customer service in a meaningful way.
Reset expectations
Your customers have interacted with your competitors, as well as with other businesses, and have an idea of what to expect. These same expectations will be put into play when they interact with you, and if you deliver the “same,” then you’ll be easily ignored. You must reset those expectations by going above and beyond the normal, delivering equal or more value in a faster, more convenient, easier and meaningful way.
Define yourself by what you know not what you do
Over the time your business has existed you have accumulated a portfolio of abilities and strengths. Think about these bundle of skills that you have accumulated over time, things that you are good at and that when combined provide new value to your customers. Stop looking at your company as a provider of specific products or services for specific markets, and start seeing it as a reservoir of skills and assets that can be exploited in different ways or different contexts to create new value.
Be something your competitors are not
In order to compete businesses follow the logic that they have to target the middle of the market, the mainstream consumers. This also means they configure their business just like competitors who are already ahead of them. The problem is that everyone else is going after the same market and with so many choices, so many brands, so much noise it isn’t enough to be good at everything. You have to be the most at something. What are you the most at? Are you the fastest? The most responsive? The most innovative? The most transparent? Look up field or downfield, go to the edges, to the extremes where you can be the most at something.
Key Takeaway: Compete differently and play the game you know you can win.
What do you think?
Delivering happiness: Not business as usual
A few days ago I wrote about how Zappos has broken the rule that a business exists purely to make profits. They’ve designed their business model around the concept of ‘happiness’ and have made it clear that the customer IS their business. The idea is driven that by making their employees happy it further drives customer happiness. It’s common sense but we, as consumers, can’t really say that other businesses look after our well being.
But what about pre-Zappos, is there another business that does business to deliver happiness?
Enter hotelier Chip Conley. In the video above he talks about how he designed his business model based on happiness. He talks about how he was inspired, to question the truth that businesses were made to profit, by a vietnamese woman named Vivian whom he met after he bought the motel where she worked as a maid. After noticing that Vivian did her work with joy, he began to question: How can someone find joy in brushing toilets for a living?
Because of her attitude towards service. She felt her job was to make not only guests happy but also her fellow employees. Sound familiar?
Like I mentioned on my previous post:
The universal truth is that no brand really cares about YOU, they care about your buying power. With such a dominant assumption (rule) why is it that businesses don’t choose to break it?
Well as you can see from the above talk, Zappos isn’t a one time phenomenon and business can be driven by ‘happiness’. What’s needed is a change in mindset, that profit is result of two forces:
Happy employees + Happy customers = profitable business
Let me know what you think.
A young mind is a healthy mind
I wrote an article for On Innovation a few weeks ago and it was published yesterday: Finding your crayons: Innovation inspiration from the young. Initially I wanted the the article to be titled ‘A young mind is a healthy mind’ but I guess that didn’t say much, but here then is what I mean in a nutshell:
To be strategic is to be unconventional
The unconventional is the province of the young who are not comfortable with conventions and take great pleasure in flouting them. The danger is that as we age, we need more comfort and predictability and lose our taste for the unorthodox. This is how one of the finest strategist in the history of our world, Napoleon, declined as a strategist: he came to rely more on the size of his army and on its superiority in weapons than on novel strategies and fluid maneuvers. He lost his taste for the spirit of strategy and succumbed to the growing weight of his accumulating years.
You must fight the psychological aging process even more than the physical one, for a mind full of stratagems, tricks, and fluid maneuvers will keep you young. Make a point of breaking the habits you have developed, of acting in a way that is contrary to how you have operated in the past; practice a kind of unconventional warfare on your own mind.
Keep the wheels in your mind churning against the soil of precedent so that it doesn’t settle on the conventional.
Innovation posts of the week: Why creativity is dangerous for business innovation
- Innovation: How Great Bosses Think About It And Do It | Psychology Today via @ralph_ohr
- Where Does Your Strategic Innovation Come From? – Harvard Business Review
- Design Thinking: A useful myth – Core77
- Why creativity is dangerous for business innovation | CustomerThink
- Innovation: 10 lessons to learn from Apple – via @cbsSmartPlanet
- Observational Research as a Key to Innovation via @jhenning
- Six Questions Every Would-Be Innovator Should Ask – BusinessWeek by @Renee_Hopkins and @Gwen_Ishmael
- How Small Changes Can Produce Big Breakthroughs | BNET
- Think and Act Like Your Customers – Scott Anthony – Harvard Business Review
- ‘Why’ Are You Innovating? via @innovate
