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The Seven Sins of Strategy
by Richard Horwath There comes a time in both our professional and personal lives when we must make a stand. Through all the swirling complexity, change and challenges that we face, we must at some point assert ourselves and set our bar of standards. From a personal perspective, it may mean clearly identifying and committing oneself to certain values and using those values to guide our daily conduct. From a professional perspective, it may mean running our business with a controlled aggression that leverages the right opportunities by accepting calculated risks. It means refusing to be engulfed in the comfortable molten lava of mediocrity that flows through many lives and organizations. It means accepting the accountability and responsibility that go hand-in-hand with excellence. In business, it means working every day to generate insights, using those insights to set direction and then fiercely executing strategy with both mental agility and perseverance. Seven Sins of Strategy In our businesses, we can pursue this journey of excellence by staying alert to the seven sins of strategy and assiduously thinking on a daily basis. The seven sins of strategy that we must constantly be aware of are as follows:
Sin #1: Substituting Planning for Thinking Since thinking is hard work, it’s not uncommon for managers to fall back on strategic planning in an attempt to shape the direction of their business. However, this ignores a crucial distinction—strategic thinking involves the generation of insights—strategic planning involves the application of the insights into an action plan. Therefore, relying on strategic planning without strategic thinking is tantamount to an organizational lobotomy because the essential thinking function has been excised. This results in the all-too-familiar tactical plans that mimic the past while a dynamic marketplace embraces new context. Because strategic planning efforts have often times excluded the prerequisite strategic thinking, they routinely turn out tired old plans that change little but the date on the cover. This leads to marginally incremental improvement at best and stifles the organization’s potential. Action: Provide managers with the knowledge base clearly distinguishing strategic thinking from planning and provide them with tools to facilitate that thinking. Sin #2: Lacking the Discipline to Say “No” Strategy involves the intelligent allocation of limited resources. “Intelligent allocation” requires us to make trade-offs and focus those resources. Too often, because trade-offs involve risk, we take cover in the status quo and don’t make any trade-offs at all. While not making trade-offs and not saying “no” to areas of resource allocation may limit short-term vulnerability, it is often a sure sign of long-term weakness. Spreading resources evenly across the business is a challenge in most large organizations as they have the deep pockets to do so comfortably. However, a firm’s initial trade-offs can play a very formative role, as Meg Whitman, CEO of eBay describes: The key decisions can all be characterized by focus, focus, focus. Back in the beginning, we were faced with a decision on what categories we wanted to focus on. We decided to really be a collectibles company. The heaviest users were collectors, the heaviest sellers were collectors. It was a very explicit strategic decision, because part of the group wanted to go into consumer electronics and all of these other categories we are in today. And we answered, ‘We have only a limited number of resources. What is the best focus that we can have?” Action: Identify your resources (capital, talent and time) and begin detailing how they are allocated, including your time. Any surprises? How is this allocation different from past months/years? Does it reflect the changing market trends and customer needs? Writing down the significant resource allocations (including what you spend your time on) is an objective way to begin measuring whether or not they are returning the requisite value for their investment. Sin #3: Not Preparing to Be a Strategist Before you can develop great strategy, you first need to develop great strategists. While most organizations provide developmental programs on leadership, communication skills, product marketing, etc., very few organizations have provided their managers with a roadmap to enhancing their strategic thinking capabilities. As successful organizations continue to grow, the need to decentralize strategic decision making becomes more important in order to leverage market dynamics and evolving customer needs in a timely manner. Each member of an organization contributes to strategy at some level. Strategy is the intelligent allocation of limited resources through a unique system of activities to outperform the competition. Since every employee has responsibility over their individual and possibly group resources (capital, talent and time), the need to optimize strategic thinking is critical. Improved strategic thinking means that managers will invest more resources in the right activities (key initiatives driving corporate success) and less resources in the wrong activities (urgent but unimportant initiatives), leading in theory and practice to greater revenue, profitability and productivity. Action: Provide managers with periodic training and development programs on strategy and strategic thinking skills sets that are tailored to their level of responsibility within the organization. Just as professional baseball players refresh their fundamental skills each spring training, managers should also refresh their business planning skills on an annual basis. Sin #4: Employing Bumper Car Strategy Not investing the time in a sound strategy development process results in bumper car strategy—the organization changing direction each time it’s bumped into by a marketplace issue (competitor activity, customer complaint, short-term fad, etc.) Anthony Zuiker, Executive Producer, CSI, CSI: Miami and CSI: New York—all three of which are among the top 10 shows on TV, said: The thing I’m most proud of is that we didn’t react to the competition. Some of the other crime shows have added labs and are doing more forensics, and there have been all kinds of knock-offs watering down the market, but we’ve held true. You need to evolve, but you don’t need to evolve defensively. That’s a classic mistake. Action: Invest in a strategy development process that is simple, concise and effective. Set aside one day per quarter for a Strategy Tune-up, where the team assesses the key business issues and assumptions to gauge progress. Sin #5: Allowing Budget to Dictate Strategy One of the most entrenched practices in organizations of every size is to allow the budget to dictate the strategy. Most managers will readily admit that it’s a faulty premise but often they are unwilling to try and turn this “aircraft carrier” of a process. While we all must operate in the real-world of finance, artificially constricting the creative strategy development process at the outset with a page of numbers can inadvertently close off avenues that might fundamentally enhance the business in ways that were not previously explored. Action: Leave the budget numbers in the folder during the strategy development process, especially during the discovery and strategic thinking phases. Once your team has had the opportunity to comprehensively think through the business and generate strategic insights, bring the budget numbers in during the strategic planning phase to help prioritize the initiatives. Sin #6: Not Linking the Strategic Plan to Action One of the great ironies is that the organizations that do invest their time in strategy development often don’t have an effective way of then using that plan on a daily basis to drive the activities of their teams. They’ve invested time, energy and money into thinking that sets strong strategic direction, only to have that direction evaporate over the course of the year due to the “out-of- sight, out-of-mind” phenomenon. Action: Transform your traditional narrative strategic plan into a StrategyPrint—a concise, two-page blueprint for your business. Page one contains the insights your team has generated regarding the market, customers, competitors and the organization itself. Page two contains the action plan, aligning the goals, objectives, strategies, tactics and metrics. The simplicity and brevity of a tool such as the StrategyPrint allows managers to use it and easily update it on a daily basis, making it a truly functional, real-time strategic plan. Sin #7: Leaving Resource Allocation Assumptions Unchallenged At the heart of strategy is resource allocation, so at the heart of a strategic manager’s work is their ability to effectively allocate their limited resources. When a manager has had success, it is common to continue to allocate resources in the same manner that led to that success. However, as the context of the business changes in the form of market trends, evolving customer needs, new competitor offerings, etc., the resource allocation formula that led to that success may become antiquated. Action: Take time during the quarterly Strategy Tune-up sessions to evaluate the assumptions on which resource allocation decisions have been made. Be on guard for the seven sins of strategy, for repentance alone won’t guarantee business salvation. Salvation will come to those with a dedication to strategic thinking excellence.¨ Rich Horwath helps managers develop the skills and expertise to create great strategy and fulfill their leadership potential. He is the president of the Strategic Thinking Institute, a former Chief Strategy Officer and professor of strategy at the Lake Forest Graduate School of Management. Rich is the author of Sculpting Air: The Executive’s Guide to Shaping Strategy and Storm Rider: Becoming a Strategic Thinker. Copyright Rich Horwath. All Rights Reserved. END | |||||||||
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