Keeping Strategy Fresh

The last 100 years of business have brought the world together in new and exciting ways. Trade and market expansion has allowed integrations the world had previously never imagined. Groundbreaking technological innovations have completely transformed industries and our daily lives. All my businesses have embraced change as a capability and driven their core business products into efficient, wealth-generating machines.

Anyone who has worked in strategy knows it’s like living life in an earthquake. You have no idea what portion of the ground will fall out from under you, and you have no idea what part of the roof is going to fall on your head. Refining yesterday's work is like trying to polish a stone during an earthquake. Sure, that one stone might get shiny, but it won't help you dodge the cracks in the pavement. When we zero in on fine-tuning our current game plan, we blindfold ourselves to fresh opportunities brewing in the chaos.

In 2013, Apple could have bought Tesla, Microsoft (and Yahoo!) had an opportunity to buy Google, and Blockbuster could have bought Netflix. These are classic examples of corporate governance boards and strategy executives who were so focused on a stale strategy that they failed to see their own horizons.

If, for one, we remember that strategy is more art than science, we remember that there are no guarantees. Part of the reason we’re all a bit nearsighted about new strategies is that we mix them up with plans. A plan is like that optimistic friend who says, “Follow this recipe exactly, and your soufflé will rise.” Spoiler alert: it probably won’t. But a strategy? That’s more like a daring adventure: “Hey, this could be a total flop.” It’s not just about a destination; it’s about crafting the right conditions for the most compelling options.

Art, done well, is hard—really hard. And because strategy is more art, it’s easy to let it go stale and turn it into a management exercise.

One of my favorite people to read is Seth Godin, a marketing guru known for his innovative ideas and transformative influence.

He graduated from Tufts University with a degree in computer science and philosophy and an MBA from Stanford Graduate School of Business. Godin's career began in the software and book packaging industry, where he founded Seth Godin Productions.

He later co-founded Yoyodyne, an internet-based direct marketing company that pioneered the concept of permission marketing idea (a crazy one at the time) that emphasized gaining consumer consent before marketing to them and has had a lasting impact on digital marketing strategies.

In his latest work on the zany world of organizational thinking, he writes that it’s too easy to fall into the trap of “strategy myopia” — that delightful fog, where urgent tasks and safe bets reign supreme, especially during chaotic times. But fear not- successful leaders wield five quirky principles that look more like features instead of bugs. What follows in this piece is my critique and corrections on his exceptional work.

In an October issue of HBR, Seth offered four easy steps to avoiding myopic approaches. First, dodge “false proxies” like you dodge awkward small talk. Why? Because new projects often move slower than a tortoise on a Sunday stroll. Instead work on discovering interesting questions. Next, channel your inner customer whisperer—figure out what folks need instead of pushing what’s already rolling off the assembly line. Third, think as carefully about the team as you do your strategy. Do not compromise on strategy or the team. Fourth, find a very critical baby step toward solving those big problems. Lastly, let the manager sit on the bench for a bit.

IT ALL STARTS WITH INTERESTING QUESTIONS

What turns a project or a new market into a full-blown industry? The right blend of convenience and efficiency. Convenience is like that friend who always brings the right snacks to a party, showing up just in time with exactly what you didn’t know you needed. On the other hand, efficiency is finding a way to get the chips and dip without breaking the bank—or your spirit.

Now, here’s the kicker: launching something new is typically about as efficient as trying to herd cats. Take Amazon's early days—every book they shipped was like tossing money into a black hole. They were the world's most ambitious bookworms, planting seeds for an efficient industry while running a profit-leakage circus.

Leaders' design questions set them apart. Questions like “Where are we now?” “What are our core strengths?” and “Where do we want to be?” are great places to start.

Deceptively simple but critical to understanding the difference between leading through strategic change and managing.

Roger Martin, one of the most famous authors and leaders of business strategy in the last 50 years, would tell us that strategy, after all, is a series of interrelated design questions organized in such a way that, when answered, compels the desired customer behavior.

This is not to say that we can’t use metrics. Leaders love their concrete metrics—like toddlers with crayons—because they’re easy to splash everywhere. But doing real strategy? Oh, it often starts inconvenient and clunky, like trying to assemble IKEA furniture without the manual. However, we should not design strategies around metrics.

In the 1920s, buying a car in America seemed like a terrible gamble and an awful investment, mostly because there was no infrastructure to support them. Leaders must remember that keeping an eye on the customer's most demanding needs will lead to optimization for the future.

CHOOSE YOUR CUSTOMER WISELY

Research shows that firms that align their organizational design with a distinct “affinity” group compared to firms that organize on some other organizing preference. The customer-centric structure allows companies to organize based on their relationship to their primary reason for existence.

Research conducted by Deloitte and Touche has shown that customer-centric companies are 60% more profitable than those that do not prioritize customer focus.

Companies focusing on providing a positive customer experience often have higher customer loyalty. Satisfied customers are more likely to return, increasing sales over time. Seems almost too easy to miss but, a minor increase in customer retention rates can significantly boost profits.

Customers who feel connected to a brand spend more over their lifetime. Their lifetime value is substantially higher, which contributes to greater profitability.

Many customers are willing to pay a premium for a great customer experience. This willingness allows companies to charge higher prices without losing customers, increasing profit margins.

Customer-centric companies often use feedback to improve products and services, leading to better market fit and higher sales. They also tend to have lower service costs as they proactively address common issues based on feedback.

One of my favorite Seth Godin quotes…choose your customer, choose your future.

CRAFT YOUR TEAM- CAREFULLY

The most essential part of any organization is the people. Having the right people in the room is crucial for developing an effective strategy because it ensures that diverse perspectives and expertise are considered. Including individuals who understand the organization's goals and can think holistically about business decisions is essential for creating a robust strategy.

Today, every company will sing you a song about talent management. They often look at it from a hiring perspective because it solves emergent needs. Still, they often fail to realize that talent management is the key to long-term succession planning and innovation. Companies ensure business continuity and minimize disruptions by identifying and developing high-potential employees for future leadership roles. Encouraging continuous learning and development fosters an environment where employees can innovate and adapt to changing business needs, keeping the company competitive in a dynamic market.

These individuals should be capable of challenging assumptions, providing innovative insights, and aligning strategic plans with the company's long-term vision. When necessary, businesses can ensure that their strategies are well-rounded and informed by various insights by involving people from different levels and areas of the organization, as well as external stakeholders.

A systematic approach to talent management ensures organizational-wide integration and a consistent management approach. This integration leads to better communication within the organization and dissolves silos, allowing for faster and more efficient responses to customer needs.

Finally, engaged employees tend to provide better customer service, as they are more committed to their roles and motivated to meet customer needs effectively. This commitment helps build strong, positive customer relationships, leading to higher satisfaction rates.

BABY STEPS

I know you want to launch new strategic initiatives that will transform your company. It’s shiny and perfect—like a tech-savvy unicorn wearing a tiara—but remember, even the most majestic unicorn started as a humble, slightly awkward pony. Every big company and change management initiative had its wobbly baby steps.

Godin offers the milk substitute industry as an example of a baby step. If you’re as old as I am, you can remember these early milk substitutes. They tasted about as appetizing as a pair of old sneakers. But hey, they had a mission—and I’m sure they had some metrics. They were food for people seeking alternative milk products, not haute cuisine aficionados.

Fast forward twenty years, and what do we have? Oat milk and almond milk are racing through grocery aisles like they just won the charm lottery. They're growing at double-digit rates, leaving traditional milk glancing sheepishly over its shoulder. The lesson here is to start small.

During his time on Wall Street doing financial research, Jeff Bezos discovered two fascinating data points. First, internet usage was growing at 2300% each year. Second, he made a list of 20 different products to see what he should sell, and he discovered that at any given time, there were over 200,000 books that could be sold. The next best product category was CDs, which was a distant second at roughly 10,000. Based on this tiny, baby discovery step, Bezos started Cadabra, Inc. (the original name of Amazon.com), based on the simple idea of reselling products, of which there are more than any other product category.

I will refrain from writing something cliché here, but we know how Amazon fared after examining a couple of critical data points and taking some very small steps when trying something new.

DON'T BE AFRAID TO TAKE A HIT ON EFFICIENCY

Godin lists this one as his number one in his work but writes it confusingly as “refuse false proxies.” The real reason I decided to do this piece is centered on this tactical error. I don’t doubt that Godin knows his audience may know his audience, but I find the traditional MBA crowd often oversells their tactics a bit. Something Martin appears to have migrated away from a bit better than his colleague Michael Porter.

Doing something new is not efficient. Doing design work, pre- and prototyping, and trying and failing is inefficient. It will cause your superstars to look like duds. Your top managers may appear incompetent, and you may question why you assembled specific teams.

I’ve worked in aviation for 26 years. It is a compliance-based industry, but innovation is not. The reasons for this are manifold, but to explain briefly, aviation engineers will not test a prototype part on a passenger aircraft. For safety reasons, that part must endure a rigorous test and evaluation process before it can be flown on a plane. On the other hand, burdensome processes stifle innovation.

Even flexible, ambidextrous strategies, those that allow high degrees of both innovation and efficiency, can allow firms to optimize toward both. However, they will still suffer a performance reduction in efficiency. Innovation always has a cost—and it is never zero.

Balancing efficiency and innovation is like trying to ride a unicycle while juggling flaming torches—lots of folks give it a go, but only a few emerge unscathed. Many companies are caught in an endless tug-of-war between saving pennies and dreaming up the next big thing. It's like watching two siblings fight over the last slice of pizza: one wants to eat it slowly to savor every bite, while the other just wants to devour it and leave the crust behind.

Management gurus, those delightful folks who like to toss around terms like “synergy” and “holistic approach,” often warn that trying to chase both efficiency and innovation can lead to mediocre results. It’s akin to deciding to master both interpretive dance and calculus simultaneously- good luck with that. Yet, in today’s chaotic marketplace, where competition is as fierce as a catfight over a laser beam, companies might need to reconsider this daring dual act if they want to stick around for the long haul.

In the end...reliable insights on how to pull off this balancing act are rare- as rare as finding Bigfoot sipping a latte. Perhaps that’s why so many companies falter, looking like deer in headlights when faced with the twin challenges. This is why the ‘bigs’ prefer to let startups do the innovative work, and they just map out a strategy to acquire them in mergers and acquisitions later down the road.

Over the last 20 years, I have enjoyed Seth Godin’s work. His influence extends beyond his entrepreneurial ventures. The guy is a prolific author with over 20 best-sellers. Some of my favorites are Purple Cow, Tribes, and Linchpin, which explore innovation, leadership, and change. His writing often challenges conventional marketing wisdom and encourages businesses to focus on creating remarkable products and services that naturally generate a ‘buzz.’ He’s a natural thought leader.

Yet, read carefully, his latest work is more of a hat-tip to the firm's resource-based theory- a stale and conventional view attempting to optimize strategy toward revenue. Just smoothing out the turbulence of strategy for stability and profitability proves the point. If a firm’s CEO and board are doing more than referencing metrics as indicators, they are not leaders but managers. If they aren’t comfortable with design thinking in their meetings and discussions, they aren’t strategists. Although I appreciate Godin’s call that strategies are not plans, organizing a “5 steps” might come off as a planning strategy.

Doing strategy work is intellectually brutal. It requires navigating complex and often uncertain environments. Leaders must consider numerous variables, including market trends, competitive dynamics, and internal capabilities. This complexity makes it challenging to predict outcomes and requires a deep understanding of the external environment and the organization’s internal strengths and weaknesses.

Strategy requires making tough choices and trade-offs. As Michael Porter has said, effective strategy involves deciding what not to do. This means prioritizing specific goals over others, which can be difficult when different stakeholders have competing interests. Balancing short-term demands with long-term objectives adds another layer of difficulty.

Until it emerges in a way that can be communicated in managerial terms, it will always be viewed as ethereal—more smoke than substance. As Godin points out, this is likely the reason most leaders spend less than one day a month working on or even discussing an organization’s strategy.

But what is useful in my very light critique of his work is this: strategy is not for the ill-prepared. It requires a repeatable (and always fresh), defensible position around a multi-disciplined, cross-sectional approach to an organization’s values based on its customers' needs. And if you think doing this work is simple, you don’t understand it well enough.