By David J. Abbott
Strategy appears to be everywhere in business, yet the truth is that genuine strategy is rarely to be seen. What most companies have is the corporate equivalent of voodoo. Instead of little dolls and statues with pins in them and reading chicken entrails the voodoo is in the Power Point slides and glossy reports that only serve to eventually gather dust.
What most companies and organisations have is not strategy, but an operational plan, a glorified to do list, a hopeful wish list of what one would like to happen, with solid diagnosis based on hard analysis and dash of creative thinking noticeably sorely absent. All those Power Point slides, glorious vision, mission and value statements based on some “fill in the blanks” approach are often naïve words on paper that have little or no impact.
In recent years, the word strategy has become confused with ambition, leadership and basic operational planning. None of these is strategy. Ask a graduate with their newly minted MBA in “strategic management” what strategy is and they may give you a confused and wrong description equating strategy with planning and goal setting.
“Core work of strategy is always the same: discovering the critical factors in a situation and designing a way of coordinating and focusing actions to deal with those factors” notes Richard Rumelt. Good strategy has what Rumelt calls the kernel which has three elements: 1) the diagnosis, 2) a guiding policy which is the sign posts setting the direction, and 3) coherent action, the nitty gritty details of what is to be done by who, and when.
Just as you don’t need to be a Hollywood movie director to spot a bad film, once you understand the structure and fundamentals of astute strategy you can spot the bad and non existent strategy, the voodoo.
Often simple and obvious
Astute strategy is almost always simple and obvious in retrospect. Think back to how little David beat Goliath on 1030 BC, or how a 23 year old Alexander the Great with 50,000 men beat Darius with his army of roughly 1 million. Both leveraged a strength and spotted the weaknesses of the competition. In September 1997, Apple was two months from bankruptcy. Steve Jobs who co-founded Apple and was let go, essentially fired, came back to revive the fortunes. His first step was cut Apple back to the core to get out of the financial nosedive and then waited to introduce the next big thing that revolutionised the industry, the elegantly simple iPod, followed by the iPad and iPhone, the rest is history. Coming up with that often simple kernel is tough, yet in hindsight often appears obvious. Safaricom became the market leader by focussing on the mass market, being the first to introduce the KSh 50 scratch card and then transformed money transfer with M-Pesa. Equity Bank that dominates the market with roughly half of all bank account holders in Kenya focussed on the “unbanked” that the big banks shunned and did not want to know about.
You can spot the bad, masquerading as strategy by the use of fluff, a lot of gibberish high sounding esoteric ideas used to create the illusion of smart thinking. If you cannot define what the challenge is to the company you cannot create a strategy. Just stating goals is not strategy, these are simple statements of desire, rather than solid plans for overcoming pot holes and the road blocks. Often the objectives are wrong, they don’t address the critical issues or they are just not practical.
Back to basics
Setting strategy begins with diagnosis which includes understanding dynamics of the industry one is in. Useful here to go back to basics and apply Michael Porter’s five forces analysis. Crunch the numbers, where does one make money ? Which product lines and products are most profitable and why ? What do your customers want ? What do your non customers want [given this is the majority of the market] ? What variant of the 80/20 rule applies ? There are all sorts of tools to diagnosis an organisation on the financial, operational and people dimension. Strangely the most common is the SWOT, a technique from the 1960’s that is a bit like asking someone who is severely schizophrenic how they feel. Yes, they will tell you, but how they see the world is likely not a good description of reality that one buy into with any sense of confidence.
In essence: in diagnosis one is attempting to figure out what is going on. Diagnosis links facts into patterns where one has to pay more attention to some issues rather than others. Trick is to know which issues are critical and others less so. Wise diagnosis ideally transforms ones view of a situation, often bringing to bare a radically different perspective. Given the small “p” political nature of organisations it not uncommon that diagnosis may bring up some unpalatable facts that not everyone wants to hear.
Cut through complexity
Art and science of effective diagnosis is to cut through all the complexity and clutter and create simplicity that cuts to the crucial points that have to be addressed. One needs to create a simple model that allows further problem solving and sets out the area where one is going to act in the guiding policy – setting the direction.
So it is back to the drawing board with an effort to create an insightful strategy. One would be lying to say all this is easy, what is easy is create all the fluff and fine but empty words. What is tougher and essential is to question fundamental assumptions and make the distinction between what is a symptom and what is the root problem. You will know your diagnosis is right when it is simple, addresses the key issues, and transforms how you see your industry. Make the distinction between strategy and day to day operations. “Operational effectiveness means you are running the same race faster. But strategy is choosing to run a different race because it is the one you have set yourself up to win” notes Michael Porter.
And, no, all this will not [almost by definition] go how you expect it to. Trick is to keep adjusting, noticing what is happening and polishing the diagnosis and approach. As Napoleon, a great strategist [and not a fan of voodoo] said: “I have never seen a battle go according to plan.”
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