The Year in Strategy

“Friends congratulate me after a quarterly-earnings announcement and say, ‘Good job, great quarter,’ and I’ll say, ‘Thank you, but that quarter was baked three years ago.’ I’m working on a quarter that’ll happen in 2021 right now.”                                                                                                                                                Jeff Bezos, CEO, Amazon

In the flurry of end-of-year activity, it’s easy to glide right into the new year without pausing to reflect on the past year and set strategy for the new one and beyond. There are a number of factors you can use to assess this past year. When she sits down with her senior executives to review their performances, Ginni Rometty, CEO of IBM, uses the following three questions:

  1. What lessons did you learn this year?
  2. How were those lessons learned? Were any learned from failure?
  3. What is your learning plan for the coming year?

These questions are instructive because they focus executives’ attention on insights. I define insights as “learnings that lead to new value.” This new value may come in the form of internal enhancements such as the elimination of manual reports or customer-facing benefits like one-step purchasing. Either way, it yanks managers off of the activity treadmill and into the reality of results.

In the past year, I’ve worked with a number of organizations on what I refer to as the “Insight Initiative” which has three components:

  1. Awareness:educating managers at all levels on the importance of insights to the company’s future success and tools they can use to generate those insights.
  2. Accountability:making each leader accountable for harvesting 3-5 insights from her team each quarter.
  3. Action:creating a virtual insight network within the company so that new learnings are coalesced and shared on a regular basis, creating a true learning organization.

From a strategic perspective, I tend to look at the following three factors when assessing the fitness of a company’s strategy:

1. Strategic Direction. Research shows that employees are 40 percent more likely to commit to a leader when that leader demonstrates the ability to set clear strategic direction. Strategic direction means that a leader has involved their team in ongoing strategy conversations that have created their top 3-5 goals, the objectives to track them, and the strategies to deliver on them. The strategic direction is then reflected in a 1-2 page blueprint for the business that is actively communicated and modified by each leader for their respective team.

A tool I created called the StrategyPrint serves this purpose. Page one of the StrategyPrint acts as a real-time repository for strategic insights on the market, customers, competitors and the company. Page two of the StrategyPrint houses the team’s strategic action plan—how they will transform the key business insights into the success parameters that they’ve established. Running a business without a 1-2 page strategic action plan that guides the daily activities of all team members is like driving a car on a winding mountain road at night with the headlights off—exciting and adrenaline-filled right up to the point where it plunges off the cliff and crashes. Does your team have crystal clear strategic direction for the new year or are the headlights off?

2. Competitive Advantage. A study by Harvard Business School found that companies with clearly defined and well-articulated strategies outperformed their competitors by 304 percent in profit margin and 332 percent in sales over a ten-year period. Competitive advantage can be defined as “the ability to deliver superior value based on differentiation rooted in capabilities.” One of the most productive exercises in the strategy workshops I lead with executive leadership teams is called the “Competitor’s Strategic Approach.” It’s where we move beyond the superficial assessment of a competitor’s products, features, and benefits and take a more granular view of seven key areas, including capabilities.

Capabilities consist of a group’s resources and the activities they use to employ them to their advantage. Examples of capabilities include Marvel Comics’ repurposing of content and Nerf’s product development. One of the keys to establishing competitive advantage in a market is understanding how your capabilities stack up versus the competition, and which levers to pull to change the dynamic if necessary. Does your business have competitive advantage or are you bobbing up and down in a sea of mediocrity, and sucking in the salt-water of commodity status?

3. Profitable Growth. When it comes to assessing the success of running a business, perhaps the rapper Future says it best with his lyric, “The jury’s at the bank down in the vault.” In most cases, losing money is a result of one of two causes: 1) short-term investment for a longer-term gain; or 2) bad/non-existent strategy. Research supports the latter. A 25-year study of 750 bankrupt companies found that the #1 cause of bankruptcy—80 percent of the time—was bad strategy. If a business lost money this year, it can blame the economy, politics, climate change or competitive headwinds. But, more than likely, its’ strategy stank.

A number of exercises I lead during strategic thinking workshops involve the methodical discovery of new pockets of value in a company’s customer landscape. One of the most fruitful exercise is the Value Mining Matrix, where we take a deep dive into customers and their current and emerging needs to tap into new pockets of innovation. I describe how to use the Value Mining Matrix, along with examples, in my new strategy graphic novel, StrategyMan vs. The Anti-Strategy Squad(Chapter 5).

As you move into the new year, one of the most powerful questions you can reflect on is, “What will we do differently this year?” Remember, new growth comes from new thinking, and just as important, complacency kills.

 

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