Strategy could be the most over-used word since leadership. How many strategies can one organization have? A lot of people say “strategy” when they really mean a goal or objective. This is a strategy trap.
In this excerpt, they comment on the signals that a company has a worrisome strategy.
There is no perfect strategy—no algorithm that can guarantee sustainable competitive advantage in a given industry or business. But there are signals that a company has a particularly worrisome strategy. Here are six of the most common strategy traps:
The do-it-all strategy: failing to make choices, and making everything a priority. Remember, strategy is choice.
The Don Quixote strategy: attacking competitive “walled cities” or taking on the strongest competitor first, head-to-head. Remember, where to play is your choice. Pick somewhere you can have a chance to win.
The Waterloo strategy: starting wars on multiple fronts with multiple competitors at the same time. No company can do everything well. If you try to do so, you will do everything weakly.
The something-for-everyone strategy: attempting to capture all consumer or channel or geographic or category segments at once. Remember, to create real value, you have to choose to serve some constituents really well and not worry about the others.
The dreams-that-never-come-true strategy: developing high-level aspirations and mission statements that never get translated into concrete where-to-play and how-to-win choices, core capabilities, and management systems. Remember that aspirations are not strategy. Strategy is the answer to all five questions in the choice cascade.
The program-of-the-month strategy: settling for generic industry strategies, in which all competitors are chasing the same customers, geographies, and segments in the same way. The choice cascade and activity system that supports these choices should be distinctive. The more your choices look like those of your competitors, the less likely you will ever win.
These are strategic traps to be aware of as you craft a strategy.
You might be surprised at what A.G. Lafley, Procter & Gamble’s former CEO, can teach you about conversations. This excerpt is from his book (kindle edition).
In any conversation, organizational or otherwise, people tend to overuse one particular rhetorical tool at the expense of all the others. People’s default mode of communication tends to be advocacy— argumentation in favor or their own conclusions and theories, statements about the truth of their own point of view. To create the kind of strategy dialogue we wanted at P&G, people had to shift from that approach to a very different one.
The kind of dialogue we wanted to foster is called assertive inquiry. Built on the work of organizational learning theorist Chris Argyris at Harvard Business School, this approach blends the explicit expression of your own thinking (advocacy) with a sincere exploration of the thinking of others (inquiry). In other words, it means clearly articulating your own ideas and sharing the data and reasoning behind them, while genuinely inquiring into the thoughts and reasoning of your peers.
To do this effectively, individuals need to embrace a particular stance about their role in a discussion. The stance we tried to instill at P& G was a reasonably straightforward but traditionally underused one: “I have a view worth hearing, but I may be missing something.” It sounds simple, but this stance has a dramatic effect on group behavior if everyone in the room holds it. Individuals try to explain their own thinking— because they do have a view worth hearing. So, they advocate as clearly as possible for their own perspective. But because they remain open to the possibility that they may be missing something, two very important things happen. One, they advocate their view as a possibility, not as the single right answer. Two, they listen carefully and ask questions about alternative views. Why? Because, if they might be missing something, the best way to explore that possibility is to understand not what others see, but what they do not.
Contrast this to managers who come into the room with the objective of convincing others they are right. They will advocate their position in the strongest possible terms, seeking to convince others and to win the argument. They will be less inclined to listen, or they will listen with the intent of finding flaws in other arguments. Such a stance is a recipe for discord and impasse.
We wanted to open dialogue and increase understanding through a balance of advocacy and inquiry. This approach includes three key tools: (1) advocating your own position and then inviting responses (e.g., “This is how I see the situation, and why; to what extent do you see it differently?”); (2) paraphrasing what you believe to be the other person’s view and inquiring as to the validity of your understanding (e.g., “It sounds to me like your argument is this; to what extent does that capture your argument accurately?”); and (3) explaining a gap in your understanding of the other person’s views, and asking for more information (e.g., “It sounds like you think this acquisition is a bad idea. I’m not sure I understand how you got there. Could you tell me more?”). These kinds of phrases, which blend advocacy and inquiry, can have a powerful effect on the group dynamic. While it may feel more forceful to advocate, advocacy is actually a weaker move than balancing advocacy and inquiry. Inquiry leads the other person to genuinely reflect and hear your advocacy rather than ignoring it and making their own advocacy in response.
An organization’s core capabilities are those activities that, when performed at the highest level, enable the organization to bring its where-to-play and how-to-win choices to life. They are best understood as operating as a system of reinforcing activities— a concept first articulated by Harvard Business School’s Michael Porter. Porter noted that powerful and sustainable competitive advantage is unlikely to arise from any one capability (e.g., having the best sales force in the industry or the best technology in the industry), but rather from a set of capabilities that both fit with one another (i.e., that don’t conflict with one another) and actually reinforce one another (i.e., that make each other stronger than they would be alone).
For Porter, a company’s “strategic position is contained in a set of tailored activities designed to deliver it.” He calls the visual depiction of this set of activities an activity system. Since “competitive strategy is about being different … [and] means deliberately choosing a different set of activities to deliver unique value,” an activity system must also be distinctive from the activity systems of competitors. In his landmark 1996 article “What Is Strategy?,” Porter illustrated his theory with examples from Southwest Airlines, Progressive Insurance, and The Vanguard Group, articulating the way in which each organization made distinctive choices and tailored an activity system to deliver on those choices. The activity system is a visual representation of the firm’s competitive advantage, capturing on a single page the core capabilities of the firm. Articulating a firm’s core capabilities is a vital step in the strategy process. Identifying the capabilities required to deliver on the where-to-play and how-to-win choices crystallizes the area of focus and investment for the company. It enables a firm to continue to invest in its current capabilities, to build up others, and to reduce the investment in capabilities that are not essential to the strategy.
How Strategy Really Works is a book about strategy, written by A.G. Lafley, former CEO of Procter & Gamble, and Roger Martin, dean of the Rotman School of Management. The book covers the “transformation” of P&G under Lafley and the approach to strategy that informed it.
This approach grew out of the strategy practice at Monitor Company and subsequently became the standard process at P& G. Over the course of our careers, we worked to develop a robust framework around our strategic approach, a way to teach the concepts to others, and a methodology for bringing it to life in an organization. … Ultimately, this is a story about choices, including the choice to create a discipline of strategic thinking and strategic practice within an organization.
What is Strategy?
Really, strategy is about making specific choices to win in the marketplace. According to Mike Porter, author of Competitive Strategy, perhaps the most widely respected book on strategy ever written, a firm creates a sustainable competitive advantage over its rivals by “deliberately choosing a different set of activities to deliver unique value.” Strategy therefore requires making explicit choices— to do some things and not others— and building a business around those choices. In short, strategy is choice. More specifically, strategy is an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.
Too often CEO’s allow the urgent to cloud out the important. “When an organizational bias for action drives doing, often thinking falls by the wayside.”
Rather than develop strategies, many leaders tend to approach strategy in one of the following ineffective ways:
they define strategy as a vision;
they define strategy as a plan;
they deny that long-term strategy is possible;
they define strategy as the optimization of the status quo; and
they define strategy as following best practices.
“These ineffective approaches,” Lafley and Martin argue, “are driven by a misconception of what strategy really is and a reluctance to make truly hard choices.”
While everyone wants to keep options open as long as possible, only making and acting on choices allow you “to win.” Great organization choose to win — tough choices force your hand but, if you let them, they also focus your organization.
When a company sets out to participate, rather than win, it will inevitably fail to make the tough choices and the significant investments that would make winning even a remote possibility.
In our terms, a strategy is a coordinated and integrated set of five choices: a winning aspiration, where to play, how to win, core capabilities, and management systems. … The five choices make up the strategic choice cascade, the foundation of our strategy work and the core of this book.
Specifically, strategy is the answer to these five interrelated questions:
What is your winning aspiration? The purpose of your enterprise, its motivating aspiration.
Where will you play? A playing field where you can achieve that aspiration.
How will you win? The way you will win on the chosen playing field.
What capabilities must be in place? The set and configuration of capabilities required to win in the chosen way.
What management systems are required? The systems and measures that enable the capabilities and support the choices.
As you can imagine, in small organizations a single choice cascade might exist, whereas in large organizations multiple “levels of choices and interconnected cascades.” Nested cascades means that choice happens at almost every level in the organization.
Aspirations are statements about the ideal future. At a later stage in the process, a company ties to those aspirations some specific benchmarks that measure progress toward them. … Aspirations can be refined and revised over time. However, aspirations shouldn’t change day to day; they exist to consistently align activities within the firm, so should be designed to last for some time.
Where to Play
The winning aspiration broadly defines the scope of the firm’s activities; where to play and how to win define the specific activities of the organization— what the firm will do, and where and how it will do this, to achieve its aspirations.
Where to play represents the set of choices that narrow the competitive field. The questions to be asked focus on where the company will compete— in which markets, with which customers and consumers, in which channels, in which product categories, and at which vertical stage or stages of the industry in question.
How to Win
Where to play selects the playing field; how to win defines the choices for winning on that field. It is the recipe for success in the chosen segments, categories, channels, geographies, and so on. The how-to-win choice is intimately tied to the where-to-play choice. Remember, it is not how to win generally, but how to win within the chosen where-to-play domains.
… To determine how to win, an organization must decide what will enable it to create unique value and sustainably deliver that value to customers in a way that is distinct from the firm’s competitors. Michael Porter called it competitive advantage— the specific way a firm utilizes its advantages to create superior value for a consumer or a customer and in turn, superior returns for the firm.
Great strategies allow a certain fit between the where-to-play and how-to-win choices that make the company stronger.
Two questions flow from and support the heart of strategy: (1) what capabilities must be in place to win, and (2) what management systems are required to support the strategic choices?
The final strategic choice in the cascade focuses on management systems. These are the systems that foster, support, and measure the strategy. To be truly effective, they must be purposefully designed to support the choices and capabilities.
[S]trategy is an iterative process in which all of the moving parts influence one another and must be taken into account together.
The heart of strategy, according to Lafley and Martin, is deciding where to play and determining how you will win there.
What business are you in?
Most companies, if you ask them what business they’re in, will tell you what their product line is or will detail their service offering. Many handheld phone manufacturers, for example, would say they are in the business of making smartphones. They would not likely say that they are in the business of connecting people and enabling communication any place, any time. But that is the business they are actually in— and a smartphone is just one way to accomplish that.