SWITCHING STRATEGIES

We live in a business world taken over by ironies and oxymoron, a world of walking contradictions in which the line between conventional and unconventional wisdom is done with disposable pens filled with invisible ink. The rules that once seemed so useful now ebb and flow like a hyperactive harvest moon. With the advent of e-commerce, Internet access, and cell phones, today’s economy evolves and changes before our eyes, and we dare not blink for fear we will miss something.

In the face of such exponential change we have witnessed a commensurate rise in the importance of strategy for the growth and profitability of any enterprise. The rise of the importance of strategy did not come easily, since conventional wisdom is replete with axioms that lobby for the status quo. If it ain’t broke, don’t fix it. Never change horses in mid-stream. The inherent problem with these supposedly tried-and-true concepts is that they have indeed been tried, but they are often no longer true.

Would you want to fly with an airline with the motto, “If it ain’t broke, don’t fix it?” Would you want to be on an aging horse in a rising stream of rapids and white water?  The real challenge today is to develop strategies that are both sustainable and flexible, implementable, yet nimble. The growing tendency of companies to change their strategic plan, core products, and organizational culture with alacrity typically leaves stockholders bewildered, customers overwhelmed, and employees confused.

 Further, the challenge of developing good strategy is exacerbated by the growing tendency of companies worldwide to change direction far too often, thereby confusing flexibility with sloppy thinking and the absence of due diligence.  Against this backdrop, let’s look then at three practical topics affecting strategy formation and change in more detail. First, what are the assumptions that underlie modern strategic thinking? Second, how do you know when it’s time to change strategy? And third, what is “good” strategy?

The “Strategic Givens”: Assumptions of Modern Strategy

It is helpful to identify and understand the broad assumptions that underlie your strategy, to know what the basic cornerstones of your paradigm are. Here are five indicative assumptions for the modern business world:

  1. Today the rate of change is exponential, not incremental. This is a crucial starting point. Things are changing at a fast pace. This makes it difficult to use conventional modes of thought, measurement, or planning. Often, things don’t build up or add up, they just explode to a new level.
  1. Things will never “get back to normal” – this is normal! The so-called glory days of the past are gone. And they won’t be back. So the new Thoughtware says, “Get over it! Get used to it! This is the normal from now.”
  1. Plan as we may, the future has plans of its own. Because the exponential change is here to stay, we have to look down the road with 20/30 version, focusing on the next 20 minutes and the next 20 years simultaneously. The bad news is that the number of senior executives and key managers who possess 20/20 vision is minimal. The good news is that this is a learnable skill that a few training programs can teach you.
  1. Organizations that learn how to learn, ask the right questions at the right time, and find out how to find the answers that will thrive in a global economy. Astute organizational strategies know that an organization’s verbs will supplant its nouns, that is, diverse methods and responsive processes will be more powerful than tried-and-true facts and off-the-shelf systems. And asking the right questions at the right time will determine the most sustainable and viable answers.
  1. The productive organizations that will excel will be ones that value flexibility, diversity, integrity, cooperation, and innovation. It’s no longer sufficient to add value to products, we have to add values to both the product and the process. Customers, creditors, consumers, and our conscience now require it.

When To Change Good Strategy: To Dismount Or To Ride On?

The questions listed below help place parameters around good strategy (good strategy is strategy that is implementable and drives success, growth, and customer loyalty). But remember that these are not seven easy questions, nor their answers cast in stone. I advise managers to ask these questions – all of them – at least twice a year. Even if the answers haven’t changed significantly, at a minimum you’ll be thinking on the right level with some regularity. Then once you have the perspective that this combination of answers offers you, you are ready to act and make hard decisions, because you’ll know why you are doing what you are doing, and your decisions will be based on sound strategic thinking. Remember too: strategy is not tactics, its directionality.

Conversely, by regularly revisiting these seven questions, you’ll have additional, crucial information to detect the early warning signs of good strategy that has taken a turn for the worse. If, for example, two or more of your strategic givens and/or answers to these seven questions change significantly, it’s often an early indicator that shifts in strategy is appropriate.  

How to Make It Happen

There is strategy and then there is good strategy, and understanding between the two rests on the ability to answer seven fundamental questions:

  1. What business are you in? Many companies are in more than one business and/or offer a variety of products and/or services without knowing it. Others have a single focus or a few well-conceived products or services. It’s important to understand the business you are in, the competition, and the most innovative practices in your industry. What is the “big deal” that shapes your business? Sam Walton started Wal-Mart to bring popular brands to smaller communities at low prices.
  1. What other businesses are you in? Many companies don’t see their business through a wide enough lens. They fail to capitalize on other opportunities that can accrue from little more than a change in thinking.  For example, trucking companies are in the transportation business; banks are in transaction management business; soccer teams are also in the entertainment business. If Toyota and BMW make more profit from their automobile financing products than their cars, are they not a financial services also?
  1. What are your core competencies? Knowing the core competency of your company will give you an incredible competitive advantage. Competencies are not mere strengths. Every company has its strengths, but only very few strengths are true competencies that are going to give you an edge over the competition, market differentiators that separate you from others.  But core competencies are always very subtle; a billion dollar computer-connector manufacturing company took much of its sky-rocketing growth from an unnoticed core competency – the ability to acquire companies and hold on to their key employees and customers. Acquisition and integration were their key competencies. 
  1. What are your core values? Isolating and identifying core values is crucial. If your core value is short-term profitability, you need to organize your company accordingly. If you value long-term relationships with customers, this requires a different strategy, compensation package, and organizational chart.  What you value should inform your strategy through and through.
  1. Which competitor will be your next partner? Necessity is the mother of odd couplings. It may be to your advantage to form a strategic partnership with a competitor on a specific product, R&D, or other aspects of your business in order to remain a player in your field. The world has changed, and a past competitor can be a future ally. Good strategy is open to new realignments, even with a current competitor. Further, when you research a competitor as a potential partner, you will see that company’s strengths and weaknesses in a new and strategically important light. 
  1. Are your short-term goals and long-term strategies aligned? Public companies tend to think from quarter to quarter in order to please financial analysts and stockbrokers. The pressures of the next quarter too often conflict with the opportunities of the next few years. Companies need to align short-term results with long-term profitability, short-term profits with long-term customer satisfaction.
  1. Do your answers to the foregoing questions complement (or negate) one another? Too often a company will provide a viable answer to one or two of these questions. The real advantage, however, will go to the company that continuously examines itself in the context of several of these questions. For example, are core competencies, goals, values working together to meet both long-and-short-term goals?

Conclusion

Strategy is increasingly becoming important to business success. Good strategy is the result of knowing the assumptions of your business model; sound investigation; open, curious, and broad thinking; and asking the right questions – often. Though strategy is often changed precipitously, in today’s world it is far better to be useful than to be correct. Old ways die hard, so strategy under constant scrutiny is best understood as an agent of change.

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