Rudyard Kipling taught Mark Procter all he knows about strategic thinking
What happens if an organization doesn’t think strategically? The answer can be found in the many organizations that kept doing what they always did while the world overtook them – Kodak, Woolworths, Blockbuster, Nokia and BlackBerry, to name just a few. Strategic thinking means taking the opportunity to distance yourself from the detail, do some thinking and future-proof your organization to prosper in a rapidly changing world. Amazon, Ikea and Google are organizations that have been successful in thinking strategically and following through with implementation.
Six honest serving men
US leadership scholar Warren Bennis once said: “Too many bosses are driven and driving, but going nowhere.”
US businessman Steven Covey said: “Begin with the end in mind.”
So, the first step is to work out where you are going. Successful organizations understand how they will get from where they are now to where they want to be. How they reach this understanding is the domain of strategic thinking. So let’s look at this in more detail with the help of author Rudyard Kipling…
I keep six honest serving men,
They taught me all I knew,
Their names are What and Why and When,
And How and Where and Who.
And that’s all you need. These are big questions and the result of asking them should be a fully integrated strategic plan. The best strategic results will come from a senior management team taking time to undertake a proper internal and external analysis and vigorously debate the strategic options available.
Let’s use these questions, but tackle them in a different order that moves us from big picture to detail, and from the conceptual to practical implementation – a more logical order for strategic thinking.
Why are we playing?
The best organizations exist to do more than make money; they have a real sense of purpose that wins the hearts and minds of employees and customers alike. In many organizations, this would be called the mission statement, but, so often, a mission statement becomes a piece of paper on the wall that everyone ignores. Real purpose will be on the tip of everyone’s tongue and be obvious to every customer. An apocryphal story is a stranger visiting the toilets in Nasa in the late 1960s and asking the cleaner what he/she was doing. The cleaner replied: “Helping to put a man on the moon”. This showed that everyone was in touch with the organization’s purpose. In today’s world, everyone knows that Apple is about leadership of innovation and that Amazon is about being able to shop online better, faster and cheaper.
Where are we playing?
Where we are playing would include:
- Geographic areas, e.g. UK, Europe, China
- Market segments, e.g. demographic, luxury, niche
- Product categories (particularly helpful when products are being phased out)
- Value creation stages e.g. designing, developing, making, distributing, wholesale, retailing, after sales service, etc
An organization must be clear about where it is competing, and with what emphasis. It’s also important to say what the organization is not doing, to prevent effort being spent on legacy products and services. The focus should be on where it can win and to stop doing things where it can’t win.
How will we win?
To make a sustainable profit, an organization must be differentiated from its competitors in some way. Only one company in a market can be the low-price cost leader; others need to offer something different. It is this differentiator that allows margin to be made. Possible differentiators include:
- Excellent service
- Top product quality
- Product reliability
- Tailoring to specific customer needs
The other side to winning (making good margins) is the cost side. For example, Ikea has a lower cost of manufacture than other retailers because it specifies low-cost furniture designs to manufacturers it has close partnerships with. A differentiator allows a premium price to be charged. Combine that with lower costs and you have a profitable strategy.
Who do we need?
‘Who’ is about getting the right people. As a strategy emerges, it often becomes clear that the organization does not have all the capabilities it needs. New capability can be grown internally or recruited from outside. It can also be found through partnerships, joint ventures or mergers and acquisitions. Another way of finding capability is by creating a template for success and then franchising it. McDonald’s acquired the capability to staff many restaurants worldwide through franchising and, as a result, created more millionaires worldwide than any other business. Today, it’s almost impossible to do anything without some sort of IT capability. Developing new ways of doing things through IT can be a strategic advantage in itself. Uber has grown rapidly worldwide through developing a sophisticated smartphone app for connecting passengers with taxi drivers that is both convenient and cost-effective.
When will things happen?
A good strategy can succeed or fail depending upon how it is implemented. Staging a strategy should be part of the strategy itself. A classic example of this staging is Amazon, which took its infrastructure worldwide with books and then back-filled with a wider range of products. Ikea opened a first branch in a number of countries and then, once the brand had been established, opened more stores in each country to grow.
What will we monitor and measure?
The final question recognizes that it is important to measure the implementation of a strategy. The most effective way to do this is to generate Key Performance Indicators (KPIs). These should be the key drivers of the success of the strategy. For example, in a sales environment, a KPI might be ‘number of leads generated’ and/or ‘percentage of leads converted into sales’ or ‘average size of sale’. The Balanced Business Scorecard (BBS) aims to have more than just financial KPIs to measure, for example, customer experience, operational effectiveness and the human resource of the organization. The aim is to find KPIs that measure the success of the strategy across a balanced business. More important measures are likely to be customer- and market-related, especially early in the implementation of a new strategy where a new product or service is involved.
Never start with why
So, these six honest serving men are key questions that any organization can answer to get strategic clarity. Never start with ‘why?’ first, as it’s a difficult question and the answer will emerge if you follow the sequence suggested above. Take the questions seriously and answer each in depth, challenging each other at every step. Remember that, with any strategy, you are trying to build on the core competency of the organization – something that is unique and hard to copy and often embedded in the culture. While building on this core, don’t project past ideas into the future. Think creatively and spend time looking for the ‘difference that will make the difference’ – ideas often found at the periphery of your industry or even in different sectors.
And finally, less is more. A good strategy should be easy to understand and make complete sense. So many strategies are written by non-board members and are huge documents that end up gathering dust on a shelf. In my experience, the best strategies can be captured on a few PowerPoint slides. This is essential for its effective communication within the organization anyway. The output should be a living, breathing, dynamic document that is reviewed regularly.
— Mark Procter is a member of Duke Corporate Education’s Global Educator Network. As well as teaching strategy and leadership, he works with the senior management teams of businesses to develop their strategy
— Illustration by Adam Quest