Before addressing the Six Questions of Strategic Thinking it is first important to ask “Why is Strategic Thinking so valuable?”
One way to answer this is to ask what happens if an organisation doesn’t think strategically? The answer can be found in the many organisations that kept doing what they always did and the world overtook them; Kodak, Woolworths, Blockbuster Video, Nokia and Blackberry to name just a few. Strategic Thinking is taking the opportunity to get up in a helicopter, do some ‘on the business’ thinking, and future proof your organisation to survive and prosper in a rapidly changing world. Amazon, Ikea and Google are organisations that have done this; they have been successful in thinking strategically and following through with implementation.
Warren Bennis said
“Too many bosses are driven and driving but going nowhere”
Steven Covey said
“Begin with the end in mind”
Sailors used to navigate by the stars and the North Star was their guiding light. Whilst technology has changed over the years, the concept hasn’t. So the first step is to work out where it is that you are going. Successful organisations 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 who famously named the ‘Six Honest Serving Men’.
These are big questions, requiring considerable discussion for leaders of organisations. The result of asking these questions should be a fully integrated strategic plan. It is tempting to treat the questions as a template and answer them quickly. However, the best strategic results will come from a senior management team taking ‘time out’ from the day to day ‘business as usual’ activity, to do a proper internal and external analysis and vigorously debate the strategic options available.
In this article, these questions are tackled in a different order to the poem; an order that moves from big picture to detail and from conceptual to practical implementation, a more logical order for strategic thinking.
Why are we playing?
Whilst profit is a primary motive in the private sector, the best organisations exist to do more than make money; they should have a real sense of purpose that wins the hearts and minds of employees and customers alike. In many organisations, this would be called the Mission Statement but, so often, a Mission Statement becomes a piece of paper on the wall that everyone ignores. A real purpose will be on the tip of everyone’s tongue and be obvious to every customer. Everyone knows that Apple is about Leadership of Innovation and that Amazon is about being able to shop online better, faster and cheaper. A strategy myth is that someone went into the toilets in NASA in the late 1960s and asked the cleaner what he/she was doing. He/she said “helping to put a man on the moon”, showing that everyone was in touch with the Purpose of the organisation.
Where are we playing?
An organisation must be clear about in which arenas it is competing and with what emphasis. It may also be important to say what the organisation is not doing, to prevent effort being spent on legacy products and services! 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 eg. designing, developing, making, distributing, wholesale, retailing, after sales service, etc.
The organisation should focus on where it can win and stop doing things where it can’t win, unless there are other strategic reasons for doing them, such as being essential to the support of profitable products.
The goal of a great strategy is to find a ‘Blue Ocean’ (a clear blue ocean where there is no competition) and to build a market, capability and brand so fast that competitors are unable to follow. Cirque du Soleil and eBay are examples of organisations that have done this.
How will we win?
To make a sustainable profit, an organisation 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 a margin to be made. Possible differentiators include:
- Excellent service
- Top product quality
- Product reliability
- Image/Branding
- Tailored to specific customer needs.
There is another side to winning (making good margins) and that is the cost side. Apple has a low cost of manufacture in China. 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 on the right seats on the bus. As a strategy emerges, it often becomes clear that the organisation does not have all the capabilities it needs. New capability can be grown internally or recruited from outside. It can also be found in partnerships, joint ventures or mergers and acquisitions. Another way of finding capability is by creating a pattern for success and franchising a business. McDonalds acquired the capability to staff many restaurants worldwide through franchising and, as a result, created more millionaires worldwide than any other business.
When will things happen?
A good strategy can succeed or fail depending upon how it is implemented. In fact, I would go further and say that the staging of a strategy is 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. The opposite would be to have implemented all products into the USA and then taken that worldwide. The obvious benefit of Amazon’s chosen strategy is preventing companies in each country finding it easy to imitate their success. Ikea opened a first branch in a number of countries and then, once a brand had been established, opened more stores in each country to grow.
A major part of any strategy implementation will be Information Technology. In today’s world, it is virtually impossible to do anything without some sort of IT development. Developing new ways of doing things through IT can be a strategic advantage in itself. Amazon’s strategy is to make things better, faster and cheaper for the customer and to leverage IT to achieve this. Uber has grown rapidly worldwide through developing a sophisticated Smartphone app for connecting passengers with taxi drivers that is both convenient and cost effective.
What will we monitor and measure?
The final question recognises 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 KPIs over and above the financial measures of revenue and profit by recommending that KPIs are also implemented to measure the customer experience, the operational effectiveness and the human resource of the organisation. The aim is to find KPIs that measure the success of the strategy across a balanced business and not focus specifically only on financial measures. 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.
Practical Considerations
So, these six key questions, or honest serving men, are questions that any organisation can answer to get clarity. In my experience there are five practical considerations to how a management team would go about answering these questions to avoid some common pitfalls.
- Sequence
The first question, “Why?, is shown in the middle of the wheel but this does not mean it should be answered first. I have found that it is more helpful to ask this later in the process as it is a difficult question but one that becomes clearer during the process of answering the other questions. Much time can be wasted wordsmithing if answering the ‘Why’ is attempted too early in the strategic thinking process.
- Core Competency
A good strategy is usually built upon the core competency of the organisation. What is it about the organisation that is unique and hard to copy and often embedded in its culture? Reaching an early understanding of how the organisation’s core competency can be exploited for strategic advantage can cut out a lot of wasted time in the strategic thinking process.
- Challenging
I have also found that these questions require effective team working to answer well. There is a temptation towards groupthink, where there is insufficient challenging amongst team members. It is tempting for a team to seek the comfort of what they know and not stretch beyond their comfort zone.
- The Bigger Picture
Another practical consideration is that, when strategic thinking, many management teams spend too much time in detailed planning, projecting past ideas and performance into the future and not enough time thinking creatively about new ideas. Most time should be spent looking for the ‘difference that will make the difference’ – a few key things that will break out of the familiar and make real progress. These ideas are usually found at the periphery of your industry or even in different sectors.
- Keep it Short and Simple (KISS)
There is a saying that ‘Less is more’. In his book ‘Good to Great’, Jim Collins describes the Hedgehog Principle. This gets its name from a hedgehog’s simple and easy to understand survival strategy. It survives by curling up into a ball and sticking its protective spines out. So, a good strategy should be easy to understand and make complete sense; it should conform to the Hedgehog Principle. 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 organisation anyway.
Summary
A good strategy can be fully explored by effectively answering six key questions. The output should be a living, breathing, dynamic document that is reviewed regularly in the light of changes to the business environment. After all, in a rapidly changing world, the only sustainable competitive advantage is to learn faster than your competitors!
There is a temptation to think that your business situation is unique, and it is. The message of this article is that your senior management team, who collectively have many years experience in your industry, will come up with the answers, provided you effectively follow a well formulated strategic thinking process that is, in essence, answering a few key questions. A strong independent facilitator helps here and that is the role of the author of this article.
The key to starting the process is setting aside the time to do it; a special day or two, off site, where the normal day to day business is set aside for a strategic discussion. The author has now worked with several organisations in this way and had great results. Click on ‘A Client’s Story’ above for some examples and get in touch if you would like some assistance.
Once you have done your strategic thinking, the next challenge is implementation and that’s another article!
Posted by Mark Procter
mark@futurepacedev.com