The Plague Of Strategic Goals
How an audacious strategic goal can crush a great company
Jim Collins, the author of Built To Last: Successful Habits of Visionary Companies, coined the term BHAG, Big Hairy Audacious Goal, thirty years ago, in 1994.
His intentions were good, so he had no idea how much damage he caused.
We love bold goals. We call them ‘North Stars’ and ‘Moonshots.’ We believe they can help us stretch our imagination and push beyond possibility.
Setting a bold goal has its (questionable) advantages. But we shouldn’t forget about the three points that reflect the dark side of big goals:
We don’t know the future
A ‘North Star’ can pave us the way to dead ends
Setting BHAGs biases our strategic thinking (yes, it’s true)
A strategy lesson from Steve Jobs
On October 24, 2010, Steve Jobs sent a very important email.
It contained the agenda for the Apple’s upcoming “Top 100” retreat, a top-secret offsite management meeting reserved for 100 of the most influential employees.
Let’s look at Jobs’s part of the agenda:
“2011 strategy – SJ
Who are we?
What do we do?
Post PC era
2011: Holy War with Google
2011: Year of the Cloud
2015: New Campus”
Wait a minute.
“2011 strategy” itself looks like a crime against the classical approach to strategy. A strategy for one year?
Let’s ignore that Jobs didn’t mention the SWOT or PESTLE analysis. But what about a BHAG? What about a North Star? Didn’t Jobs want to inspire his team?
He did. But he did it the way he had always done it before. He wanted them to focus on great products and the opportunities they brought. You can see some details of his speech in the picture (picture source).
I haven’t found a single interview with Jobs where he would mention bold goal setting as an effective management tool. As you can see in the picture, Steve Jobs focused on products and customers, not on revenue, profit, or market cap. As he said in one interview, “If you do the right things on the top line, the bottom line will follow.”
And his other idea, which I will tell you about at the end of the article, looks inspiring.
We don’t know the future
When we set a bold goal for our business, two possible premises may fuel our enthusiasm:
We believe we know the future – or at least we can predict it accurately.
We think it will make our team change their thinking, stretch their imagination, and push beyond possibility.
The first one is entirely wrong. The future is unpredictable, and our ability to anticipate it is very limited. Even the most prominent companies with the best analysts can’t make accurate projections.
You won’t find a company that has never had to tweak its objectives.
Let’s look at some quotes:
“Ford and General Motors scale back electric vehicle production” (source).
“Hertz, the rental car giant, is bowing to consumer demand by selling about a third of its global EV fleet and buying more gas-powered cars with the proceeds” (source).
If automakers had BHAGs for their EV programs, they should forget about them for some time. They all failed to hit their targets in 2023, including Tesla.
The second premise looks more promising but has flaws, too.
On the one hand, we’ll never attain our ambitions if we don’t have them.
On the other hand, the idea that our big aspirations can change the material world is an excellent example of ‘magical thinking.’
Quote: “Magical thinking is the belief that one’s ideas, thoughts, actions, words, or use of symbols can influence the course of events in the material world.”
No strong evidence exists that ‘magical strategic thinking’ can help build a great business.
Many of the companies Jim Collins described in his books failed.
Mass media portrays Steve Jobs, Elon Musk, Travis Kalanick, Larry Ellison, Brian Chesky, Marc Benioff, and some others as very ambitious business leaders. And they have undoubtedly succeeded. But it proves nothing.
Let’s not forget about the hindsight bias. When successful people reach the top, and journalists ask them about their life journey, they start believing they knew they would be successful since childhood. They say they have always had big aspirations. But is it true? They don’t know themselves.
You know nothing about some large companies’ leaders and their bold dreams. What about Toyota, Procter & Gamble, Shell, McDonald's, PepsiCo, Visa, Samsung, Lóréal, Johnson & Johnson? You use their products daily, but we can’t claim that bold goals are their primary source of success.
There are more than 334 million companies worldwide. Common sense tells us that some of their leaders are ambitious but fail, and others don’t set bold goals but succeed.
Believing that having an audacious goal can help you become successful because Elon Musk says so is the anecdotal fallacy.
Richard Rumelt, the author of Good Strategy, Bad Strategy: The Difference And Why It Matters and a famous critic of lofty goals, says in the book: “I do know that believing that by thinking only of success you can become a success is a form of psychosis and cannot be recommended as an approach to management or strategy.”
What’s more, big, audacious targets can blind us.
Typewriters and bold goals
“Never give up, disgrace yourself till the end!”
Imagine it’s the 1970s. A CEO of a company that manufactures typewriters sets a BHAG – to double sales in three years. The market is booming. Some guys are soldering homemade computers in garages, but no one is paying attention to them – so far.
What are the chances that the CEO will recognize the threat and change the strategy? They are slim – he has a BHAG.
A goal isn’t just a number. It’s a commitment.
It narrows down our thinking – that’s what goals are for.
“Thank God, we’ve finally got clear goals!” I’ve heard this phrase many times from executives after strategic retreats.
Their sigh of relief means they can stop discussing the future options and delve deeply into implementation – the work they like and know how to do.
Add to this a culture of blind adherence to one’s goals (“never give up, disgrace yourself till the end!”), and you have the perfect recipe for failure.
A CEO told me one day that he realized the goal he had set for his business a few years ago was wrong. But he was afraid of admitting it to his team.
Every goal is a result of choice. By choosing one thing, we give up the rest.
And if we call it a BHAG, we make a serious promise – to our team members, board, and shareholders.
Moreover, setting lofty goals biases our strategic thinking.
Goals and assets
“Strategy is a means to an end.”
You may have heard it many times.
I believe it is a totally bankrupt management concept. I’ve written about it in detail here.
Our thoughts determine the words we use. And vice versa, the words we use affect our thinking. It is called the ‘misinformation effect’ or ‘framing effect.’
In 1974, Elizabeth Loftus and John Palmer conducted an experiment.
They divided 45 college participants into five groups. Students watched seven short videos of traffic accidents. Then the scientists asked them: “About how fast were the cars going when they … each other”.
The groups were given five different verbs: ‘contacted,” hit,’ ‘bumped,’ ‘collided,’ and ‘smashed.’
The results were as follows (mph):
Contacted: 31.8
Hit: 34.0
Bumped: 38.1
Collided: 39.3
Smashed: 40.5
When we call something a ‘goal,’ we turn everything else into ‘assets,’ a means to an end.
We turn our customers, employees, suppliers, and business partners into resources to achieve our goals. We signal our team to use them to make us rich.
But doing business means treating all the stakeholders equally.
Goodharth’s law says: “When a measure becomes a target, it ceases to be a good measure.”
Pro Tips
Many companies I’ve worked with succeed by using goals only as directions. They make strategic choices by determining the development direction and roughly outlining its pace.
That’s enough.
The future is unpredictable. Believing that we can achieve long-term goals is self-deception, not strategic wisdom.
A main long-term goal for any business is not to increase its revenue, profit, or market share. It is to build a robust, resilient company that can succeed in various conditions.
A quote about Steve Jobs I promised to give at the beginning of the article:
“His goal, according to Walter Isaacson’s biography “Steve Jobs,” was to build an enduring company that prioritized people. Everything else — products and profits — while still important, would be secondary.
Technology is nothing. What’s important is that you have faith in people.” (source).
Read also: The Quality of Relationships Defines Business Success.
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Jobs flipped it around and focused on the details—what consumers actually want and need. Lee Iacocca did the same thing with the minivan. Everyone pushed back, saying families wouldn’t want a boxy car, but he zeroed in on what people would actually use. It ended up revolutionizing the car industry. Sometimes it’s not about chasing the big idea; it’s as simple as figuring out what people really need and making that happen.
Having an aspirational goal is good, but they have a way of becoming a ‘must do’ requirement. Heads will roll if we don’t hit it.
A direction that’s constantly adjusted is better, but it’s hard to convince some people.