What is NOT a strategy?
Don’t waste your time on the secondary, focus on the essential
Today's article is a chapter from my upcoming book Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism. You'll receive the e-book for free soon; we're currently working on formatting and proofreading. Stay tuned!
This newsletter will also soon be renamed to Strategic Seeing, as it better reflects its essence.
“Profit for a company is like oxygen for a person. If you don't have enough of it, you're out of the game. But if you think your life is about breathing, you're really missing something.” Peter Drucker
Bloodletting was an extremely inefficient and dangerous procedure that medical doctors used to treat most diseases until the end of the 19th century. They believed that some diseases caused human bodies to produce too much blood.
Most doctors knew it did much more harm than good, but they still employed the method. Why? They didn’t have a better tool.
Thomas Kuhn, a historian of science, pointed out that scientific theories never fail under the weight of their errors. They disappear only when new, more effective theories emerge. Medical doctors believed in bloodletting for over 2000 years until scientists developed more effective approaches.
I am far from claiming that the classical strategy theory is as harmful to businesses as bloodletting to bodies.
But the basics of business strategy were formulated in the mid-60s and haven’t advanced significantly since then. Many brilliant minds have developed numerous new strategic tools. However, the fundamental principles such as shareholder value primacy and 'me-strategy' are still around.
Overlooked ideas
Why are some small startups more innovative than big companies? Because they view the world from another angle.
A few years ago, my former employee called me for advice. He had started a business and wanted to craft a winning strategy. He told me he had already set a bold goal for the team – to quadruple his young company in three years.
I advised him not to start with goals but to scan the horizon in search of opportunities first. He rejected the advice as he believed it could bring only mediocre ideas for slow, incremental growth. "I need a breakthrough," he said firmly. "Breakthrough always begins with big goals."
Three years later, I bumped into him at a conference. He told me his business had closed its doors. His team devised a strategy primarily consisting of copying the steps of the major competitors. "We also considered some other alternatives," he said, "But they didn't seem very promising."
A year after our phone call, a hardly known young startup took one of the ideas they rejected as the basis and disrupted the industry. Big companies managed to adapt because they had almost unlimited resources, but my friend's business didn't.
Many businesspeople believe that setting bold goals for a team can unleash its creativity and force them to think outside the box. At times, it works very well. But sometimes, it backfires.
When you set a stretch goal for your team, you unintentionally activate two mental filters in their minds.
The first one filters out non-obvious, questionable, doubtful hypotheses because the likelihood that they will catapult the business is not evident and dubious.
The second one takes this short list and filters out the most challenging ideas because our brain hates to spend energy.
Imagine it is 2007. A cab company owner sets a new goal for their team – to triple the revenue in three years. The team brainstorms and proposes three ideas:
To acquire a few competitors.
To reduce service prices dramatically to steal competitors' customers, hoping to raise prices later and recoup losses.
To create a mobile app that will connect passengers with drivers.
What do you think are the chances they will vote for the third option?
Large companies must grow quarter after quarter because their investors want them to do so. As they are already big, they need initiatives with significant growth potential. Their executives are primed by this requirement and may overlook some non-obvious ideas.
But small startups are free of such limitations. They may play with ideas they love and sometimes find gold that their gigantic rivals have overlooked.
When you start strategizing with a bold goal and vision, we fit your task to the answer. Your success depends on your ability to discern unique opportunities rather than your ambitions.
Strategy and design thinking
"At the heart of a strategy is an approach for achieving your chosen objectives and overcoming the challenges associated with it." This is another quote from my LinkedIn feed.
Who said that? What's the proof? Who made this an axiom?
All successful people are ambitious, but not all ambitious people are successful. This is a cognitive bias called false causation. Most startup founders dream about taking on the world, setting bold objectives, and thinking big, but statistics say up to 90% of them fail.
When I help companies craft strategies, I never start with audacious goals. I invite them to use design thinking tools to delve deeply into customer experience. We try to learn as much as possible about how customers live and work, about their problems and difficulties.
It brings us insights and strategic hypotheses. We also gather and analyze some data on the market, competitors, and trends, but that's not our primary source of inspiration. The main source of inspiration should be the same as the source of income – the consumers.
Only then, when we have a number of plausible hypotheses, do we start thinking about goals and objectives.
What is NOT a strategy
A plan that can solve the challenges that keep you from reaching your ambitions is not a strategy if your aspirations are only about making it onto the Fortune 500 list.
Strategy is not a means to an end because there is no 'end.' Strategy is the ongoing process of learning and improving your Value Waves. Discussing your strategy with your team has its own value because it alters how your team members think. Paraphrasing Dwight Eisenhower, I could say that strategy is useless, but strategizing is indispensable.
A set of goals, however ambitious and audacious, is not a strategy. It doesn't give either the direction of development or the pace of expansion.
A three-year business plan with Gantt charts and financial projections is not a strategy.
A set of broad aspirations like ‘We will provide our customers with the best service’ is not a strategy.
A list of broad initiatives and intentions, a so-called ‘one-page strategy,’ is not a strategy.
A plan to increase your business's revenue and profits is not a strategy.
M&A deals are not strategic moves if you make them only to increase your market share, profitability, or competitive position. They may become a strategy only if they will let you deliver more value to the key stakeholders.
Digitalization or the use of AI can’t be a strategy if it doesn't deliver additional value to at least three stakeholder groups, including customers.
If an initiative doesn’t promise additional value to at least three stakeholder groups, this initiative is not strategic.
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Read also: Cutting Out to Climb Up. Strip Your Strategy to the Bone
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Loved this article ! I had kinda chance finding your feed ! Just joined your Telegram. I wish I have time to read and think from your other articles.
Loved this article ! I had kinda chance finding your feed ! Just joined your Telegram. I wish I have time to read and think from your other articles.