Recently, while I was designing a course on ‘Strategic Management’ for our Executive Program in Business Analytics, there were two things I decided I will not do: use PowerPoint and throw jargon. Suddenly, a line of thought triggered.
While reading up the vast amounts of literature available on strategy, having studied it during my student days, practised it in my corporate career and taught it in various avatars as an academician, I felt a sense of nagging discomfort.
This led me to ask a few fundamental questions: Has the word Strategy become overcooked and over hyped in Business Management circles? Is Strategy the haloed domain of only Fortune 500 CEO’s, revered Management Gurus, blue chip Consulting Firms and Ivy League Business Schools? In the process, have we adulterated its purity of thought?
Business Management education is often guilty of making simple things from everyday life complex and convoluted. The result is a ‘Tower of Babble’ like scenario where a lot is said, but little is understood. So it is with ‘Strategy’!
The fact is, Strategy originated not in boardrooms but on battle fields. The great generals were the master strategists who thought and acted with simplicity and decisiveness.
It migrated to the board rooms and B-Schools in the era of ‘competition’, where business was equated with warfare. Which is why Sun Tzu’s ‘The Art of War’, sits comfortably next to Kenichi Ohmae’s, ‘The Mind of the Strategist’ on bookshelves. However, in its march towards progress, Strategy has become less actionable, very cookie cutter and over glorified. While Strategy remains a critical tool in managing business, have we started worshiping the ritual (the jargon, the models, the tools) and forgotten the God (strategy itself)?
There is an urgent need to bring Strategy down from its pedestal and return to the simplicity and purity of the original idea. As Sun Tzu has written in his book, The Art of War, “People should not be unfamiliar with strategy. Those who understand it will survive. Those who do not understand it will perish.”
The first question is always, ‘What is Strategy? This has been eloquently and elaborately answered in Michael Porter’s definitive piece in the Harvard Business Review and used widely as the Bible on defining strategy.
The question I asked myself: Can we simplify this further? I got my answer not from any CSO, strategic guru or bestseller, but from everyday life.
Incident-1: I was observing some students at the tea shop opposite our campus and overheard them saying, “Dude! What strategy should we use to bunk tomorrow’s classes?”
Incident-2: In a Bollywood movie that I was watching, 3 buddies were trying to woo a new girl in office. They began their pursuit by discussing, the strategy they should employ to win her attention (and eventually her affections).
This led me to define strategy, arguably in its pristine form: ‘Strategy is the art of thinking, feeling and doing, to accomplish a specific task.’
You first define a task. Then you think by using your ‘head’ on how to approach it. The ‘heart’ comes next, you feel emotionally driven to do it. Finally you do it, by converting your thoughts and feelings into action. There is a ‘Think-Feel-Do’ process to strategy.
Think: All strategy begins with a clear task, thought process and reasoning. Both, analytical and inventive thinking are the key to plan your moves on accomplishing the task.
Feel: The ‘emotional charge’ is equally important. Great strategic initiatives are driven out of a ‘pain’ to change something or a ‘passion’ to accomplish something. As a famous neuroscientist, in his extensive study on human behaviour, aptly concluded, “Reason leads to conclusions. Emotions leads to action.”
Do: Success of a strategy does not depend only on how good your plan is, but on how effective your actions are. Good strategies often fail due to poor execution, rather than due to poor planning.
This definition of Strategy is all pervading and applies to tasks from simple day-to-day life, to the more complex ones from the world of business, governance and management- from TATA’s ambition to become a global enterprise, to Modi’s election campaign; from Dhoni’s mission to retain the World Cup, to IBM’s focus on cloud, analytics, mobile and social; from Amir Khan’s agenda to make his flick work at the box office, to a kid’s plan to steal from the cookie jar.
The 4 Pillars of Strategy
Enough has been written on ‘what makes good strategy’. In keeping with the spirit of simplification, here is my take on this.
The 4 Pillars of Strategy in my book are: Uniqueness, Focus, Consistency and Integration.
The problem with using standardized models is that ‘everyone learns the same things and ends up doing the same things, in the same way.’ In the process, ingenuity, creativity and uniqueness are lost. No wonder most industries and businesses get caught in the parity- trap. Strategy by nature is not about doing the same things better, but doing things differently. The Harley Davidson Company expressed this brilliantly in their philosophy, “When our competitors Zig, we Zag.”
Strategy is about making a choice and trade-offs. Too often we find CEO’s with the ‘Kid in the Candy Shop’ syndrome, wanting everything and ending up getting confused.’ Strategy is less about what you want to do and more about what you don’t want to do. Empirical research across industries has established the axiom (with a few exceptions), that the value of a company is inversely proportional to its scope of activities.
Changing your strategy too frequently, depending on which side of the bed one gets up from, is never a good idea. The patience to give sufficient time and chance for a strategy to work (or not work) is imperative. In most cases, we end up throwing the baby with the bathwater, in our eagerness to accomplish things too quickly.
The importance of consistency is best brought out in this famous anecdote:?The Leo Burnett Advertising Agency and its client Phillip Morris were celebrating 10 years of the ‘Marlboro Cowboy’ campaign at a Press Meet. A clever-by-half journalist asked ?Mr. Leo Burnett (the Founder of the Agency) as to how many people did he employ in the Agency. To which Mr. Burnett answered, that it was around a hundred people working there. The journalist then went on to ask him as to why he needed a hundred people, since the same ‘Marlboro Cowboy’ campaign was running for a decade. To which Mr. Burnett replied, “While 1 person created the campaign, the other 99 are there to stop it from changing.”
Having set the direction with your strategy, the bottleneck is largely in the execution. The key issue here: Is everything working in the same direction? Strategic implementation is like an orchestra where harmony and synchronization makes the difference between melody and cacophony. All people and processes must align to the strategy and all actions must integrate seamlessly. Everyone and everything must sing from the same sheet. It is said that, “Integration is like the Yeti. Often talked about, but seldom seen.”
The 5 Fundamental Questions
There are a multitude of frameworks for developing business strategy, formulated by both industry and the academia. This leads to a never ending dilemma of which ones to adopt and which ones to reject. In fact, choosing the right model itself becomes a strategic choice. To simplify life, here are 5 Fundamental Questions that lie at the heart of any business strategy:
1. What business are we in?
2. Who are our core customers?
3. How do we create & sustain value for them?
4. What products/services do we offer?
5. What competencies and resources do we require to deliver these?
What business are we in?
When the President of Rolex was once asked, how the watch business was doing, he famously answered, “I don’t have a clue as we’re not in the watch business. We’re in the luxury business.” Your business is not about the industry or category, it is really about the consumer need it fulfils and the value it creates by doing so. Gianni Versace said the reason he charges exorbitant prices for his designer label was because he was clothing egos of the rich and famous. The CEO of Black and Decker once said, “People don’t go into a DIY store because they need one of our drills. They go because they need a hole in the wall.” Wonderbra in their internal communication to staff say this, “We do not sell underwear. We do not sell lingerie. What we sell is self-confidence for women.” The starting point for any business is not about the products and services, but about understanding and fulfilling consumer needs and wants, profitably.
Who are our core customers?
Whether you serve broad mass markets or focused niche ones, defining your core customers is of utmost importance. While most business tend to cater to more customer segments that one, prioritizing them is important. According to the 80-20 principle or Pareto’s Law, your core customers are those 20% who will give you 80% of your revenue. They will be the ones who will sustain future earnings by being loyal to your offerings.?For example: Hyundai defined it core customers in India, as the first-time car buyers and focused its hatch backs towards tapping and growing this segment of the market. Volkswagen focuses on the repeat car buyer/upgraders in the same market. Heineken targets people around the world, who see beer drinking as form of chic, social hedonism. Budweiser on the other hand, talks to people for whom beer drinking is a form of bonding with their buddies. Home Depot defines is core customers as ‘Mr and Mrs FIX IT’.
How do we create & sustain value for them?
Given a proliferation of options that customers have today, what is it that will attract them to you not once, but again and again? In other words, how do you intend to create a superior and compelling value-proposition. The value can be created either through lower cost or higher differentiation. It is a combination of tangibles and intangibles. Apple’s value comes from superior design, user-friendly performance and product innovation at one level and its creative, imaginative and maverick imagery at another. The company sustains this value by surprising its customers with new devices that keeps Apple a step ahead of others. Everyone looks for the next big thing from Apple in eager anticipation. At the other end of the spectrum, a company like CavinKare, which pioneered the one-time use sachet revolution in India with CHIK shampoo, creates value through a low cost strategy by bringing shampoo within reach of consumers at the bottom of the pyramid. The Body Shop has created value not just with their organic, natural and sensorial products, but also with their ‘sustainability mantra’ of no animal testing, fair trade ingredients, biodegradable packaging, low carbon footprint and support to environmental causes. As Don Corleone says in a scene from the movie Godfather, “Make me an offer I can’t refuse.” In the same way, you need to make your customers an offer they can’t refuse. And be ready with your ‘Next Big Offer’ (NBO), that will sustain value and create entry barriers for your competitors. Horst Rachelbacher, the founder of AVEDA has this to say, “My company is not interested in competing. It is interested in making a contribution to people.”
What products/services do we offer?
This is a portfolio decision and sets the agenda for developing the specific product/service architecture that will be the means to deliver the intended value. Here, not only the product/service concepts need to be developed and commercialized, but decisions on horizontal or vertical integration need to be taken. Ultimately a product-market strategy needs to be evolved. The scope of the portfolio is a key decision to be taken. Apple confines its product/service offerings to devices in the area of ‘ICE on the move’ (hardware and software in Mobile Information, Communication and Entertainment). While Samsung, in addition, extends its play to Display Devices (Televisions, Monitors, etc.). Honda’s automobile portfolio comprises both 4-wheelers and 2-wheelers, whereas Toyota limits itself to only 4-wheelers.
What competencies and resources do we require to deliver these?
A strategic plan on paper can be executed only if the company has the required competencies, as well as human and financial resources to make it happen. Or else, the strategy remains just a pie-in-the-sky. The first step is to clearly spell out the competencies and resources required. Then audit the current situation and analyse what already exists and what needs to be acquired. The thumb rule is that a strategy can be delivered, most of the time, if 80% of what is required exists and only about 20% needs to be acquired, in terms of competencies and resources (and not the other way round). Start-ups being the exception. The core competencies are not just capabilities, but if well managed, can become a source of competitive advantage.
At Volkswagen for instance, the ‘Platform Strategy’ is a core competency which allows the company to introduce multiple car models built on the same platform. This has increased their speed to market as well as reduced cost. It also enables them cater to different customer segments under the VW marquee. Another case- in- point is Marico, whose competency in sourcing, procuring and blending natural oils, has made it successful in the hair care, skin care and cooking oils business in India. Players in the Indian E-tailing industry can put down their exponential growth to the competencies acquired in supply chain & logistics, sales promotions, pricing & payment models, web analytics and getting big ticket funding to support their operations and growth. Now Amazon is following suit in the Indian market. The owner & founder of Diesel, Renzo Rosso says, “Our inspiration is always from the street. Listening to and watching people. This is our biggest strength in creating fashion trends.”
One can guess that most modern day business leaders like, Steve Jobs, Jack Welch, Akio Morita, Ratan Tata, Dhirubhai Ambani, Anita Roddick, Jeff Bezos, Larry Page and Mark Zuckerberg, to name a few, strategized with simplicity of thought, rather than with the complexity of models, frameworks and jargon that have become associated with strategy.
While the points of view expressed here are open to debate and discussion, one thing is clear: Strategy needs to be demystified from its current halo and made simple and pure by returning to the basics. It needs to be democratized for one and all. I certainly do not have all the answers, but if this has raised the right questions, it is a good beginning. And well begun is half done.