Live in the Gain (Not in the Gap): A New Approach to Goal SettingJanuary 6, 2024
In his final hit single, “Any Road,” former Beatle George Harrison sings, “If you don’t know where you’re going, any road will take you there.”
The key question in this paradoxical wisdom is, do you care where you’re going? If not, then by all means crank up the music and enjoy the ride!
However, I’ve never met a leader who answered “no” to that question. Yet research suggests 85 percent of executive teams spend less than an hour per month discussing strategy, and 50 percent don’t spend any time on it at all. With the amount of information executives currently have to manage just to get through each day, it’s not surprising that important topics related to strategy take a back seat to the “tyranny of the urgent.”
But is strategy really that important? Yes. Research shows that the main cause of prolonged financial decline by once-successful companies is poor decisions related to strategic factors.
So why don’t more executive teams spend more time discussing strategy? Great question. I’ve found four common reasons: 1) they don’t understand what strategy is, 2) they aren’t trained in the essential elements of strategic thinking, 3) they lack experience developing and applying strategy, and 4) they don’t prioritize the time that’s required to focus on strategy. Let’s briefly unpack each of these.
What is strategy?
The definition of strategy that I’ve found most useful is one I learned through my professional military education in the Marines: strategy is the careful integration of ends, ways, and means to create a competitive advantage. Ends are your overarching objectives. Ways are your methods for achieving those objectives. Means are the resources you need to execute the methods. And the competitive advantage you create hinges on how your ends, ways, and means differentiate you from your competition.
For example, during World War II, the Allies’ overarching objective (end) was to win the war and reestablish world peace. “Europe First” was the way to achieve this objective, by first focusing on defeating Nazi Germany while containing Japan. The means were to leverage the Allies’ competitive advantage in mechanized operations and amphibious capabilities to go after Hitler’s soft underbelly along his southern flank in Italy and North Africa using mechanized divisions to draw Hitler’s attention south, and then employ amphibious forces against his northern flank in France (Normandy) to establish a foothold from which they could penetrate south, join forces, and squeeze the Nazis east toward Russia’s Red Army.
In the context of business, “Strategy is about how a company creates value for their targeted customers and the relative position it occupies against competitors – it is external looking, and focused not on where the company is today, but where it will be positioned for success in the future,” says Tom Leppert, former CEO of several large companies including Kaplan Global Education and an experienced board member of multiple public and private international companies.
Question for reflection: What are your organization’s ends, ways, and means, and what differentiates you from your competition?
What are the essential elements of strategic thinking?
To help you and your team think more strategically, consider seven competencies:
- Critical Thinking. At the heart of strategic thinking is critical thinking, which centers on understanding and challenging assumptions. Critical thinking is most effective in an environment that encourages diverse points of view to bring to the surface underlying assumptions that can be debated and discussed.
- Context. Understanding your operating environment is vital. Start by considering the relationships between these “4 Cs”: your company, customers, competition, and chance.
- Anticipation. Assess cause and effect relationships based on interdependencies in the operating environment so you can be proactive rather than reactive. As hockey great Wayne Gretzky said, “Strategy is going to where the puck will be, not where it is.”
- Vision. Identify opportunities based on your assessment of interdependencies in your operating environment.
- Risk Management. Identify, analyze, and mitigate risks based on the interdependencies.
- Learning. When designing a strategy, benefit from the lessons of others who have successfully and unsuccessfully navigated an operating environment similar to yours. And when executing your strategy, learn from your own successes and mistakes by continuously evaluating your progress.
- Adaptability. Change is inevitable when you transition from strategy design to execution, because your customers, competition, and chance will all get a “vote” in how it plays out. Rigidity can be fatal when this occurs. Don’t succumb to groupthink or confirmation bias toward your own thinking. Monitor and challenge your assumptions as your strategy unfolds, thus continuing the cycle of strategic thinking.
Question for reflection: Which elements of strategic thinking do you need to work on with your team?
How do you develop a strategy?
Once you know where you want to go (ends), the fundamentals of strategy development boil down to applying the essential elements of strategic thinking to determine how you will get there (ways) and the resources you’ll need to execute your strategy (means), while considering how you can best leverage your competitive advantage.
For example, Netflix was founded in 1997 as mail-based DVD rental business using online ordering. At the time, Blockbuster dominated the home entertainment industry and was raking in $4B in annual revenue. Ironically, after the dot-com bubble collapse in 2001, Netflix’s founders tried to sell the company for $50M to Blockbuster, who laughed them off.
Netflix regrouped and developed a strategy to become a market leader in the industry. They challenged the assumption that brick-and-mortar video rental stores were the way of the future, and recognized that the digital revolution was drastically changing the operating environment. They anticipated that online access would attract customers based on convenience, and saw opportunities to generate revenue through a subscription service instead of relying on late fees like Blockbuster.
During this transformation, Netflix managed risk by offering a wide variety of online video options while maintaining relatively low fixed costs. They created a culture of learning by using data to generate strategy-informing insights rather than chasing opinions, and they adapted their content based on customers’ specific interests.
Finally, Netflix invested their resources heavily into evolving technology infrastructure to support their streaming services, which enabled them to deliver a seamless user experience.
Ultimately, this strategy created a competitive advantage for Netflix that eventually forced Blockbuster into bankruptcy in 2010. Today, Netflix is worth $243B and is the leading streaming platform in the U.S. with a market share of 44%.
Question for reflection: Where do you want to go, how will get there, and what resources do you need to create a competitive advantage for your organization?
How do you find the time to focus on strategy?
Making the time to properly focus on strategy is a challenging proposition in today’s operating environment where information saturation causes your plate to be constantly overflowing and the “tyranny of the urgent” overcomes your urge for the important. Nevertheless, prioritizing time for you and your team to think strategically is crucial for your organization’s success. In fact, as we previously discussed, research shows that not making time for strategy is setting your team up for failure.
What’s the key to prioritization? Discipline. How should you start creating discipline? Start with the “one-hour rule”:
- Executives spend one hour per day on strategy
- Managers spend one hour per week on strategy
- Employees spend one hour per month on strategy
Then, if you make an effort to ensure the time spent on strategy at these three levels is integrated and aligned, you’ll be well on your way to getting where you want to go.
Question for reflection: How will you prioritize time for your team to focus on strategy?
If your organization doesn’t have a good strategic plan (or any strategy at all), don’t hesitate to reach out to us at [email protected]. We’d love to help!