Thursday, 21 August 2008

It looks like we don’t have a strategy…

Whenever I interview people at a particular company regarding their firm’s strategy – for instance because I am writing a business case about them – I try to make a point of not only finding out exactly what their strategy is, and why it works, but also where it came from. That is, how they came up with the strategy in the first place. And usually, I get a perfectly logical and rational answer – at least at first…

However, often, when I subsequently “dig deeper” into the organisation, by interviewing middle managers and engineers (who have been there for a long time), by talking to the CEO again, by reading up on some company documentation, etc., it appears that the (wonderful) strategy was not the result of some sort of rational analysis at all. Instead, invariably, it seems, there was some lucky moment or unexpected event which triggered the company to alter its course and move into a new direction.

Hornby accidentally saw itself appear in the hobby market (instead of the toy market) when they spent their cost savings from outsourcing on adding detail and quality to their products; CNN figured out it could become a global (instead of US) news company when Fidel Castro (picking up the American satellite signal in Havana) told founder Ted Turner he watched it all the time, Southwest invented low-cost airlines when competition forced them to sell a plane but decided to try and fly the same routes with three instead of four aircraft, and Bisque founder Geoffrey Ward switched from being a plumber to selling designer radiators when people kept knocking on his door asking whether they could buy that funny-shaped radiator which he had just removed for a client and placed in his workshop window to make it appear shop (to see off the civil servants who had told him he was illegally located in a retail zone).

But why do people, in retrospect, almost always want to make it sound like it was the result of some thorough analysis and innovative thinking? Ego? Embarrassment? I guess that might play a role; “rational thinking” sounds better than “ehm… we stumbled upon it, I guess…” But, I’ve also found that people I interviewed who weren’t there at the time of the strategic switch at all – and therefore can’t take any credit or blame for it anyway – make it sound all logical. And that’s, I guess, because in retrospect, it all sounds so bloody obvious: moving into the hobby market, becoming global, not handing out food, newspapers and hot towels on a 45-minute flight (but instead focusing on turning the darn thing around on the tarmac in 20 minutes and fly again). It just makes so much sense, that it just had to be the result of thorough analysis and thinking – surely.

But admitting – even if alone to yourself – that the best strategies often emerge when you weren’t really planning for it, could actually help you get lucky more often. Andy Grove – former CEO and Chairman of Intel – figured that one out when Intel moved its microprocessors into computers after IBM (finally) convinced them that they could be applied in their PCs and, “yes, they really wanted to buy them”. After that, he said:

“We say we have a top-to-bottom strategy. But don’t act top-to-bottom. You can look at it positively or negatively. Positively, it looks like a Darwinian process: we let the best ideas win; we match evolving skills with evolving opportunities. Negatively, it looks like we don’t have a strategy…”

And you want to make sure ideas reach you from everywhere: suppliers, customers, competitors, bloody civil servants and, yes, even Fidel Castro.

2 comments:

Wally Bock said...

I think we've set up the expectation that the best business strategies are both logically and dispassionately arrived at. Many times, though, they're simple concepts played out in many different ways.

Take Southwest Airlines. Herb Kelleher said for years that their strategy was to "be THE low fare airline" and that everything else flowed from that. Yes, they needed to sell a plane to stay alive and found new ways to turn their planes around faster, but when the crisis was over, they kept the practice because it fit the strategy. Choosing to fly only one kind of aircraft was another practice that grew from turning planes quickly and from keeping costs down.

In truth, I think the best strategies are simple. "Be THE low fare airline." "Be number one or two in every market we serve." "Increase the percentage of innovation from outside."

If you can't explain it to a fifteen-year-old, you haven't got a strategy, just paperwork.

Tom-R said...

Much harder to act on this advice however if you're already big.

Then you have to 'think small' in order to combat the barriers and be brave I suppose. Turning an organisation round with 1,000 employees takes longer than 20 mins with or without food and hot towels.

I bet there's a million and one books from HBS on how to do that.[