Talking Strategy

A strategy is, at its core, a guide to behavior. It comes to life through its ability to influence thousands of decisions, both big and small, made by employees throughout an organization. A good strategy drives actions that differentiate the company and produce financial success. A bad strategy drives actions that lead to a less competitive, less differentiated position. A lot of strategies, though, are simply inert. Whether they are good or bad is impossible to determine, because they do not drive action. They may exist in pristine form in a PowerPoint document, or in a “strategic planning” binder, or in speeches made by top executives. But if they don’t manifest themselves in action they are inert, irrelevant. They’re academic.

It’s not a lack of effort or good intentions that renders a strategy inert. Every executive wants his team to understand. But there are three nasty barriers that make strategic communication more difficult. We’ll discuss them and offer suggestions for overcoming them.

Barrier 1: The Curse of Knowledge

If there’s one concept we wish we had emphasized more in Made to Stick, it’s the Curse of Knowledge. We see its effects everywhere. And, as in all the domains we discussed in the book, the Curse of Knowledge afflicts leaders when they try to communicate a strategy to the rest of an organization. It leads executives to talk about strategy as though they themselves were the audience. It tempts them to use language that is sweeping, high-level, and abstract: The most efficient manufacturer of semiconductors! The lowest-cost provider of stereo equipment! World-class customer service!...

Trader Joe’s describes its target customer as an “unemployed college professor who drives a very, very used Volvo.” The image is a simplification, obviously—at any given moment, there are probably zero of these “target customers” in Trader Joe’s. What the “unemployed college professor” image does for Trader Joe’s is this: It ensures that everyone in the organization has a common picture of the customer…

because they force us to use concrete language. For instance, FedEx has an award called the Purple Promise, which honors employees who keep FedEx’s delivery promise that packages will “absolutely, positively” arrive overnight. The Purple Promise award honors stories like these: In St. Vincent, a tractor-trailer accident blocked the main road going into the airport. Together, a driver and a ramp agent tried every possible alternate route to the airport, but they were stymied by traffic jams. Eventually, having run out of options, they struck out on foot, carrying every package the last mile to the airport, which ensured an on-time departure. In New York, after a delivery truck broke down and the replacement van was running late, the FedEx driver initially delivered a few packages on foot, but then, despairing of finishing her route on time, she managed to persuade a driver from a competitor to take her on her last few deliveries.

These are not just interesting stories. They are tangible demonstrations—in vivid, concrete, on-the-ground terms—of the company’s competitive advantage, which is to be the most reliable shipping company in the world. Like CHIFF, these stories can work to inform decisions across the organization. A top sales executive can use the New York story to convey, “This is how seriously we take reliability.” A new delivery driver can use the story as a guide to behavior: “My job is not to drive a route and go home at 5 P.M.; my job is to get packages delivered any way I can.” An operations person can use the story to make better decisions about maintenance contracts —for example, it’s worth negotiating for the fastest possible maintenance cycles on delivery trucks…

Both stories and concrete language help leaders dodge the Curse of Knowledge, and everyone in the organization benefits from a shared understanding of the strategy.

Barrier 2: Decision paralysis

Most people in an organization aren’t in charge of formulating strategy; they just have to understand the strategy and use it to make decisions. But many strategies aren’t concrete enough to resolve a well-established psychological bias called decision paralysis…

Barrier 3: Lack of a common language

In the classic 1950s models of communication, a “sender” communicates with a “receiver.” The metaphor suggests that the message passed is a kind of package—wrapped up on one side and unwrapped on the other. There is certainly a lot of communication that operates in this way—professors lecturing to their students, ministers preaching to their congregations, etc. Should strategic communication work this way? Absolutely not…

The scrappy Savings & Loans Credit Union, based in Adelaide, Australia, has developed a common strategic language. Internally, the company defines its strategy this way: “We don’t want to be first, but we sure as hell don’t want to be third.” The meaning: They want the company to be a fast-follower. They’ll stand back and let the first mover take the risk and grab the glory of innovation, then they’ll come in right behind and copy it, while making the copy crisper than the original. For instance, a competitor offered a credit card that paid part of its commission to an environmental group. The card was a flop, but meanwhile Savings & Loans had ginned up its own card affiliated with the local children’s hospital, which was an instant hit—proceeds from the card funded a $2.5 million renovation of the Emergency Department.

Strategy as Winning – A.G. Lafley:

By the time of my election to CEO in 2000, most of P&G’s businesses were missing their goals, many by a wide margin. The company was overinvested and overextended. It was not winning with those who mattered most—consumers and customers. When I visited all our top retailers in my first thirty days on the job, I found that P&G was their biggest supplier but nowhere near their best supplier. Consumers were abandoning P&G, as evidenced by declining trial rates and market share on most of our leading brands. I was

determined to get P&G’s strategy right. To me, right meant that P&G would focus on

achievable ways to win with the consumers who mattered the most and against the very

best competition. It meant leaders would make real strategic choices (identifying what they would do and not do, where they would play and not play, and how specifically they would create competitive advantage to win). And it meant that leaders at all levels of the company would become capable strategists as well as capable operators. I was going to teach strategy until P&G was excellent at it. I wanted my team to understand that strategy is disciplined thinking that requires tough choices and is all about winning. Grow or grow faster is not a strategy. Build market share is not a strategy. Ten percent or greater earnings-per-share growth is not a strategy. Beat XYZ competitor is not a strategy. A strategy is a coordinated and integrated set of where-to-play, how-to-win, core capability, and management system choices that uniquely meet a consumer’s needs, thereby creating competitive advantage and superior value for a business. Strategy is a way to win—and nothing less.

It is tempting to believe that strategy in general, and where-to-play and how-to-win choices in particular, are needed only for outward-facing functions—those folks who interact with external consumers and competitors. But every line of business and function

should have a strategy—one that aligns with the strategy of the company overall and decides where to play and how to win specifically for its context. At P&G, corporate functions are all tasked with crafting their own strategies in this way. Joan Lewis, global consumer market knowledge officer, explains: “Where to play and how to win has been a very important framework for us. Organizations are often good at one or the other without realizing that they’re two different sets of decisions. At one point, we weren’t as disciplined about our where-to-play choices. It was everywhere anybody needed consumer insight or anywhere we thought it could add value. Just like a business dilutes its focus and in turn its growth potential when you try to do too many things at a time or do things that are further away from your core strengths, we were relatively diluted in the nature of the impact we could have.

The Most Important Ǫuestion in Strategy – Roger L. Martin

At an impasse, an idea popped into my head. Rather than have them talk about

what they thought was true about the various options, I would ask them to specify what would have to be true for the option on the table to be a fantastic choice. The result was magical. Clashing views turned into collaboration to really understand the logic of the options. Rather than having people attempt to convince others of the merits of options, the options themselves did the convincing (or failed to do so). In this moment, the best role of the consultant became clear to me: don’t attempt to convince clients which choice is best; run a process that enables them to convince themselves.

And while some of the specific do’s and don'ts for CEOs are unique to their role, most essential things like setting expectations, developing a vision, establishing a management process, creating priorities, building your management team, and doing an exceptional job on your earliest projects apply equally to anyone in a new leadership role.

When Ron Daniel was the managing partner of McKinsey & Company from 1976 to 1988, he sent a memo to new recruits when they started, entitled, “On Becoming an Associate.” His advice is still memorable all these years later: “Recognize the necessity of getting off to a good start in the firm. Your first few engagements are critical. During these studies, you can establish an internal clientele for yourself - that is, by performing in an outstanding way, your reputation will be quickly established in your office and even the firm.” (We’ve incorporated Ron’s memo in the Appendix of the book.)

This is especially important because whenever you assume a new role, you’re in what Max DePree, former CEO of furniture company Herman Miller and author of Leadership Is an Art, calls “a temporary state of incompetence.” Even if you think you know a company - or a department or a division - before you take over its leadership, think again. As GE’s Immelt reminisces, “I worked for this place for twenty-one years before I got the CEO job and there were still things that shocked me when I took over.”

The knowledge gap is even wider for outsiders. “Anyone coming into a new situation is faced with the fact that they often have to do the most at a point they know the least. You may have previous experience and you may be smart and have insight into how things work, but you know the least about the actual company you’re engaged in at the same time you have to set things in motion,” says AOL chairman and CEO Jonathan F. Miller, himself recruited into the company from the outside.