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.

CHAPTER SEVEN: Think Through Strategy

“As you begin articulating your strategic choice cascade, the obvious place to start is at the top. We’ve argued that it is essential to define a winning aspiration up front, and it does make sense to begin thinking about strategy by defining the purpose of your enterprise; without having an initial definition of winning, it is difficult to assess the value of any subsequent choice. You need a winning aspiration against which you can weigh differentchoices. But remember that strategy is an iterative process, and you’ll need to return to refine your winning aspiration in the context of the subsequent choices. So, rather than dwell on crafting the perfect definition of winning, sketch a prototype, with the understanding that you will return to it later with the rest of the cascade in mind. Then consider the real work of strategy as beginning with where to play and how to win—the very heart of strategy. These are the choices that actually define what you will do, and where

you will do it, so as to generate competitive advantage.” (Lafley and Martin, “Playing to

Win”, p.159-160)

“Ultimately, there are four dimensions you need to think about to choose where to play

and how to win:

• The industry. What is the structure of your industry and the attractiveness of its segments?

• Customers. What do your channel and end customers value?

• Relative position. How does your company fare, and how could it fare, relative to the competition?

• Competition. What will your competition do in reaction to your chosen course of action? These four dimensions can be understood through a framework we call the strategy logic

flow, which poses seven questions across the four dimensions.

STRATEGY LOGIC FLOW DOS AND DON’TS:

• Do explore all four critical dimensions of strategy choice: industry, customers, relative position, and competition.

• Do look beyond your current understanding of the industry, pushing to generate new ways of segmenting the market.

• Don’t accept that entire industries are or must be unattractive; explore the drivers of

different dynamics in different segments, and ask how the game could be changed.

• Do consider both channel and end consumer value equations; if only one of these constituents is happy, your strategy is a fragile one. A winning strategy is a win-win-win; it creates value for consumers, customers, and the company.

• Don’t expect either the channel or the end consumers to tell you what constitutes value;

that is your job to figure out.

• Don’t be blasé about your relative capabilities or costs; compare them with those of your

best competition, and really push to understand how you can win against them.

• Do explore a range of possible competitive reactions to your choices, and ask under what conditions competitors could block you from winning.

Six Strategy Traps:

There is no perfect strategy—no algorithm that can guarantee sustainable competitive advantage in a given industry or business. But there are signals that a company has a particularly worrisome strategy. Here are six of the most common strategy traps:

• The do-it-all strategy: failing to make choices, and making everything a priority. Remember, strategy is choice.

• The Don Ǫuixote strategy: attacking competitive “walled cities” or taking on the strongest competitor first, head-to-head. Remember, where to play is your choice. Pick somewhere you can have a chance to win.

• The Waterloo strategy: starting wars on multiple fronts with multiple competitors at the same time. No company can do everything well. If you try to do so, you will do everything weakly.

• The something-for-everyone strategy: attempting to capture all consumer or channel or geographic or category segments at once. Remember, to create real value, you have to choose to serve some constituents really well and not worry about the others.

• The dreams-that-never-come-true strategy: developing high-level aspirations and mission statements that never get translated into concrete where-to-play and how-to-win choices, core capabilities, and management systems. Remember that aspirations are not strategy. Strategy is the answer to all five questions in the choice cascade.

• The program-of-the-month strategy: settling for generic industry strategies, in which all competitors are chasing the same customers, geographies, and segments in the same way. The choice cascade and activity system that supports these choices should be distinctive. The more your choices look like those of your competitors, the less likely you will ever win.

8. Employees can articulate the following key components of the company’s strategy accurately.

• Big Hairy Audacious Goal (BHAG) – Progress is tracked and visible. Core Customer(s) – their profile in 25 words or less.

• 3 Brand Promises – And the corresponding Brand Promise KPIs reported on weekly.

• Elevator Pitch – A compelling response to the question “What does your company do?