I recently read an article by strategy consultant and writer Ken Favaro which nicely explained how to best think about strategy in today’s business environment. “Many business leaders subscribe to the classic definition of strategy as a set of actions designed to achieve an overall aim,” wrote Favaro in The Trouble with Putting Goals Ahead of Strategy, published in strategy+business in 2015. “In other words, they believe strategy starts with a goal. But for companies that have implemented winning strategies, that’s not how it typically happens.”
Goals and strategies serve very different purposes. Goals, visions and missions are important to paint an exciting picture of the future around which everyone can rally, as well as to help set the general direction of a company. But being too high level, goals by themselves don’t give you much guidance on how to get things done and what key decisions must be made and prioritized. “[G]oals tell you very little about the fundamental choices you should make around creating customer and company value. Such choices are the very essence of your strategy.”
Most winning strategies start with an idea for an innovative new product, service or business model, followed by a plan to bring the idea to market. Only then should come a big, bold goal, as a way “to crystalize an ambition, motivate the troops, and excite investors. Unfortunately, strategic planning in most companies gets this sequence exactly reversed - and when that happens, bad strategies result.”
I totally agree with Favaro, based on my personal experiences leading emerging technology initiatives at IBM, including parallel supercomputing, the Internet, and Linux. Let me share some of what I learned when working on IBM’s Internet strategy.
Our job was to figure out the business value around the Internet, what we should advise our clients to do and what new products and services we needed to develop. Equally important, we had to come up with an Internet business model for IBM that made sense and was financially sound. We worked through 1996 to figure out what our strategy should be, and towards the end of the year the picture began to emerge.
What made the Internet job different from just about any other I’d previously had is that there was no one technology or product you could work on in the labs that would make you a success in the marketplace. This time around, the strategy had to come from the marketplace itself, not the labs. And so it did. Watching what our customers were doing, it became clear that the Internet was definitely going to have a profound impact on just about all aspects of business.
The universal reach and connectivity of the Internet were enabling access to information and transactions of all sorts for anyone with a browser and an Internet connection. Any business, by integrating its existing databases and applications with a web front end, could now reach its customers, employees, suppliers and partners at any time of the day or night, no matter where they were. And they could start very simply by web-enabling specific applications and databases.
Thus was born what became our successful e-business strategy. As I think back, the aha moment came to us when we succinctly captured our strategy with the simple phrase e-business = Web + IT. Companies were now able to engage in their core activities in a much more productive and efficient way. But, unlike the prevailing hype, we also believed that the brand reputation, installed customer base and IT infrastructures that companies had built over the years would be even more valuable assets when combined with the new Web capabilities. All companies could benefit, - whether large or small, new or mature.
The e-business strategy was very well received in the marketplace. In the Fall of 1997 we launched a creative marketing campaign that successfully established the e-business brand in the marketplace by consistently telling our e-business stories over a variety of communication channels, including press interviews, conferences around the world, IT and financial analyst meetings, Web articles, TV and print ads, and lots of client engagements. These communication and marketing efforts helped to explain what it meant to do business in the Internet age and closely associated IBM with the Internet. They also helped us revitalize IBM’s brand.
I’d like to conclude by discussing a second strategy+business article published by Ken Favaro earlier this year, - Why Popular Strategies Always Fade. In this article, Favaro discussed the difference between a high level strategy concept, and a concrete strategy implementation.
“For nearly 50 years, strategy has been a business of promoting universal prescriptions based on what appears to explain the success of a few revered companies,” he wrote. “At first glance, this practice makes perfect sense. Why not draw lessons from those who seem to have figured it all out?” However, such a practice has limited value. “By their nature, big strategy concepts are not particular to any one company. That’s problematic, because when they become wildly popular and widely adopted, no one gains advantage from them. In fact, the me-too pursuit of strategy concepts stymies their supposed benefits…”
“Great strategies answer five critical questions (the strategic five) in ways that are unique to your company: (1) What business or businesses should your company be in? (2) How should you add value to your businesses? (3) Who should be the target customers for your businesses? (4) What should be your value propositions to those target customers? (5) What capabilities should differentiate your ability to add value to your businesses and deliver their value propositions?”
By the end of 1995, for example, it was pretty clear that the Internet had evolved from a network primarily used by universities, research labs and geeks in general, to a major new technology for just about all aspects of IT and business. So for IBM or any other company to embrace the Internet was important as a high level strategic direction, but without lots of additional details it did not constitute any kind of implementable strategy. By the time a strategic concept becomes popular, - e.g., total quality management, business process reengineering, core competencies, co-opetition, time-to-market, user experience, - just about everyone has embraced it. For a company to extract competitive advantage from the concept it must define a much more detailed and differentiated strategy.
“Nevertheless, the business of strategy will continue to churn out the next big thing, because strategy concepts provide a modicum of comfort in an uncertain, complex world. But the most capable strategists are never swept up in the hype. They understand the limitations of such concepts and resist the allure generated by their popularity…”
“To exploit strategy concepts without allowing them to take over, consider each one that comes along to be an opportunity to challenge and improve the strategy you already have. If you don’t already have a strategy to which you are truly committed, you are particularly vulnerable to being captured by the latest strategy fashion. If you do, ask how a new concept can enhance it. But never let that concept become a shortcut: a way to skip the hard work of identifying the big idea that will power your company’s strategy; of formulating a unique, specific, and complete set of answers to the strategic five; and of owning your strategy through thick and thin.”