Starting a walk where there is no map, no compass, no guide….

It’s also interesting that the firm largely doesn’t really understand itself.  Most of the major features of the its’ operations are the function of creeping commitment style decision that have built up over years, which means these positions are largely not intentional and often not even recognized as being decisions.

So it is an interesting place to be.  We don’t really have a solid understanding of the firm’s current competitive position, let alone a working understanding on why it has worked in some markets in the past, in certain situations, and not worked in other markets in the past, in other situations.  And so from this shaky platform, the intention is to build a strategic intention, implement it, and of course rule the world.  But I suppose every such initiative starts somewhere.

To get the ball rolling, we did a lock in meeting with a small number of business leaders, and hence my title – starting a walk where this is no map, no compass and no guide.

The conversation almost felt like a therapy session, with many of the senior leaders rolling back and forth between customer stories on ‘what matters’.  When these items come up, and I strap in for a 10 minute monologue on what various customers care about, it gets frustrating.  Building a common understanding of what customers care about is useful, but the punch line that comes out of a story on solving a narrow paperwork problem for one particular customer does not a strategy make.

The other side of the customer stories monologue, is the ‘just do it strategy’ (The sales team should sell more, the delivery team should do better, etc) and/or the the everything is fine right now strategy (but we are terrified of how the future will affect us).

Perhaps I am just being a crank – after all it is the first day and there is a handy graph that talks about this,

Perhaps not accidentally, the image looks like a roller coaster.  And I can’t wait.

Is strategy the same as success? NO! We consider a few models for risk management.

What do you do when your business is successful, but you don’t really know why?  How about when the world around you is changing, and customers are getting squiggly and trying out new delivery models?  What then?

For many businesses, the answer is to rejig their strategy and change with the times.  But what does this do to the very risks that initiated this whole process? On the whole, not a heck of a lot.

Strategy by itself may consider various business risks, but ‘doing strategy’ is a process that is fraught with risk, and having a strategy is not the same as being a success.

So risk is always a part of strategy, and success is never guaranteed.  OK, and what can we do to manage that risk?

For this I look to portfolio and gambling theory,and schools suggest a few things that might be interesting.  Specifically,

1) A balanced portfolio of investments is key to risk management.  Put slightly differently, this is the old adage to not put all of your bet in one place. 

In investments, this is often thought of as sizing the value of your individual portfolio positions, so your portfolio and net worth can survive an upset in any one position.

In business, this is akin to running small experiments to test, reject or refine a proposed strategy in a manner that won’t break the business if it is not working.  Retail and product companies do this all the time.

An important corollary to this is a reminder to not wait until your business is in bind before your start trying new things.  It is always good practice to be running alternative bets that may not be correlated to your core business (or may even be inversely correlated), so when the imperative of change comes, you may have experimented with things that can reveal your next desirable strategic position.

2) Be explicit about what you are trying to do – and hold yourself accountable. 

There is no worse sin in investing than sliding into a position you don’t well understand, and do not have a plan for what to do if it starts working against you.  Just about every investor that manages their own book (and many professionals), will have a story on when they did this and got wiped out.  It’s the type of event that can be an expensive, but ultimately very valuable educational experience.

The same dynamic exists in more traditional business – As you take steps to launch your new strategy in a test market, be sure to do so in a meaningful and well articulated way.

Make your assumptions and beliefs explicit, as creeping commitment is a bitch and otherwise you will won’t be able to spot the moment they turn out to be wrong.

Understand as best you can the tradeoffs your new strategy requires, and make sure they are being incurred, as without these tradeoffs, it is unlikely you are truly doing anything meaningfully different from your existing approach to business.

3) Know and manage your odds  

Look for situations or strategic alternatives that offer attractive odds, ie 10 dollars wagered for  a potential 30 dollar payoff.

It may sound like common sense, but this is where you want to be, and if the baseline approach doesn’t offer this kind of payoff structure, take a hint from private equity and start value engineering relentlessly.  If value engineering doesn’t work, follow the gamblers approach and recognize when it doesn’t make sense to play.

4) Have an escape plan if things go ugly.

I’ve always been told that success is being 51% right.  So that means you need to be able to successfully navigate what happens the other 49% of the time.

In investing, this means cutting loser positons quickly and protecting your core capital.  Business is pretty much the same.

The best thing here is to have pre-established quitting points, and firmly established success criteria to guide your decisions to double down or expand your commitment to the strategy.

Just a few ideas….  Feel free to share back any more that strike you thought the comments section.

Book Review: How to Sweet-talk a Shark

So on advice of a friend, I picked up a copy of How to Sweet Talk a Shark by Bill Richardson, former Governor of New Mexico.  Gov. Richardson has had an impressive career in politics, spanning several administrations and has acted as an ambassador to the United Nations, as well sometimes official, sometimes unofficial envoy for the United States in its engagements with various dicey situations in the 3rd world.

The book takes the form of a conversation wit the Gov, where he recounts some of the pinnacle negotiations from his career.   And quite a career it has been, it seems like whenever a US citizen gets in hot water with a dictatorship, Gov Richardson was on the roster to work it out.  In his book, he recounts such negotiations with practically every member of the Axis of Evil, from North Korea, to Iraq and others.

Perhaps importantly though, most (but not all) of the scenarios come from his work overseas although I’m sure if he was to ever write a second book on the backroom politics at home, it would be even more interesting.

The book is entertaining – Gov Richardson is a natural story teller and his interesting career has given him some great material.  It does promise ‘Strategies and Stories from a Master Negotiator’,  I found this part a bit light.

The stories were great, but strategies not so much.  Still though, it is an interesting read, especially if you want to get peak behind the headlines.  Check out a copy on Amazon – How to Sweet Talk a Shark

When do you need to think strategy?

Some people are strategic by nature.  It is in their bones and they just do it, without a lot of effort or thought.

But for most people, thinking strategically doesn’t come easy.  It is mentally challenging and when you start chasing data and insights down the rabbit hole, its hard to know what really matters or when to stop.  If you are part of a team (or leading it), there is the even larger challenge of forming a point of view and winning over your peers.

It’s not easy, so hence the question, When do we actually need to think strategy?

My answer to this is that building and communicating strategy can have benefits for pretty much any pursuit that is characterized by scarce resources and competition.  Strategy helps to the extent it works as a tool to help you compete more effectively and maximize your claim. (of course your strategy can always be wrong, but that’s a whole other post).

Let’s also face facts, scarce resources and competition are pretty much baked into everything we do.  Without scarcity, our friends in the dismal science would be out of a job, and likewise all of the time we put into strategy wouldn’t look so smart any more.

On the bright side, working through a problem strategically doesn’t have to be complicated.  It can be as simple as establishing a clear end objective, identifying intermediate goals that are supportive of your objective, and then communicating these goals clearly to all players on the team. (think about your typical sports team).

Or, on the heavier side, it can involve mobilizing resources on a global scale, integrating layers of deception and leveraging all of the tools of statecraft and business (witness current events in the Ukraine).

Or it can be very personal, like entering into a crucial conversation with an objective in mind and road map on a few things you will try to bring the other person along to get there.

Thinking strategy is something we all do all the time in various parts of our lives.  For some people, it is unconscious – they have a set of implicit preferences and beliefs, and they act on them.  Sometimes it works, sometimes it doesn’t, but hey, that’s life.

For other people however, strategy is a skill, and one that can be improved with study and practice.  These people work hard to examine their preferences and beliefs, and then seek to adapt to the competitive challenges they face.  This approach is a bit more unsettling, as considering many courses of actions comes with its own set of challenges, like reluctance to commit fully or slower time to implement.

Implicit or deliberate, which is the better approach?  Well, that’s an interesting question, and history is the only judge that matters.

Wisdom from Children’s Stories

Another great post on the topic of strategy to call out, this time from James R Holmes at the Diplomat.  Full link included Here.  It’s a great but light hearted dive in to the complexities of pinning strategy down and formulating it in a useful manner.  And it is all wrapped up in one of the classics from Aesop’s fables.

A quick intro from the post,

The strategist Aesop relates a tale of misbegotten strategy. A group of mice convenes to determine how to outwit their archnemesis, the Cat. An enterprising young mouse devises an ingenious strategy, pointing to “the sly and treacherous manner in which the enemy approaches us.” The mice, he reasons, could escape the feline’s clutches easily once alerted. He therefore urges “that a small bell be procured, and attached by a ribbon round the neck of the Cat. By this means we should always know when she was about, and could easily retire while she was in the neighborhood.”

The council of mice applauds the proposal — whereupon an older, wiser mouse asks who will bell the Cat. Silence descends. The fable concludes with the sage mouse intoning that “It is easy to propose impossible remedies.” Or, as a former teaching partner of mine puts it, anyone can come up with an impossible plan!

 As if coming up with the ideas alone wasn’t hard enough.  Reading the full post is highly recommended.

 

Strategy is a Word that is Completely Over Used

What a great way to start this little project off.  I recently caught a blog post titled ‘Strategy is One of the Most Misused Words in Business’ and thought, wow, that’s something I can really agree with.   The full story is definitely worth reading and can be found at http://switchandshift.com/strategy-is-one-of-the-most-misused-words-in-business.

The thrust of the article is great but really it comes to the idea that when most people are talking strategy, they really mean ‘objectives’, or ‘plan’, or whatever.  pretty much anything but true strategy.  I’ve started mentally substituting the word ‘objective’ in whenever I see strategy, and it actually fits pretty well.

So what does this mean to the practitioner?  The obvious point is that thinking and talking strategy is hard work, particularly when most of the people around you probably don’t really get it.  I recently was part of a corporate planning session where the concept of strategy was batted around and I found that we were permanently mired in the world of tactics, operational objectives and perhaps most troubling, self delusion (ie we happen to be doing well at x, so that is our strategy).

So if you live in that sort of a reality, how the heck are you supposed to do strategy?  and by do, I mean formulate an approach for strategy, implement it, measure its impact and adjust.  Well, I’m still working this one, but I do have a few working theories,

1. Shrink the circle.   If you find that you are surrounded by ‘objectives as strategy’ people, shrink the circle until you have a core group of people that either get it or are open to learning.  Once you have some momentum, you can always go back and pick them up.

2. Write it down.  Even if you don’t have a high degree of confidence, a good strategy should be focused enough that it can be communicated concisely in writing.  If you can’t write it down, you probably still need to refine your thoughts somewhat.

3.  Be completely honest about your assumptions and required resources.  Anyone can develop an impossible plan, but for a strategy to have value, you must able to implement it in a measurable way.

4. Have a realistic view of trade-offs.  If you strategy doesn’t involve trade-offs, it is a reasonable sign that you haven’t fully committed, or it is not really strategy.

There’s probably more, and I hope to track and develop these ideas over time.   As a closing thought – if you can understand strategy and start to really work it, the payoffs are huge.  We live in a world where most people think operations and don’t really understand the jargon that goes flying around.   And that creates an opportunity for the true practitioners that are out there, honing their skills and building their understanding of the true art of strategy.