The Four Audiences for Strategy (or Why Am I Creating a Strategy Again?)

I regularly see that developing strategy is viewed as an inconvenience that takes people away from doing their real jobs. Sometimes strategic planning becomes a rote process that organizations do at a particular time of year. Or maybe you're developing a strategy because your boss asked for your team's strategy and you didn't have a good answer.

But if time is money, why do organizations invest precious resources in developing strategy?

What's the point of developing strategy?

To answer this question, look at the four audiences for your strategy:

1. EMPLOYEES - People who are engaged in their work perform better. One of the keys to being fully engaged is to have a meaningful vision of the future and way to get there that's believable. Get your team involved in the process of developing strategy and then communicate, communicate, communicate the results with them. On top of engagement, the strategy will guide your employees in the hundreds of decisions they make (some big, most small) on a weekly basis.
2. BOSS/BOARD OF DIRECTORS - It's important that your boss (or BoD) believes in you. This is part of "managing up". You need the support of your superiors to be successful. Develop a strategy that aligns with the bigger goals of the organization. Make your boss/board/superiors look good and help them to achieve their goals.
3. INVESTORS - I use this term loosely. In the case of a business, you may have outside investors. For a team within a larger organization, think of your investors as those who control resources. You have to show them that you have a compelling strategy for achieving success in order to get access to the resources (money, people, tools, mind share) you need. 
4. YOURSELF AND YOUR TEAM - This is the CORE of why you develop strategy! The strategy creates the foundation for how your team will operate. What things will people work on (and, just as importantly, NOT work on)? How will individuals and the team focus time, money and other resources? (A good reference is Principle 1 in the Bain article Strategic Planning That Produces Real Strategy.) What metrics will you track to measure progress and, ultimately, success or failure? 

Two final notes to leave you with. First, be explicit with the four audiences about why you are investing the organization's time and resources in strategic planning. Address head on the toxic mindset that it's a waste of time. You need the smartest minds as engaged in the process as possible!

Second, be sure to think through your audiences at the beginning of your strategic planning process so that the resulting strategy will be viewed as positively as possible by all stakeholders. No one wants a "meh" strategy or one that gets put on the shelf without impacting the organization. Go build a great strategy that produces great results for your organization!

The One Question You Must Answer Before Setting Strategy

To illustrate this point in advance, let's start with a quick exercise. For the next minute, brainstorm ideas on how you could make $10 cash (or €10 or £10) in the next 4 hours. Go ahead. I'll wait.

Ready?

Some of the typical responses I hear include washing cars, delivering lunches and begging for money. Here's the "a ha" follow-up question:  Which of your ideas could you turn into a $1 million business? How about $10 million or $100 million? I'm still waiting for the day when someone jumps up enthusiastically and runs out of the room to pursue their brilliant idea!

How the question is framed shapes your thinking and, therefore, the outcome. The same goes for strategic planning.

So the one question you must answer before setting strategy is

"What is our goal?"

Is the goal to grow the business to $10 or $100 million? That's the difference between grabbing a bucket and sponge to wash cars and creating a highly valuable, scalable, differentiated product.

Is the goal to achieve market share of x% or profitability of y%? That's the difference between Google's strategy to maximize Android market share (according to Statista, Android market share is approaching 90%) and Apple's strategy to maximize profits (according to Strategy Analytics, Apple Captured Record 91 Percent Share of Global Smartphone Profits in Q3 2016). Yes, I know that this isn't exactly an apples-to-apples (no pun intended) comparison, but you get the idea.

To get to the best possible outcome from your strategic planning process, start by getting all of your stakeholders aligned on the most important question to answer:  What is our goal?


[P.S. I'm pretty sure that I did not come up with the $10 strategy exercise above...but I can't remember the source and I can't find one. I'm happy to acknowledge the source if anyone knows it.]

Apple's Brilliant Pricing Strategy

Setting prices is one of the most difficult things to figure out in Marketing and Product Management.  There’s no simple formula to follow.  On the upside, psychology is being applied more frequently to understand buying decisions and there is more and more research on the subject.

Here’s an article that I just read on Business Insider about Apple’s pricing for the new iPhone 6:  Thanks To Apple's Financial Geniuses, The iPhone 6 Isn't Just A Smartphone — It's A Magic Profit Machine.  Brilliant.  When I made my iPhone 6 purchase decision, I never hesitated to upgrade memory to the maximum amount.  The basic level model with 16GB of storage isn't even an option that I would consider.  Neither is the mid-level upgrade--I already have a hard time with my old iPhone that has 64GB of storage.

The high price of the extra storage is annoying to me—but absolutely worth it.  As a result, Apple is making $160 extra in pure profit from me.  And the Apple money-making machine has shifted to an even higher gear!

Failure Is Not An Option!

…IF you’re Chuck Norris.

But none of us can even dream of such a lofty perch. So, as it turns out, failure actually IS an option.

Take Apple, for instance—arguably the most innovative and most successful company in the world. Well, they made a big investment in Ping …aaaannnddd they just killed it. (Do you even know what Ping is???)

The message is pretty simple: If you want to be innovative, you have to be willing to fail.

The Myth of Data Driven Decision Making

The idea of guiding decisions (business or otherwise) on data sounds so …infallible. Unfortunately, the same data can mean different things to different people. You see, we humans have a tendency to seek data that supports our original point of view. What’s worse, finding contradictory data may actually make us believe in the wrong view EVEN MORE. “Like an underpowered antibiotic, facts could actually make misinformation even stronger” wrote Joe Keohane in How Facts Backfire (The Boston Globe).

Wait. What???

Brendan Nyhan, a political scientist at the University of Michigan, describes this tendency as “backfire”. True, this is research on politics and not on decision making in business... but I, for one, am not going to disregard expert information that indicates that I may be making poor judgments! :^)

In fact (ha!), Scientific American’s 60-Second Mind reports on another study that shows that We Only Trust Experts If They Agree with Us.

Consider this in the context of decision making in the business world. For example, if an employee proposed one strategy and then changed her mind based on new data, wouldn’t that be viewed negatively? Most of the time, the answer is yes—and that’s a problem.

The moral of the story for those of us in the business world? First, be aware of your human flaws and make a conscious effort to be genuinely open to new data and new expert opinion. Second, commend that employee who overcomes her human tendency to (only) validate her point of view and changes her mind!

Fail Your Way to Innovation

If you want to be consistently innovative (either personally or as an organization), you must be willing to fail. In my last post (If You Want to Innovate, Hire a Kindergartener), I noted that one of the keys to success was a willingness to try something, learn, make adjustments, and repeat.

One recent, large-scale example of that is Google Wave which Google just stopped developing.

While Wave was a failure, it was not a failure for Google. I agree with Karim Lakhani's assessment that "Google Wave Decision Shows Strong Innovation Management". Here are the reasons why:

• Google established performance benchmarks and remained committed to them.
  
• Google shut down Wave quickly. Too often, we become emotionally attached or equate a project's success with our own. The result is a tendency to continue wasting time, money, and resources.
  
• Google learned. Elements of the technology will be incorporated into other products. No doubt that Google gained valuable market lessons, too.
  
• Google's willingness to fail--and fail publicly--reinforces its culture of innovation. Senior Vice President Urs Hölzle wrote, "We are proud of the team for the ways in which they have pushed the boundaries of computer science." What top-notch professional wouldn't want to work in an environment like that?
  

As leaders, we must break the mindset of our organizations that failure is necessarily bad. On the contrary, failure done properly (how ironic!) is a strong indicator of your organization's ability to innovate.

If You Want to Innovate, Hire a Kindergartener

CEO's are the exceptional few who lead the world's businesses. One would expect them to be among the elite in terms of intelligence, insight, leadership, and other key attributes. So how is it that kindergarteners regularly outperform CEO's in a test of innovation?

It turns out that the way we are taught to approach some challenges--whether through our experiences in the business world or at business school (the kindergarteners beat MBA students, too)--doesn't achieve the best results. The Marshmallow Challenge is a simple test of teamwork and innovation. According to Tom Wujec, a Fellow at Autodesk, "On virtually every measure of innovation, kindergarteners create taller and more interesting structures."

The key is that people in the business world are trained to find a single "right" plan. They spend virtually all of their time on planning and then attempt to execute that one plan. Kindergarteners, on the other hand, experiment with different solutions from the beginning and revise along the way. This cycle of prototype --> refine --> prototype again is what enables the little kids to beat the CEO's and MBA's.

The lesson for business leaders is to stop rewarding the "perfect" plan and punishing "mistakes". Forethought and planning are still essential--but don't count on those to deliver successful innovation. Encourage experimentation and testing--even if that means "failing". Your teams will learn, revise, and produce better results.

By the way, when Wujec offered a prize worth $10,000 to the winning team, all teams failed to produce a standing structure!

Tom Wujec: Build a tower, build a team

Running Time: 7:22