Do you know the difference between a good strategy and a bad strategy? (Part I)
“All too much of what is put forward as strategy is not. The basic problem is confusion between strategy and strategic goals.” Richard Rumelt
So much talk about strategy and so little understanding of what it is, what it involves, and the difference between a good strategy and a bad strategy. You can call me a little touchy (or a lot touchy) when it comes to strategy and strategy making. I encountered strategy only after being heavily involved in the operational stuff – getting my hands dirty making the ‘trains run on time’. Being new to strategy I made the time and put in the effort (lots of it) to study strategy and strategy making. I do wish more people would do the same then we would not have tons of rubbish being written on strategy by people. Yes, this paragraph is a rant. Now lets move forward and doing something constructive: learn the difference between good strategy and bad strategy. If you don’t care then I suggest you stop reading right now.
What Paul Hagen of Forrester says on strategy
As you might have noticed (if you follow me on Twitter) I make time to keep up with the domains that impact the Customer. During the course of this process I came across a post on the 1to1 Blog by Paul Hagen (“principal analyst, Forrester Research, serving Customer Experience professionals”). Step 2 – Define key of a strategy – got my interest, here it is:
“2) Define key elements of a strategy. There are many different kinds of experiences that companies can deliver…all of which are valid. Witness USAA and Costco, both of which score high marks on Forrester’s Customer Experience Index. A strategy should provide a vision for the kind of experience to deliver, derived from a core value proposition inherent in a company strategy and key attributes of the brand promise that are most meaningful to customers. This “intended experience” should provide guidance about the kinds of activities the company can start (and stop) doing to achieve the end-state. The strategy also needs to articulate the company’s aim for how good the experience should be…does the firm seek to be the best in its own industry or across all industries, or is it merely trying to maintain parity with other firms? This will guide the kind of resources that the firm may need to dedicate to reaching this objective.“
Design the Customer Experience to be in alignment with the Value Proposition
I am in total agreement with the first sentence of Paul’s statement. What he is saying is that there is no such thing as a homogenous customer experience. The customer experience that you design and deliver has to be in alignment with the value proposition that you have communicated to your customers. This is why, in the model below which I developed and use, the Value Proposition feeds into the Customer Experience; the third pillar is Customer Insight – it feeds the creation/refinement of the Value Proposition and the Customer Experience.
The sequence goes like this. Generate insight into customers (Customer Insight). Use this insight to craft a Value Proposition that a customer/market segment finds attractive enough to sign-up for. And deliver a Customer Experience that is in alignment with the promise (implicit, explicit) made through the Value Proposition. Do that and you have happy, even delighted, customers – which is why both USAA and CostCo can score high marks even though the Value Propositions and associated Customer Experience is radically different.
So far Paul and I are in agreement.
Does anyone understand what a real strategy is?
Then he goes on and ruins it for me:
He writes “A strategy should provide a vision for the kind of experience to deliver, derived from a core value proposition inherent in a company strategy and key attributes of the brand promise that are most meaningful to customers……” Hello, anyone at home? A vision is a vision – it is picture of the ‘future’ that you want to bring about. So, I might have a vision of living in Rio and spending my days surrounded by Brazilian beauties, soaking up the sunshine, waited hand and foot, swimming in clear blue waters…. A vision is not a strategy and a strategy does not include a vision.
He continues with “The strategy also needs to articulate the company’s aim for how good the experience should be…does the firm seek to be the best in its own industry or across all industries, or is it merely trying to maintain parity with other firms? This will guide the kind of resources that the firm may need to dedicate to reaching this objective.” Now that sounds awfully like objective setting to me. Maybe I am a little simple and being simple, in my world objectives are objectives and they in turn drive the formulation of the strategy. Continuing with my analogy, if my objective is to be waited hand and foot on the beautiful beaches of Rio, all my needs catered for, then I have to formulate a strategy that allows me to get hold of the money/power that I need to realise my objective. Notice that the objective comes first.
Continuing with my Brazilian (Rio) analogy, let me ask the question: “Why do I need a strategy?” Perhaps the challenge is that I live in the UK, I am penniless and I do not have a passport. Now if that is so then I need a strategy that addresses these challenges – the challenges that prevent me from being in Rio surrounded by Brazilian beauties and being waited on hand and foot. Let’s continue and explore this further.
What are we talking about when we talk about strategy?
The issue at hand is that ‘strategy’ has becoming a meaningless phrase bandied about by all of us (including myself) to mean anything that we want it to mean. In my simplest way of thinking, one needs a strategy in order to outwit intelligent opponents and/or address an important challenge which if not faced ‘promises’ an exit from the game of business. Does that sound like Kodak to you? Which is why monopolists who control valuable resources, that people cannot easily do without, do not need to formulate a strategy: they just have to make sure that they continue to be the monopoly supplier.
The components that feed into and drive the strategy making process include: Challenge (the pain that requires a strategy to be developed); Vision (the future state that you wish to create / bring about); Objectives (the specific, measurable, outcomes that you want); Resources (what resources are ready at hand); and Constraints (these can take many forms political, legal, technological, values that cannot be sacrificed….). If you want a deeper understanding of strategy and strategy making then read this post.
What are the hallmarks of a bad strategy?
Richard Rumelt has written one of the best books (Good Strategy Bad Strategy) I have read on strategy (and I have ready many of them). He says that there are 4 hallmarks that we can look out for when detect a bad strategy. Can you guess what they are? Here are the 4 the hallmarks:
Fluff/ Fluff is gibberish that masquerades as strategic concepts and arguments . It uses “Sunday” words (words that are abstruse / inflated) and esoteric (I call them ambiguous, unnecessarily complex) concepts that create the illusion of high-level thinking.
Failure to face the challenge. Bad strategy fails to recognise and clearly set-out the challenge. Richard points out that if you fail to clearly set-out the challenge (in concrete terms) one cannot evaluate a strategy or improve it.
Mistaking goals for strategy. Richard says that many strategies are just statements of desire (the vision) rather than plans for overcoming obstacles and addressing the challenge.
Bad strategic objectives. Strategic objectives are bad when they fail to address critical issues or when they are impracticable.
I will go into these in more detail in forthcoming posts. In the meantime I wish to leave you with the following statement by Richard Rumelt which, in my view, goes to the heart of the matter: “All too much of what is put forward as strategy is not. The basic problem is confusion between strategy and strategic goals.” Do you think Paul Hagen has fallen into the same trap?