5 Problems with Strategy (the word)

The word “strategy” is a confusing mess.

Every day I overhear someone asking “Hey, what’s our strategy for dinner tonight?” or “Wow! What an awesome strategy!” referring to some trick to pick up their dog’s 💩 from the sidewalk¹.

At the same time, I also hear people proclaim that strategy doesn’t matter – that execution is the only thing that matters.

And while I agree that execution is essential to winning, discarding strategy altogether usually means that we’re not paying enough attention to why we’re doing what we’re doing and why we’ve prioritized things the way we have.

In this post, I’m going cover 5 problems with the word strategy which explain why there’s so much confusion about the concept. Most importantly, understanding strategy better gives us a huge leg up in our competitive landscape.

Problem 1: The word Strategy has a huge burden to carry

The first problem with the word strategy is that it has a huge burden to carry.

In English, the word strategy is truly unique. There is no other word that means the same thing as the word strategy.

The phrases “plan of action” or “master plan” seem to get closest, but still fall way short since strategy is so much more than just a plan or a todo list.

Strategy is an important concept with so much nuance. Strategy involves:

  • choosing our objectives
  • evaluating the resources at our disposal
  • understanding the competitive landscape
  • attempting to predict what our opponents and allies might do
  • trying to understand the tradeoffs between all of the possible actions we could take in any given moment
  • and finally choosing what to actually do

Only after we figure all of that out does execution really enter the picture. And even then we can’t just myopically focus on execution. Our strategies must also be dynamic as we implement them and receive new information.

And since there’s no other word that encapsulates all of this meaning, the only word we have – strategy – must carry this huge burden.

That’s why it’s so important to properly define strategy. Which brings us to the second problem with the word strategy: There is no clear definition.

Problem 2: There is no clear definition of Strategy

Not only is strategy a unique word with a big burden to carry, there’s also no clear definition. I’ve spent dozens of hours searching for a good off-the-shelf definition and I’ve never found one – not in the dictionary, not online, not in all of the corporate strategy books I’ve read, and not in the academic business literature from reputable sources like Harvard Business Review.

Even in the most cited and famous article on strategy – titled “What is Strategy?” By Michael Porter – the word is never defined. Three times Porter rhetorically asks himself what strategy is and three times he given a different description.

10 years ago I started studying entrepreneurship and strategy at Stanford for my master’s degree. I recently reviewed my notes from my strategy courses and not once did we even attempt to define the word Strategy. Why? Because it’s really hard.

And one of the biggest reasons strategy is a hard word to define is because the word has at least two distinct meanings.

Problem 3: Strategy is both a process and an outcome

Even without defining strategy, you can see that there are two – related but different – meanings of the word strategy. The first meaning represents the concept of strategy. The second meaning represents a particular strategy.

I like to illustrate this point by using both meanings in the same sentence:

Before the weekend retreat, the executives didn’t even understand the difference between strategy and tactics, but afterwards they were ready to present two strategies to the board.”

You can see that the first usage is about the concept of strategy – in contrast to the concept of tactics. The second usage is about the two specific strategies the executives developed.

For the linguist nerds out there: The difference here is between a countable noun and uncountable noun – also called mass noun. In English, a noun is countable if you can slap a number in front of it and it still makes sense. “There are six chairs in the dining room.” vs “There are six furnitures in the dining room.” 🤔. Chair is countable. Furniture is not. Also, countable nouns take the modifier ‘fewer’ and uncountable nouns take ‘less.’ “We need fewer chairs in the dining room!”

Some nouns – like strategy – have both a countable form and an uncountable form… which can be confusing.

Back in January, I developed a slide to illustrate this idea.

Long story short: strategy can mean:

  1. the process of being strategic, of strategizing, or the field of strategy as a whole
  2. the output of that process – a strategy that you can choose to implement or not

The problem here is obvious: there are 2 distinct meanings for the exact same word.

Problem 4: Tactics are often mistaken to be strategy

The fourth problem with the word strategy is that: Tactics are often mistaken as strategy. This confusion is particularly disastrous for inexperienced strategists.

When we understand the difference between strategy and tactics, we can avoid the latest engineering/marketing/sales/investment/etc fads which are almost always tactics, not strategies. Tactics should always serve our broader strategy – not the other way around.

So while Virtual Reality advertising on YouTube may be the hottest new marketing fad, if it’s not aligned with our over-arching marketing strategy, then it’s a distraction and a waste of resources.

Which brings me to the 5th, and final, problem with the word strategy: When we don’t understand what strategy is, others will take advantage of us.

Problem 5: Business gurus and consultants benefit at our expense when we don’t understand strategy

I’m all for hiring experts, for getting coaching or mentorship when we need help achieving a goal or objective. But too often individuals and businesses are counting on some third party to copy-paste a solution that worked for someone else in an attempt to fix their particular problem.

When we understand what strategy is and isn’t – when we’ve developed a strategy tailored to our objectives, our resources, and our competitive landscape – then it’s usually much more obvious what outside help we need to achieve our goal.

When we don’t fully understand one or all of these components of strategy, handing our money over to some guru to solve all of our problems can be really attractive.

Wrapping It Up

Alright, the 5 problems with the word strategy are:

  1. The word Strategy has a huge burden to carry.
  2. There is no clear definition of Strategy.
  3. Strategy is both a process and an outcome.
  4. Tactics are often mistaken to be strategy.
  5. Business gurus and consultants benefit at our expense when we don’t understand strategy.

I’ve addressed many of these problems by defining strategy (both the process and the output) and by distinguishing strategy from tactics.

¹ Invert the bag, wear it like a glove, pick up 💩, re-invert, tie a knot, and throw away (or, if you live in SF, just leave the bag anywhere you like when no one is looking).

The “Just Plane Smart” Strategy & Activity Alignment

A key breakthrough I really grokked during one of my many silent strategy meditation retreats is that strategy is all about alignment – especially once you fully wrap your head around your goal, your resources, and the competitive landscape. Alignment is what gives systems that 1 + 1 = 3 result and misalignment can bring systems to their knees.

A strategy is a set of well-aligned activities with the aim of occupying a valuable position within a competitive landscape.

For example, synchronous rowing has been proven to be 8% faster than non-synchronous rowing. Further, when oars tangle – which can only happen during asynchronous rowing – someone is usually going for a swim. So if your goal is to win a race, then you should row synchronously.

Southwest Airlines

The classic corporate example of great strategic alignment is Southwest Airlines. Growing up in Dallas, Southwest’s headquarters and home-base, I had a front row seat to the company’s incredible growth into its current position as the largest domestic air carrier in the US (by passengers boarded). Over the past 5 decades, Southwest has delivered tens of billions in value to customers, employees, and shareholders. Remarkably, the company has been profitable for 46 consecutive years – which is completely unheard of in the airline industry.

BTW, even if you don’t care for Southwest as a customer, the lessons from this company – especially around alignment – are quintessential for developing your own strategies.

What’s the Goal?

Before digging into the alignment between Southwest’s activities, we need to know their objective. Southwest’s vision is “to become the world’s most loved, most flown, and most profitable airline.” I’m assuming that they have clear internal definitions and KPIs for most loved and most flown.

Southwest Airlines’ Activity Map

Now we can dig into their specific activities. This is obviously an incomplete list fo their activities, but it’s a starting place to illustrate the importance of alignment.

Southwest Airlines' Activity Map and Strategy

As you can see visually, most of their activities reinforce one or several other activities, resulting in very high alignment.

Alignment Isn’t Risk-Free

Southwest’s strategy is not, however, without its risks. For example, Boeing is Southwest’s sole supplier for aircraft and many parts. The March 10 crash of a 737 MAX 8 in Ethiopia (the second crash in 6 months of that model) and the subsequent grounding of the entire MAX 8 fleet worldwide is clear evidence of the risks of overly-tight alignment. Neither crash was a Southwest flight.

Southwest Airlines' fleet of grounded 737 MAX 8s

(Source: CNN)

Fortunately, Southwest only owned 31 MAX 8s as of Jan 1, 2019 (of a total fleet of 750). But grounding 4% of your fleet is a big deal and Southwest is due to buy or acquire another 37 MAX 8s in 2019 and over 200 MAX 8s over the next 8 years. I’m confident that Southwest will survive the 737 MAX 8 issue relatively unscathed, but the unfortunate events are a clear reminder that even brilliant strategies like Southwest’s are neither permanent nor invincible.

Key Take-Aways

  • A good strategy is inherently well-aligned. Good alignment is the best way to deliver disproportionate value and results (1 + 1 = 3). Poor alignment usually means that some parts of a system are destroying value that was created elsewhere.
  • Tradeoffs are inevitable, but should be deliberate. For example, Southwest chooses to invest heavily in its employees and in ways to reduce fuel costs. A myopic focus on cutting costs would be a huge mistake long-term.
  • While there may be many ways to win, just choose one. Southwest ignores the high-end travel market and focuses on a low cost strategy. The company knows exactly what it is and what it isn’t. And, just as important, they’re disciplined about it. Focus and consistency have the additional benefit of carving out a clear brand in customer’s minds over time.
  • Cut activities that don’t fit (49 services Google has killed, some of which they acquired at great cost) and double down on activities that do fit. YouTube, Android, Google Home, Maps, and Chrome may feel like expensive & unprofitable distractions on the surface, but they actually fit very tightly with Google’s/Alphabet’s core strengths: organizing the world’s data, powerful search, and monetizing intent via advertising.
  • Remember: you have to be crystal clear on your objective before you even begin to worry about what activities to perform or not.

Herb Kelleher, Southwest’s Heart

This short podcast with Herb Kelleher, the co-founder and former CEO of Southwest, is a must-listen. Herb was a living legend until he passed away early this year. I was deeply saddened by Herb’s passing but I promise you’ll laugh out loud if you check it out.

Also, Southwest Magazine did a nice job with an extended article about Herb’s life. The opening story is classic Herb.

Concept: Hidden Competition

One last thing.. writing this piece made me think about a cool concept: Hidden Competition.

When Southwest first started flying in 1971, they weren’t really competing with the major interstate airlines, whose customers were mostly businessmen with expense accounts. Southwest’s quick flights between Dallas, Houston, and San Antonio were actually competing with Greyhound and other surface travel options. For Greyhound, Southwest represented hidden competition and was a key reason Greyhound is only a fraction of its former self and filed for bankruptcy in 1990.

Strategy is Both a Process & an Output

Strategy is both a process and an output.. confusing huh?

I’ve been meaning to make this slide for a while as part of my explanation for why strategy is such a muddy and often difficult concept to understand. In short, the word “strategy” has to carry the weight of both 1) a process and 2) the output of that process. A strategy (the countable noun) is the set of activities that you execute on after using strategy (the mass or uncountable noun) to determine the right activities given your objectives, resources, industry landscape, and your competition.

Tesla: Mass-Market or Niche? Both.

Should Tesla focus on the high-end of the market now and seek an immediate profit and a potentially sustainable long-term niche?  Or should it go all-out to do nothing less than become the major player in the entire worldwide automotive market, taking advantage of its high valuation to raise billions of capital to fund years of cash burn?  These are super interesting questions that I will not address today.  Tesla’s apparent choice in this question is … neither.  It has clearly gone all in, at least in rhetoric, on dominating the automotive market and Elon Musk has announced (at least on Twitter) future new products in nearly every automotive niche.  But at the same time Tesla has refused to leverage its high stock price to raise capital and actually has been cutting back on capital spending and slow-rolling expansion plans.

(emphasis mine)

Source: Coyote Blog

Like Coyote (Warren Meyer), I suspect that not all is right in the land of Tesla. While I’ve praised Elon for publicly laying out a clear strategy for Tesla in the past, launching a “semi, pickup, new coupe, 10K a week m3 [Model 3] production, china factory, Europe homologation, expanded service network, in house body shops, car carrier production, solar shingle, gen 2 supercharger” is far from focused.. or even aligned.

Too many product? Too many markets? Too many balls in the air? Not enough investment? Only time will tell with this one…

Puma is reissuing the dorkiest shoe ever made

A new generation of nerds will finally be able to get their hands on the legendary Puma RS-Computer.

Puma’s RS-Computer shoes, originally released in 1986, were way ahead of their time. For the first time, a pair of running shoes could track your steps, distance, calories burned, and running time electronically, just like your phone or smart watch does today. Now, the German sports company is re-releasing the rare sneakers for the dorks of today. I say dorks because–well, just take a look at this news report from CES 1986.

Source: FastCompany

Nostalgia is always a winning marketing play. Some of the now-adults who grew up wanting these are definitely going to grab a pair, and probably an NES Classic while they’re at it.

Personal Rebranding

Do you need a career makeover? In this episode of HBR’s advice podcast, “Dear HBR:”, cohosts Alison Beard and Dan McGinn answer your questions with the help of Dorie Clark , the author of Reinventing You: Define Your Brand, Imagine Your Future .

Source: Personal Rebranding

Good episode! Read the summary here.

The truth is, the vast majority of people aren’t paying much attention to you. That means their perceptions are probably a few years out of date—and it’s not their fault. With hundreds (or thousands) of Facebook friends and vague social connections, we can’t expect everyone to remember the details of our lives. So we have to strategically reeducate our friends and acquaintances—because they’re going to be our buyers, recommenders, or leads for new jobs.

The original marshmallow test was flawed, researchers now say

I still think self-control is a very valuable trait – even if it’s not as predictive as once thought…

A team of psychologists have repeated the famous marshmallow experiment and found the original test to be flawed. It joins the ranks of many psychology experiments that cannot be repeated, which presents a considerable problem for its findings.

Source: The original marshmallow test was flawed, researchers now say

What a Toys “R” Us Comeback Could Look Like

Toys “R” Us is being resurrected for the holiday season. After filing for bankruptcy protection from creditors in September 2017, it closed all its stores in the United States and United Kingdom earlier this year.

Source: What a Toys “R” Us Comeback Could Look Like

The Toys’R’Us saga continues… previously on Straty:

Silicon Valley Code Camp 2018

Slides


A Developer’s Guide To Strategy (PDF, Download)

Recommended Books:

Strategy

On Strategy: HBR’s 10 Must Reads – Audible

Strategy: A History (Lawrence Freedman) – Audible

Competitive Strategy: Techniques for Analyzing Industries and Competitors (Michael E. Porter)

Entrepreneurial Strategy

Zero to One: Notes on Startups, or How to Build the Future (Peter Thiel & Blake Masters)Audible

Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers (Geoffrey Moore)

The Four Steps to the Epiphany (Steve Blank)

Built to Sell: Creating a Business That Can Thrive Without YouAudible

On Entrepreneurship and Startups: HBR’s 10 Must Reads

The Magic of Thinking Big (David J. Schwartz)Audible

Business Strategy

Built to Last: Successful Habits of Visionary Companies (Jim Collins & Jerry Porras)

Good to Great: Why Some Companies Make the Leap and Others Don’t (Jim Collins)Audible

Who Moved My Cheese?: An A-Mazing Way to Deal with Change in Your Work and in Your LifeAudible

Competing on the Edge: Strategy as Structured Chaos

Book Reviews?

A few more detailed book reviews

Silicon Valley Code Camp 2018

Welcome to Silicon Valley Code Camp, 2018!

I’ve been invited to speak at Silicon Valley Code Camp again – this time in the business management track.

I’m scheduled to speak at 5PM on Saturday Oct 13, 2018 in Fireside D. My talk is titled: A Developer’s Guide To Strategy

I hope to run an improved version of the simulation I ran with the MBA class at Saint Mary’s earlier this summer but I’m not sure I’ll have enough time during the presentation (or even between now and then).

Register here (giant red button).

Note: I wasn’t able to speak or attend last year so I haven’t seen the new space but I understand that there’s only room for about 800 people now (vs 3k previously). I don’t think they’ve sold out yet, but they definitely will.