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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.

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.

“What is Strategy?” at 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 not sure if I’ll be on the big stage live-streamed again but I’m excited to give my “What is Strategy?” talk for the 4th or 5th time and to continue to incorporate the incredible feedback I’ve been getting.

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).

The dates for the weekend are Oct 13-14, 2018 at PayPal Town Hall in San Jose, Ca. I’ll post my specific speaking slot and location once I have that info.

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.

1992 Debate with Ross Perot, Bill Clinton, and George H. W. Bush

Controlling Outcomes by Controlling Table Stakes

Nielsen estimates that 84 million people watched the first presidential debate of the 2016 election. That was 36.4% of eligible voters and 60.5% of actual voters. Given how many US voters watch the presidential debates, participating in the televised debates is considered a table stake for having a shot at being elected president.

The official sounding ”Commission on Presidential Debates” decides who gets to be on the debate stage. It’s formation and stated purpose is interesting:

After studying the election process in 1985, the bipartisan National Commission on Elections recommended “turning over the sponsorship of Presidential debates to the two major parties”. The CPD was established in 1987 by the chairmen of the Democratic and Republican Parties to “take control of the Presidential debates”. The commission was staffed by members from the two parties and chaired by the heads of the Democratic and Republican parties… (wikipedia)

The League of Women Voters had been the previous host of the debates.

In 1988, the League of Women Voters withdrew its sponsorship of the presidential debates after the George H. W. Bush and Michael Dukakis campaigns secretly agreed to a “memorandum of understanding” that would decide which candidates could participate in the debates, which individuals would be panelists (and therefore able to ask questions), and the height of the lecterns. The League… released a statement saying that it was withdrawing support for the debates because “the demands of the two campaign organizations would perpetrate a fraud on the American voter.” (wikipedia)

Ross Perot’s 1992 bid for president as an independent was disruptive. Perot took 19% of the vote and many believe that had he not run, Republican incumbent George H. W. Bush would have been re-elected instead of Democrat candidate Bill Clinton.

The CPD excluded Perot from the televised debates in 1996.

Changing the Table Stakes

Four years later, the commission changed the rules of the game entirely, requiring that candidates have at least 15% in 5 national polls in order to get on the debate stage. Which polls count are consider to be “national polls”? The CPD decides.

The creation of the Commission on Presidential Debates (a cartel) and the 15% rule clearly benefit the candidates of the two major parties in the United States at the expense of all third-party (or independent) candidates and the voting populace. This legal collusion has been extremely effective at controlling who has a serious shot at running for president and who ultimately becomes president.

So not only is being on the debate stage a table stake, but having 15% in “5 national polls” approved by the CPD is considered a table stake as well.

When structured in this way, table stakes can be a form of moat or barrier to entry. So whoever controls the table stakes can have tremendous control over the outcome. Check out Jeffrey Pfeffer’s Power: Why Some People Have It and Others Don’t for a few great examples of establishing and controlling tables stakes in corporate environments – even if you’re at the bottom of the power hierarchy.

Lessons From Build-A-Bear’s Brilliant Blunder

DIY toy taxidermy shop Build-A-Bear had decreed that Thursday, July 12, was Pay Your Age Day in shops across the U.S., Canada, and the U.K. The self-explanatory event lets bear lovers make a furry friend, stuff it with love, and pay a dollar amount that matched their current age—a payment model that vastly favored spoiled 1-year-old knee-biters over 50-year-olds who just needed something to love.

What could go wrong

The 21 year old company was likely planning on leveraging nostalgia from grandparents and parents while building loyalty with a new generation of toy-lovers. Now was an especially great time for this campaign as Toys”R”Us has shut down hundreds of stores worldwide and there’s marketshare on the table to capture – especially for a focused, experiential brand like Build-A-Bear.

It was a good plan and a great marketing idea, save for one tiny little problem—the fans loved it too much. In fact, they loved it so much that they started lining up before Build-A-Bear Workshops opened in the U.S. The long lines made the company nervous about crowds and maybe bear riots, so they sent out a statement on social media saying it would limit the number of people who could take advantage of the deal due to safety concerns.

Customers were pissed – especially those who lined up around the block. Plus no one wants to hear you make excuses, blaming “safety concerns” and “local authorities.”

Sadly, all Build-A-Bear had to do was test this genius, goodwill generating campaign at a single store and then in increasingly larger markets to work out the kinks. To make matters worse, Build-A-Bear didn’t jump on the bad press and make anything of it.

Takeaway: Launch slowly – even if you have a great idea – so that any mistakes in your plan or missed assumptions don’t spiral out of control.

Boring Company Flamethrower

The Boring Company Not-A-Flamethrower

The Boring Company Not-A-Flamethrower was casually announced by Elon Musk in this Dec 10, 2017 tweet.

The remaining promotional hats sold out quickly.

Seven weeks later:

100 hours later:

The Boring Company – Musk’s underground drilling company – sold 20,000 Flamethrowers in about 100 hours. That’s $10 million in top line revenue and millions more in free press and captured mind space.

Opps.. It’s not called a Flamethrower. It’s a “Not A Flamethrower” – a brilliant regulatory decision, drawing even more attention (and desire) to Musk’s scheme:

Musk drew some heat for this move – many criticizing him for making a flamethrower for his “rich friends” instead of giving a bunch of money to charity or ending world hunger.

What the non-strategic thinker missed was that Elon wasn’t making a toy for his friends. They have plenty of toys. This was a brilliant marketing stunt.

Of course it’s not just a stunt. The flamethrowers were real. And so is the deal the company just signed with the city of Chicago. The Boring Company will build an 18 mile high-speed (150mph) skate-based tunnel transit system between O’Hare International Airport and downtown Chicago.

Bottom Line: If Musk can get people excited about city planning and tunneling, you can get people excited about what you’re doing.

Entertaining review of the Not-A-Flamethrower pickup day in LA.

Capitalizing on Changing Beauty Norms

It’s one thing to be obsessed with our looks, our beauty…

As the demands of beauty rise, not only do we have to do more all the time, but their nature also changes. Beauty becomes more important. It has begun to function as an ethical ideal. Beauty is often what we — rightly or wrongly — value most. It is what we think about, talk about and what we spend our time and hard-earned cash on. If we are good at beauty, we feel we are good, virtuous; if we are bad, we feel we are no good, almost no matter what else we do. We judge others too on how they look. We make assumptions about what people are like and how successful they are. We read character traits directly from looks, and we start doing this as young as four years old.

…but it’s another thing to confuse beauty practices for health practices.

Consumers are allowing themselves to be manipulated by obvious marketing tactics and the beauty industry is capitalizing on the opportunity. These marketing and advertising tactics remind me of the diamond industry, which I’ve written extensively about.

Let’s take hair for instance. “Shaving, plucking, waxing and lasering” have become so normalized that hair removal is no longer a “beauty practice” but has been “redefined as a hygiene practice, as part of so-called “routine” maintenance.” And these redefined social norms aren’t just for celebrities – they’re for everyone.

Hair removal becomes something we have to do, a requirement. It is not an option to refuse — like teeth-cleaning, but without any of the health benefits. Beauty practices are indulgent and optional; hygiene practices are necessary and required. You don’t have to do a beauty practice; you do have to do something that is required to meet minimum standards, just to be normal. Once the shift to routine is complete, the fact that this is a demanding beauty practice becomes invisible.

The Beauty Market

The Economist reported in 2003 (Real Men Get Waxed) that the US male grooming market was $8 billion. 15 years later, that number has nearly tripled and is on pace to grow by 12% annually.

(source)

Bottom Line: Societal norms and their changes drive huge shifts in spending – especially when there’s strong emotional connection or potential for embarrassment. What shifting & emotionally-charged norms can you capitalize on?