• Innovative Strategies That Create More Profits

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Insights, not data or information lead to better strategic decisions.

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Insights, not data or information lead to better strategic decisions.

 

We know that strategy starts with a comprehensive diagnosis of the problem, which will lead to insights. At that point, you have to make a series of important decisions. To start, you have to decide how much data do you need before you can make a decision? If all you did was a search on Google, you could get millions of articles, etc. The problem is you can’t read them all, and you would have to verify the information in each item.

The mindset of most executives is that you need lots of data on whatever the problem is before you can make a decision. That may be true, but what data? Christopher Frank and Paul Magnone wrote a book on “making decisions without drowning in information” that may change your mind about data, information, insights, and decisions.

They state that you need to start your quest for data by asking, “What is the essential question you need to answer to make the decision.”  In other words, you only need data that will help you answer that essential question. Therefore, you should be able to eliminate most of the data. The data or information may be interesting but not relevant. The question will tell you what data you need.

Once you have your information, you can begin triangulating this information. This triangulation will enable you to gain insights that you did not have before, answer the question, and make better decisions.

In summary, start the decision-making process by asking the essential question you have to answer to make the decision. Gather only the data that relates to that question. Compare the data points to get the information you need. Then, by triangulating the relevant information available, you will get the real insights you need to make the decision.  

You may have to rethink your mindset about what data you need and how much data you need to make carefully thought out timely decisions.  

 

 

Why Do Some Strategies Fail?

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Why Do Some Strategies Fail?

 

If you ask leadership why strategies fail, you will get a lot of reasons including market conditions, economic instability, and a plethora of macro problems that would derail any strategy. However, before giving any specific examples, you have to remember that the initial strategy, those initial insights that resulted from your diagnosis, are hypotheses and have to be tested and verified like any other hypotheses. Remember, the J C Penny example and not testing and validating their hypothesis. Here are some common reasons why some strategies can fail.

Mistaking goals for strategy

Professor Rumelts mentions a CEO who defined his company’s strategy as  “pushing until we get there.” For him, the strategy was a goal, which is a common mistake.

Overly complicated strategic objectives

Objectives must spell out the particular steps needed to achieve the strategy. A common issue is a strategy that is overloaded with objectives. A strategy is a simple statement like Apple’s Think Different. Don’t put together a list of objectives that would take years to achieve.

Failure to identify the main problem

Defining the problem can be difficult. It may be challenging to recognize or facing the real problem that may be complicated, or when several people are involved, each person could have a different view and definition of the problem. When the problem isn’t apparent, the strategy will start in the wrong direction.

Fluffy language

Rumelt defines fluff as a type of nonsense hidden as strategic opinions or concepts. Rather than telling the obvious with clear and simple to understand words, people sometimes use obscure and inflated words, intricate drawings, and statements to appear analytic and knowledgeable.

This point is more of a reminder that not everyone has the same definition of a word or concept. How many definitions of “America” would you get from ten people, ten?

The cohesiveness of the team

To be successful, the entire team has to be on board with the strategy; This takes constant communication with team members. Also, it is essential that any new hires agree and support the strategy before they are hired. It is too hard and too disruptive to try to convince them after they are employed.

Overconfidence in one’s decision-making ability

We all make decisions based on our belief that we are right, Yet, if you were asked to estimate, with 90% certainty, something you were not familiar with like the population of Los Angeles, your estimate would probably not be correct or the estimate would be so wide it would be worthless. Sometimes we need to ask ourselves if we are right or think we are right. Remember, until tested an verified, our strategy is an estimate with hopefully 90% certainty.

There are lots of other reasons why strategies fail. It takes a lot of time and hard work to create a successful strategy, but, it’s worth it.  

 

Six Different Ways To Diagnose Your Problem

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Six Different Ways To Diagnose Your Problem

 

In this article, we want to talk about different ways to diagnosis a problem in our hunt for insight into the solution to the problem. There are several useful approaches one can use. Some are very well known and others may be unfamiliar,

Depending on your problem, you might want to pick one and go through it step by step, or you can choose the one you like. My suggestion is to look at and use all of the parts of each one.

The more information, contrasts, and comparison and patterns, you can get the better your chances of coming up with the perfect insight.

Here is a one-sentence summary of each of the methods you can use to diagnose your problem. We will cover each one in separate, future articles.  

The first one will focus more on analyzing the structure of your industry and developing a strategy of maximizing profits.

The second will look at analyzing a very competitive environment and creating a strategy that helps you create a unique position or even changes the definition of your industry.  

The third and fourth analyses focus on how you can get more creative in your analysis of strategy and innovation.

The fifth is a different way to look at data and information to keep from being overwhelmed with data when you only have to gather the data you need to answer the essential question you need to solve the problem and make a decision.  

The sixth and last diagnosis I want to present is one of my favorites. It is visual thinking. About 40% of people learn better using visual information. This method is problem-solving with a little fun tossed in.

We will begin discussing each of these methods in upcoming, separate articles so we can go deeper into each one of them. However, we need to cover a few additional things first like why do some strategies fail.

Getting To An Agreed Definition Of The Problem

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In the last article, we ended with a definition of a strategy as a simple description of how your company will exploit the opportunity you have identified and do so in a way that captures a significant share of your selected market and at the same time, puts your competitors at a disadvantage in this market.  

Our research shows that of all the problems businesses have, one of the most critical is a clearly articulated strategy. About 80% of CEOs say that strategy is very important. But, only about 50 % have a strategy. Many CEOs said they had a strategy but when asked what it was, they would give a mission statement or define goals.

In an executives study by PwC, the consulting firm found that 79% were concerned their strategy was not clear, and 73% though their strategy was not meaningfully different from the competition.

That study also found that companies that got their strategies right are 3X as likely to report above-average growth and 2X as likely to report above-average profits.

Before we go deeper into creating a strategy, I want to say a little more about the kernel we talked about last time.  A strategy is more than the kernel, but if the kernel is absent or missing, you will have a problem. Once you determine the kernel, it is much easier to create, describe, and evaluate a strategy. It allows you to approach the task like a doctor who makes a diagnosis, then describes a therapeutic approach, and then prescribes a solution or prescription.

In business, we are often talking about change and competition, but sometimes the problem could be internal to the organization itself.

Starbucks is an example.  In 2008, they were experiencing flat or declining same-store traffic growth and lower margins. So they began to question: how serious was this situation? Are we reaching saturation? Were their opportunities for expansion overseas? Was their differentiation vanishing? Management people came up with different definitions of the problem and consequently, different diagnoses.

Here is the problem. None of these problem definitions, by themselves, was actionable. In other words, each suggested a range of things that might be done. Also, none of these diagnoses could be proved to be correct, and each was a judgment about which issue was predominant.

Therefore, the diagnosis was a judgment about the meaning of facts. What is a fact? Understanding what a fact means is a critical discussion, and we will talk about it in another article. However, for our purposes here, we will say a physical thing, a bridge, a ballpark, etc. is an indisputable fact. If the fact is not physical, it is a fact because of an aggregated consensus of a  group of people who believe it is a fact. For example, 49% of people think George is smart, and 51% of people think George is dumb.

Consequently, Starbuck’s problem was “ill-structured” (per Richard Rumelt), meaning no one could be sure how to define the problem or the actions that would be required to solve the problem.

Therefore, because the problem was not well defined, the diagnosis or the conclusions or solutions could not be put into a real strategy based on observed facts. More analysis was required, or they had to use a diagnosis based on an educated guess.

With an explicit agreement as to the problem, your diagnosis should replace the overwhelming complexity of the problem with a simple story that calls attention to the critical aspects of the problem.

A simplified and agreed-upon definition of the problem that makes sense of the situation allows you to engage in further problem-solving.

General Policy and Cohort Action

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In addition to diagnosis, we also need to look at the other two parts of the Kernel, the general policy, and cohort action. In addition to diagnosing a problem and having an insight into your strategy, it is also essential to have a coherent strategy — one that coordinates policies and actions.

Many companies go after several or many objectives rather than focusing and coordinating their policies against one objective. Your strategy gains strength when it’s focused and coordinated.

Also, once you understand the Kernel (diagnosis, general policy, and cohort action), it is much easier to create, describe, and evaluate a strategy.

The General Policy is for dealing with the challenge. You need an overall approach to deal with or overcome the obstacles identified in the diagnosis, and a set of cohort actions that are designed to carry out the general policy.

This guiding policy outlines the overall approach for overcoming the obstacles highlighted by the diagnosis. It is “guiding” because it channels action in specific directions without defining precisely what will be done. It also directs and constrains action without fully defining its content.

This policy is not a goal or a vision. What the general policy does is define a method of grappling with the situation and ruling out vast numbers of possible other actions. Remember Apple; their strategy was to break with the status quo (computers were for businesses) and empower individuals and their general policy was only to produce well designed and easy to use computers (you had to be a techie to use computers at that time).

This general policy gives you an advantage. It anticipates the actions and reactions of others; it reduces the complexity and ambiguity of what will be pursued,  it exploits the leverage inherent in concentrating your efforts, and by creating policies and actions that are cohort rather than responses that cancel out each other.

The third part of the Kernel is coherent action. A strategy is about action. Actions have to have an impact, actions need to be coordinated, and they must build upon each other, and focus the company’s energy. The strategy will determine what actions should be taken.

A strategy is about deciding what is essential and focusing resources and actions on that objective; It can be challenging because focusing on one thing means leaving out others. Remember, you have to think narrow, and own that space first to become more prominent.  

How To Set Your Company Apart From Your Competition

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Strategy: How to set your company apart from

your competition and control your destiny

In this module on strategy, we are going to focus on creating unique, insightful strategies, corporate or functional like marketing to help you and your team turn your startups into a business and if you are an established company to accelerate your growth again.

Whenever you talk about strategies you have to define what you mean by a strategy because the word has become so overused and because people confuse strategy with goals, growing your business 20% per year for the next three years is not a strategy, its a goal.

Having a strategy is critically important and often is the difference between a ho-hum business and a spectacular business. Richard Rumel in his book “Good Strategy / Bad Strategy” has the best definition of strategy I’ve seen. It’s simple and it’s practical. He says the “Kernel” (the minimum requirements) of a strategy are:

A diagnosis of the problem or opportunity and from that diagnosis, creating insight to solve the problem or exploit the opportunity.  

Then, you need to define the general policy you will use to achieve the goal. This requires deciding what the company will do and what the company will not do. And the will not do is very important because you have to conserve resources and focus on the goal.

And finally, defining the specific, focused, coherent actions you will take to realize the goal. And again because resources are limited.  

Southwest Airlines is a quick example of a good strategy. In San Antonio, Texas in 1972, Rollin King was filing bankruptcy on his small regional airline and was being helped by Herb Kelleher, his lawyer.

At the end of the meeting, Rollin said he had a great idea (insight) and drew a triangle and at each point wrote: San Antonio, Houston, Dallas. Rather than running a small airline that served small towns, why not run a small airline that served big cities. They could avoid the Texas Civil Aeronautics Board, which would mean they could operate pretty much as they wanted. They both agreed it was a crazy and brilliant idea.

The general policy was that they would fly short routes into large cities, they would avoid hubs (where the big airlines dropped off and picked up passengers) fly into small airports (like Love field which was more convenient for passengers) They would/could lower fares because of operating efficiencies.

Their cohesive action (it took 4-years to get operational)  included hot-pants wearing stewardesses and “free” fifths of Chevis scotch for passengers who purchased full fare tickets.

Today, they are the largest low-cost airline, and in 2018, and they are the only airline that has been profitable every year they have been in business.

To contrast this, J C Penny is an example of a bad strategy. This story also makes another point. This example also illustrates the point that strategies can also be risky. Well. Strategies are hypotheses, and like any hypotheses, they need to be proved and validated.

Remember when J C Penny’s was in trouble, and the board of directors brought in Ron Johnson from Apple (he was an experienced retailer and had designed the Apple Stores (which get the most revenue per square foot of any retail store). His strategy was to make JC Penny stores more like Apple stores.  

He made many changes without finding out if his customers liked what he wanted to do. He changed how the merchandise was laid out. Instead of the merchandise displayed in groups, like the boy’s department and the girl’s department, he changed the store layout to be like small boutiques. He also did away with discounts and changed the name to JCP. Then he spent a ton of money remodeling all 1,200 stores in 12 months.

The results were disastrous. JCP customers were not like Apple customers. They liked their discounts, etc. and the board fired him after one year.

A strategy is a simple description of how your company will exploit an opportunity you have identified and do so in a way that captures a significant share of your selected market and at the same time, puts your competitors at a disadvantage in your market niche.

General Policy and Coherent Action

In addition to diagnosis, we also need to look at the other two parts of the Kernel, the general policy, and coherent action. In addition to diagnosing a problem and having an insight into your strategy, it is also essential to have a coherent strategy — one that coordinates policies and actions.

Many companies go after several or many objectives rather than focusing and coordinating their policies against one objective. Your strategy gains strength when it’s focused and coordinated.

Also, once you understand the Kernel (diagnosis, general policy, and coherent action), it is much easier to create, describe, and evaluate a strategy.

The General Policy is for dealing with the challenge. You need an overall approach to deal with or overcome the obstacles identified in the diagnosis, and a set of coherent actions that are designed to carry out the general policy.

This guiding policy outlines the overall approach for overcoming the obstacles highlighted by the diagnosis. It is “guiding” because it channels action in specific directions without defining precisely what will be done. It also directs and constrains action without fully defining its content.

This policy is not a goal or a vision. What the general policy does is define a method of grappling with the situation and ruling out vast numbers of possible other actions. Remember Apple; their strategy was to break with the status quo (computers were for businesses) and empower individuals and their general policy was only to produce well designed and easy to use computers (you had to be a techie to use computers at that time).

This general policy gives you an advantage. It anticipates the actions and reactions of others; it reduces the complexity and ambiguity of what will be pursued,  it exploits the leverage inherent in concentrating your efforts, and by creating policies and actions that are coherent rather than responses that cancel out each other.

The third part of the Kernel is coherent action. A strategy is about action. Actions have to have an impact, actions need to be coordinated, and they must build upon each other, and focus the company’s energy. The strategy will determine what actions should be taken.

A strategy is about deciding what is essential and focusing resources and actions on that objective; It can be challenging because focusing on one thing means leaving out others. Remember, you have to think narrow, and own that space first to become more prominent.  

Have you been through this process for your company? Even if you have strategies have to be updated as time and technology changes. Maybe its time to re-think your strategy.

Start With Why

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Before we begin the discussion of strategy, I want to mention the idea of pre-strategy, which I define as the thought process you go through before you start work on your strategy. When do you ask yourself why? Why do I want to do this? Many people think that goals or the mission statement are the strategies. Not so. A strategy is how you get to that goal.

If your goal is aspirational like wanting to save the world from global cooling or you are committed to curing cancer in the next five years, that is wonderful. And that aspirational goal will attract other, dedicated people to your cause. But the only way you can reach that goal is with strategy.

If you believe that blue light from your computer is harming your vision, and the product you have invented, eliminates that problem, you will attract other people who believe as you do. But you still need a strategy to sell your product or service.

The only point is that you don’t mistake goals and beliefs with having a strategy.  A strategy is problem-solving. It is about how you accomplish that goal or achieve that dream.

What’s The Shape Of Your Pipeline?

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Jeff Hoffman wrote an article where he talks about the shape of your pipeline. Individual salespeople generally have a good handle on their pipeline. But management does not, Management needs to keep watching the shape of the sales funnel as a metric in order to get a better understanding of the pipeline and the status of the people in that pipeline, 

What is the shape of your pipeline? 

Do you use the traditional funnel, broad at the top and then gets continuously more narrow as it gets closer to closing? Let’s say there is a  statistical relationship of 3x the number of leads to closes. Therefore, salespeople need to get 3x the number of leads to closes if they are going to meet their quota.  

However, a better-looking funnel is shaped like a  champaign glass, which is wide at the top and narrows quickly down the stem to the base. Thie idea, of course, is to qualify prospects quickly so you can get rid of poor-prospects and have more time to work on real prospects. Naturally, this requires a well-designed qualifying system, But, it would be well worth the time an effort it takes to get that qualifying system. Then multiply that by the amount of  quality sales time gained,

The real prospects are in the stem of the champagne glass. These prospects have a 1.25 statistical probability of closing. Therefore, in the lower stem, you need 1.25 real pre-close prospects to meet a closing sale. And, much more time for the salesman to work on these potential prospects to meet his quota.  

Make an illustration of your pipeline because it’s an easy way to see where you are, and then keep track of the numbers (leads vs. closes) over time so you can plan your sales forecast more accurately and with less consternation.

If you know someone who needs to change the shape of their funnel, forward this post to them. Maybe it will help. 

 

 

Do you want to make the right decision or be right? 

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When you are working in a startup, decision making is difficult because there are so many unknowns. And you can’t get enough information to decide in a reasonable time frame.

Often, others will disagree wholly or partially with the founder’s “facts.” However, unless we are talking about physical objects, “facts” are simply one person or one group’s aggregated opinions. That implies there can be many different facts about the same fact,  

However, some founders believe that every decision they make must be right. But what is more important than being right, is making the right decision. You can only do that if you believe you are fallible. 

If your decision doesn’t work out, admit it. You can quickly change course and think about why you made that decision. Study your decision-making process. Learn from it. That’s how you gain the knowledge that will help you when it’s time to make the next decision.

 If you know someone who has to always be right, only send this to them anonymously. 

Jim Zitek/ https://https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com 

 

 

Persuasion Requires Understanding And Empathy

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To be persuasive, you have to spend a considerable amount of time getting to know your audience. What is it that they want to hear, not what you want to tell them. 

A key element of persuasion is empathy (the feelings desires. wishes, fears, and passion of the audience). Persuasion comes when you stir their emotions. The best way to achieve empathy is with a story that relates to their situation. 

Everything you say and do must serve the needs of the audience and if you are guided by the audience, you will be successful. An important way to achieve understanding and empathy is to change your focus from features to benefits. 

A feature is a fact about you or your product or service and may not be relevant, but a benefit is always relevant. People need a reason to act and that reason must be theirs, not yours.

Think about this. Give the audience a fact and some context as to why that fact is important. Then, give them the benefit of that fact. If you don’t have a benefit, you don’t need that fact. 

If you know someone who needs to turn skeptics into believers, tell them about this post. Maybe it will help.