Dov Gordon: Spitting In the Wind, A Single Obvious Insight to Focus and Sharpen Your Strategy.

I remember reading that more than 90% of people believe that they are better looking and funnier than average; better drivers, too. It often seems that more than 90% of executives believe that they are better than average strategists. But can this really be so?

Many executives find themselves frustrated when leading strategic discussions. The deliberations take numerous turns, many – or even most – of which do not move forward. Like an infant who can’t quite crawl, we reach for what we want and find that we have moved backwards or in circles. The loudest, most charismatic or most senior voices tend to dominate and these are not always the most informed and most objective. When there finally appears to be agreement – it is often mere submission.

When it comes to strategy, there is too much ego and not enough understanding.

We tend to become very attached to “our” ideas about how strategy should be formulated and we forget that there are objective tasks to be done.

The missing link in strategy is this: We need to forget our definitions of strategy and begin to deeply understand what we are trying to accomplish.

I was sitting with Richard, the COO of a $130,000,000 distributor, discussing a problem they were having. "You know, Dov, yesterday I used your approach to strategy when presenting some ideas to the team," he told me.

Since I hadn't yet shared anything with him personally but had sent him my audio book, I asked "Oh, did you listen to the audio book?”

"No. I just looked at the model. I am familiar with all that stuff already," he said. "I studied strategy with Professor So-And-So who is widely considered to be the foremost strategic mind in the country."

"Really," I said, unimpressed. “With all that you know about strategy, I have one question for you. What is the difference between a strategy and a plan?”

"Strategy is the WHAT and a plan is the HOW," he replied.

"You mean that strategy is a goal? It’s a kind of vision? It’s what you want to achieve?" I asked.

"No, it is more than just a goal. It is also what you plan to do to get there," he said.

"So a strategy is both what you want to achieve and your plan for reaching your goals?" I asked.

Now he was stumped. And perplexed. Like so many others before him, I had quickly shown Richard that neither his MBA nor all he had learned from his prestigious professor helped him really understand this tool we call “strategy.”

We often sit around the same board room table, debating strategy without a clear – let alone a common - understanding of what it is.

Double Bracket: At a recent seminar on strategy, I began by asking the group, “So what is strategy, anyway?”

Two partners were seated in the back. One said “Strategy is where you want to
get to. It’s your big-picture goal.” Simultaneously his partner blurted out that “Strategy is your plan for how you are going to reach your goals.”

I couldn’t have scripted a better demonstration of why the ideas that follow are so necessary.

2. Don’t Define it. Understand it!

Any strategy formulation process should meet the following four criteria:

1. It should provide a big-picture context so that everyone knows what the mosaic will look like with all its tiles.

2. It should be simple yet sophisticated and flexible enough to handle the inevitable complexities.

3. It should help you zero in on the details and help you answer the four most fundamental strategic questions:

i. What products will we offer and not offer?

ii. What markets will we serve and not serve?

iii. How do our target markets need to perceive us in order to want to do business with us? [This leads you to your competitive advantage.]

iv. What key capabilities do we need in order to successfully create that perception so that our target market comes and buys our products and services?

4. It should leave you with a simple statement, no longer than six or eight pages, that everyone can read and understand what they therefore need to do next. If you end up with a book (as you will if you hire the major a strategy firms) you have probably just engaged in glorified market research, not strategy.

The common approaches create more confusion than clarity. For example, here are three common ways of thinking about strategy:

1. "[Strategy comprises] those policies and key decisions adopted by management that have major impacts on financial performance. These policies and decisions usually involve significant resource commitments and are not easily reversible."

2. “A strategy is a long term plan of action designed to achieve a particular goal, most often ‘winning’. Strategy is differentiated from tactics or immediate actions with resources at hand by its nature of being extensively premeditated, and often practically rehearsed. Strategies are used to make the problem or problems easier to understand and solve.”

3. "Integrated actions in the pursuit of competitive advantage."

The first definition is just so much verbiage. The second sets up strategy and tactics as being differentiated by their degree of premeditation. (How do you measure that?!) The third certainly doesn’t help us know what to do next and it confuses strategy and planning.

Fortunately, there is a smarter way.

These two pyramids are identical except for their titles. The left-hand pyramid deals with The Strategic Marketing Sphere – the company towards the outside, its target markets. The right-hand pyramid deals with The Strategic Leadership and Management Sphere, the company towards itself, its employees and capabilities.

The terms on this pyramid border on cliché. Yet they are grossly misused precisely because we give them definitions when definitions are incapable of capturing the whole picture. Instead of defining we will simply say that each of these concepts answers a question. When faced with a question, we know exactly what to do next: answer the question.

Let’s begin with The Strategic Marketing Sphere, at the bottom left and follow the arrows.

Mission

Instead of defining “mission” we simply say that when we answer the following questions we have our “mission statement”:

· What do I / we really care about?

· What do I / we really enjoy?

· Why are we uniquely qualified to do something about it?

Every organization must be based on core values, a reason for being. By answering these questions you have explained your reason for being and you have a mission statement. As simple as that. This is the foundation for every future decision and activity.

Vision

Vision answers these questions:

· Where do we want to be at a particular point in the future? (One year? Three years? Five years? Etc.) Specifically:

Ø Which products do we want to be offering – and not offering? Why?

Ø Which markets do we want to be serving – and not serving? Why?

Vision is like a picture on the wall. Look at it and describe what you see.

Strategy

Strategy answers this question:

· “For each target market, how do they need to perceive us in order to want to do business with us?”

Ultimately, we do or don’t do business with people or companies because of how we perceive them. You will choose one restaurant for a quick bite to eat in the middle of your work day and another for a romantic anniversary dinner. You choose based on your perception of what each restaurant will give you.

Tactics

Tactics answers this question:

· “What can we do to move from where we are today to a place where our target markets perceive us as the company they want to do business with?”

Tactics would include anything from what features to include or exclude in your products to what marketing and sales tactics to use and not use.

If you push your way up the left side, you will automatically roll down the right side.

Beginning at the bottom left with a clear mission: what is important to you and why you are uniquely qualified to do something about it. That is your foundation for determining what products you will offer to which markets. (You have now moved up to vision.) A deep understanding of your target markets at the strategy level tells you how they need to perceive you in order to want to do business with you. (Strategy level.) If you choose your tactics (Tactical level) only after you have that deep understanding, you will effortlessly roll down the right side. Here’s what it looks like…

The various marketing tactics you use will lead your target markets to perceive you as the one they want to do business with. (You are now down at the strategy level – you’ve created the required perception.)

They will therefore buy. (You are now down at the vision level. Vision, for the most part, is a sum total of many transactions.)

And as long as you are working on something that you believe to be important and valuable you are fulfilling your mission.

Simple, isn’t it?

4. The Strategic Leadership and Management Pyramid

Let’s take a look at the right-hand pyramid, The Leadership and Management Sphere, moving from bottom to top.

Mission is the same. One company has one mission.

Vision is also the same (What does it look like at a particular point in the future?) however we now add some detail to the picture. We now ask:

· “What key capabilities do we need in order to successfully create the right perception [which will be our competitive advantage] so that those target markets will want to buy our products?”

The answers to this question will help you clarify what kinds of people, talent, character, tools, machinery, locations, offices, etc. you need.

At the strategy level we ask essentially the same question as we did on the Marketing side. However on the Leadership and Management side, our target market is our internal constituents – our employees.

· We want to attract great people and we want them to perform at their peak, so… “How do they need to perceive our company in order to be driven to perform at their peak?”

Tactics refers to those dozens or hundreds of things we do to keep our organization ticking. What kinds of meetings do we have? What kinds of salaries do we pay? Do we stock our labs with cutting edge equipment or our competitor’s throwaways? What kind of training do we provide? Etc. These and numerous other details influence how our employees perceive working for us. The question to ask is:

· “What can we do so that the kinds of employees we want working here will perceive us as the place where they can excel?”

Again, follow the arrows up the left side of the pyramid and you’ll roll down the right side…

If our values and reason for existing are clear (Mission); and if we are clear as to what talent and capabilities we need to achieve the goals we set when working on The Strategic Marketing Sphere pyramid (Vision); and we develop a deep understanding of how those people need to perceive us in order to want to perform at their peak (Strategy); and if we then choose our policies and internal practices based on this Clarity, Clarity and Understanding, we will roll down the right side…

…Our management practices – our tactics – will lead top people to perceive us as a fantastic place to work. (Strategy.) Those people will join us and give it their all, building the key capabilities we need. (Vision.) Finally, as long as we are working on those things we deeply care about and enjoy, we are fulfilling our mission.

What we have here is a very simple “Context.” This provides us a genuine understanding of what we are trying to accomplish with our strategy formulation. We now understand what strategy really is – because we’ve asked all the right questions instead of trying to articulate just the right definition.

There’s more. Following the case study, we will review some subtle nuances that will deepen your understanding still further.

5. Case Study[1]: The Four Seasons and the Culture of Service Distinct In Degree and In Kind.

The story is told about the wedding guest who arrived at a Four Seasons hotel only to

discover that he was underdressed; the wedding was black tie. A low-level tuxedo-wearing manager realized that he was about the same size as the embarrassed and disappointed guest. On his own initiative, he took the guest to the in-house tailor who quickly made all the necessary adjustments so the guest could go on and enjoy the wedding. The truly amazing thing is that this is only one of many such stories told about the Four Seasons.

How does a company create a culture where its low-level employees take such an

interest in the well being and satisfaction of the company’s clientele?

The Four Seasons Hotels and Resorts was founded in 1960 by Isadore “Issy” Sharp. Since then it has grown to a chain of more than 70 hotels and resorts in more than 31 countries. They are widely considered to be the most exclusive chain of hotels and resorts. For more than 21 years now their hotels have consistently won more AAA Five Diamond Awards than any other hotel chain in the world.

It is also noteworthy that in 2007 the chain Double Bracket: When it comes to strategy, there is too much ego and not enough understanding. was purchased for $3.8 billion dollars by two men who could afford to buy anything in the world that they want: Bill Gates and Prince Alwaleed Bin Talal. They chose to buy the Four Seasons, I presume, as much for its cachet as anything else.

Did we mention that the Four Seasons is also consistently high on lists of the best companies to work for?

Let’s walk through The Context of Strategy™ using The Four Seasons as a case study.

Mission: What do we really care about? What do we enjoy? Why are we uniquely qualified to do something about it?

Issy Sharp cares about The Golden Rule: Do unto others as you would like others to do unto you. Around 1980 he decided that this would be the guiding value of his growing chain of hotels. They would treat all others – customers, employees, partners, suppliers – as they themselves would want to be treated.

“There was nothing new about this, of course,” said Sharp. “What was new was that we enforced it.”

Indeed, Sharp has noted that this was a very difficult time for him. He realized that some of the leading executives who had helped his company achieve its early success were not going to make the switch to behaviors required by a Golden Rule culture. Yet, he enforced it and let them go.

How would Issy Sharp answer our Mission questions? Probably like this:

“We care deeply about treating all others the way we ourselves would want to be treated. We enjoy it, too! And we are qualified to do this because we have the clarity of purpose and the discipline to enforce Golden Rule behavior at all levels in our company.”

Vision: What will the company look like at a particular point in the future? Specifically, what kinds of products and services do we offer – and not offer? What kinds of markets do we serve – and not serve?

When Sharp started his hotel company, hotels were either very large with around 800, 1,000 or even 1,500 rooms or small with about 200 rooms. The larger hotels could afford to be luxurious by spreading the cost of amenities over a larger customer base. However, their size was also a disadvantage: they lacked the warmth and personal attention of the smaller hotels. A mid-sized hotel was considered “impossible.”

Sharp wanted to create hotels that could be both luxurious and warm and personal.

The market he wanted to serve was the high-end luxury and business traveler who was willing to pay extra for a truly exceptional experience.

Strategy: How do they need to perceive us in order to want to do business with us? [What will be our competitive advantage – as perceived by the people we want to do business with?]

An important insight that helped Sharp create a previously “impossible” hybrid was his understanding of how the high-end traveler really perceived luxury. Others defined luxury by elegant surroundings. Sharp realized that nothing was as important as time. He recognized that if they could make people’s hotel stay not just pleasant because of the surroundings, but also one in which they would feel so well taken care of that they cherish the time they are in the hotel his target market would flock to the hotel, pay premium rates and tell their friends. He refers to this as service “distinct in degree and in kind.”

Tactics: What can we do to lead our target market to perceive us the way they need to perceive us in order to want to do business with us?

At the Four Seasons they must have asked some version of “What can we do to lead high end business and luxury travelers to perceive our service as ‘distinct in degree and in kind?’”

Four Seasons was first to offer what is now standard in most luxury hotels and even in many motels: shampoo, large bars of soap, free shoe shines, non-smoking floors, fitness rooms and real live people, not machines answering the phones.

These tactics are easily copied and have since been implemented by nearly everyone. So how has the Four Seasons maintained their lead? See the Subtleties and Nuance section below for our answer.

Now, let’s take a look at The Leadership and Management pyramid.

Once we know what products we want to offer to which markets and we understand how each market needs to perceive us in order to want to do business with us, we move to the inside of the business.

Mission, as we said, is the same on both sides.

Vision: Where do we want to be at a particular point in the future? Specifically, what key capabilities do we need in order to successfully create that perception which will lead our target markets to want to buy our products and services?

More than anything else, The Four Seasons needs its employees at all levels to treat each other, their guests and suppliers according to the Golden Rule. This is not a simple thing! Yet they knew that if they could build a Golden Rule culture, they would be perceived by their target markets as the best of the luxury hotel and resort chains.

Strategy: How do our employees need to perceive us in order to want to do business with us; meaning, to perform at their peak?

At the Four Seasons, they probably asked something like this: “How do our employees need to perceive working here in order for them to eagerly provide a level of service that our guests will perceive to be distinct in degree and in kind?”

Well, they probably need to feel valued and cared for. What organizational tactics, policies and procedures will achieve that?

Tactics: What actions can we take to create the required perception?

At a time when most hotels treated their employees as low paid replaceable cogs, The Four Seasons hotel treated their employees according to the Golden Rule.

They provided high levels of training and career tracks for even the lowest level employees. Employee facilities and food are the same or similar to what is provided for guests. These and many similar tactical steps grew out of their strategy which grew out of their vision and mission.

A most incredible story: When Southeast Asia was hit with that terrible tsunami in December of 2004, the Four Season resort on the Maldives Islands was seriously damaged and forced to close. Sadly, this would have meant that hundreds of employees would be left without work just when they needed it most. Yet, what Sharp and his team did was remarkable. In Sharp’s own words:

“The tsunami forced our Resort to close, putting hundreds out of work at the moment when they needed income most as they started to rebuild their lives and communities. We couldn't let that happen.

“Instead, we sent them to our other properties around the world - including properties in the United States, in Dallas, Palm Beach, Jackson Hole, Los Angeles, Maui and Washington. In true Four Seasons fashion, they have become a dynamic part of the teams at these hotels, embracing our guests with their caring service.”

Imagine you work at a Four Season in Palm Beach. You come to work one morning and find that there is someone new working beside you. You ask a few questions and learn that he has just arrived, at your employer’s expense, from the Maldives where he had lived through the tragic tsunami. You learn that your company has taken it upon themselves to send all its local employees around the world in order to continue to employ them while rebuilding. How would you feel towards the company employing you? What kind of loyalty would this create? How would you treat guests at your hotel?

Master the following nuances and your trot will become a canter and your canter a gallop.

A. Clarity > Clarity > Understanding > Execution.

The Mission level is about clarity. We are each born with a mission and it remains with us for life. Over time our mission – what we truly care about, enjoy and are uniquely qualified to do something about – doesn’t change much. But it DOES get clearer. Our values, clearly articulated, form our mission.

Vision is also about clarity. We need absolute clarity as to which products we want to be offering – and not offering, which markets we want to be serving and not serving, and what key capabilities we need and don’t need.

Strategy is about deep understanding. We are looking to influence people to act. They will only be influenced if they feel we deeply understand what they care about.

The tactical level is about execution or implementation. Your tactics will succeed – meaning they will create the required perceptions – if you build them on the foundation of Clarity, Clarity and Understanding. Unfortunately, most companies rush to the peak itching to get to work. Bob Mager said it very well: “Too often we confuse activity with progress.”

B. The Red Line: Us vs. Them.

The line between vision and strategy should be thought of as a stark red line. Mission and vision is about you. It is about your values and what you care about, the kinds of products and services you want to be offering and the kinds of people you want to be serving.

However, strategy and tactics are about them – your target market and what they care about. It is about your employees and suppliers and what they care about. Your actions, your tactical steps, must speak directly to what they care about – or they won’t care.

If you find yourself in a situation where your target market just doesn’t perceive any value in your product, you’ve got to go back down the pyramid. No tactics in the world will help you when they just don’t perceive value – or sincerity – in what you are offering.

The strategy question has been carefully worded: “How do THEY need to perceive us in order to want to do business with us?” It is NOT “How do WE WANT them to perceive us.” There’s place for what we want below the red line. Once we cross the red line, it is ALL about them.

A talented architect recently shared his frustration with me. Everyone he talked to about his ideas for environmentally friendly “sustainable architecture” loved his ideas. Yet no one was willing to invest.

A quick look at one of his promotional pieces immediately revealed the problem. He was trying to sell his values and people weren’t buying. He should be talking about what his target market already values and show how his ideas will give it to them. Then everyone will be happy. They may never care about the environment the way he does, but so what? They will be living in environmentally friendly homes and he will have the pleasure of seeing his ideas come to life.

The light went on for him. That’s what I enjoy.

C. Now You Clearly See Why Definitions Confuse…

The Context model makes it clear that strategy really happens on two levels and in two different spheres. Remember, there are FOUR fundamental strategic questions:

· Which products will we offer and not offer?

· Which markets will we serve and not serve?

· What will make those markets perceive that we offer them advantages?

· Which key capabilities do we need to successfully create that perception and sell those products to those markets?

Notice the fascinating dynamic! The first two questions take place on the vision level of The Strategic Marketing pyramid. The third question takes place on the strategy level of the same pyramid. The fourth question takes place on the vision level of The Leadership and Operations pyramid.

The questions are split between us and them; they exist on both sides of the red line. No definition can capture this dynamic and incomplete definitions confuse, they don’t clarify.

It gets better… (or worse).

D. So, What’s A “Strategic Plan?”

People often use “strategy” and “strategic plan” interchangeably. Even McKinsey is guilty. However, a plan is simply a series of tactics; it is a collection of activities you intend to do.

Suppose you have a women’s clothing store and you want to grow your pool of repeat customers, your might plan the following:

1. We will have a sale of up to 50% off everything in the store.

2. To publicize this and draw people into the store, we will advertise in our local newspapers and on the radio.

3. When people come in the store we will ask to add them to our email list in exchange for a chance to win a shopping spree.

4. Once or twice a month we will mail list-only specials and advance notice of new offerings.

Each item here is a tactic – something you will do; an ACTION you will take. Strung together, they form a plan.

Is your plan strategic? It depends.

If you took the time to develop clarity on our mission, clarity on our vision and a deep understanding of your target markets – and your plan is built on that clarity, clarity and understanding, then you have a strategic plan. It is almost certain to create the right perception in the minds of the right people. You pushed your way up the left side and can expect to enjoy the thrill of rolling down the right side.

But if in your fervor to just do something you rushed to the top, your “strategic plan” is a wish list.

Double Bracket: Tactics are like a balloon. On their own they will neither bounce nor fly.
It’s what’s inside that makes one slip and the other one soar. To make this perfectly clear: Imagine you are holding a red balloon and I am holding a blue balloon. You let go and your balloon soars up through the clouds. I watch, mesmerized and eager for my balloon to do the same.

I leave go. To my great disappointment, my balloon falls to the floor.

What is the difference? Obviously, not the balloon but what you have inside. Your balloon held helium; mine – hot air.

Two companies in the same industry can be using essentially the same tactics in an effort to attract the same clients. Yet one company will succeed and the second will flop. What’s the difference?

Simple. Tactics are like a balloon. On their own they will neither bounce nor fly. What matters is what you have “inside.”

Do you have clarity, clarity and a deep understanding? That’s your helium. If you don’t, your tactics won’t work because all you do have is hot air!

Remember how the Four Seasons developed its edge by offering full sized bars of soap, shampoo, etc.? We pointed out that these tactics are easily copied. Today everyone offers this and more. Yet the Four Seasons has maintained their lead. How did they do that?

It has to do with the red and blue balloons. While other companies were merely emulating the Four Seasons, the Four Seasons had actually pushed their way up the left side of the pyramid. They were clear on their mission and vision and they had developed a deep understanding of their target markets. So their tactics – their balloons – are filled with helium. Most other chains have jumped straight to the peak of the pyramid and copied the tactics. Their tactics are filled with hot-air and will sink not soar.

E. Where Does Marketing Fit In?

Marketing is another one of those words that means many things to many people – and often falls flat when we need it most.

We generally avoid definitions in favor of focused questions. But after we have the foundational principles of The Context of Strategy™, we can use them to define elements that are overlaid. Marketing, for example.

With what we’ve developed so far, it is quite simple. Marketing simply refers to that collection of tactics we use to create the right perception in the minds of our target markets. If our marketing is based on clarity, clarity and understanding, it is “strategic.” Otherwise we are spitting into the wind.

F. Stay Away from S.W.O.T.