We will explore the importance, if not the urgency, of driving simplification and focus through an organization. Saying “no” is one of the hardest actions to take, and yet it is one of the most important. To be successful strategically, an organization has to have a purpose, mission and vision, but also has to be grounded in data to understand what is happening today and what is likely to happen tomorrow. We will review examples of segmentation, portfolio prioritization, 80/20 and operational principles and how to align an organization’s structure and process to a strategic set of priorities.
Are You Strategic?
One of the most over-used questions about assessing the capabilities and strengths of a business leader is “is s/he strategic?” After all, this seems to be mandatory…how can one lead an organization without being strategic? But what exactly does “being strategic” mean, and as a leader, how do you take actions to define and champion strategic direction?
What do these phrases have in common?
- To use our imagination to bring happiness to millions
- Enabling Americans to perform extraordinary acts in the face of emergencies
- To defend America by dominating air, space and cyberspace
- A relentless ally for the individual investor
- To give people the freedom to fly
- To save people money so they can live better
Each of these phrases are a Purpose Statement, as outlined in the excellent book It’s Not What You Sell, It’s What You Stand For, by Roy M. Spence, Jr. In order, these are the purpose statements for (1) Disney; (2) American Red Cross; (3) United States Air Force; (4) Charles Schwab; (5) Southwest Airlines; (6) Wal*Mart.
The purpose statement is, quite simply, a business or organization’s fundamental reason for existence and will drive all the actions and decisions taken by an organization. It is the start of every strategic direction and conversation within an enterprise, and is critical for defining both the strategic direction as well as the cultural direction of the company. Clarity of purpose does something critical when defining the strategic direction:
Great leaders understand one of foundations to “being strategic” is simplicity. If a leader does not know the “why”, s/he will never be able to explain it to others, much less rally people around it. It also allows the next important directional aspects to be defined, which are the Mission and Vision.
- Mission: Encapsulates the strategy that will be delivered in order to deliver on the purpose.
- Vision: A future state or worldview (your world, not necessarily THE World) as your mission is executed and purpose is delivered.
A Synopsis: Strategic Clarity
Back to the question above…are you strategic? What makes someone strategic is not some genetic strength, university education or company background. What makes someone strategic is the ability to understand and embrace the “why” (Purpose & Mission) and “how” (Differentiation); the tenacity to drive simplicity and focus; the clarity and passion to be able to share, rally & inspire others through organizational alignment & clear metrics.
Strategic Clarity is best represented in a cycle, as shown below. As you develop your strategy, you are answering the five big questions: why, what, who, how, when & where. We’ve already covered the importance of the purpose, mission and vision.
The next step, the what, is pivotal: portfolio segmentation. In all my experiences and my current consulting with large and small firms owned by private equity, this is the most challenging and complex area. What makes portfolio segmentation so challenging? It forces each business to make data-based and well-grounded choices – what to focus on and what to de-prioritize or eliminate? It challenges an organization as to whether it understands applicable trends, and whether an opportunity places an organization in the blue ocean or the red ocean? If you are not familiar with this strategy, check out this link to the founders at http://www.blueoceanstrategy.com
Once you have developed your portfolio segmentation, the next critical step is defining the who…end-user definition. Stated simply, who is your core target, and what are their needs, motivations and behaviors? If you are a B2C business, you will want to create a very clear consumer target profile, including demographic, psychographic and behavioral information. If you are in a B2B business, you will want to have a clear understanding of your core customers, what drives & motivates them, and what partnership attributes are most valuable to them?
Next in the cycle…the how? Here you are pursuing the pathway to growth and meaningful differentiation. There are several types of documents you will want to use at this stage to crystalize this information. Consider:
- Porter’s Five Forces
- Strategic Intent
- Plan on a Page
- Positioning Pyramid
You may use a combination of these documents, but before you focus on which one, remember what this state of the cycle is all about. Here you are defining how you are going to compete in the portfolio segments you have identified, and how you are going to connect with your end users. The how stage is where brand clarity & positioning, innovation stage-gate & pipelines, and competitive assessments all become measuring devices for quantifying the power of your point-of-difference.
I’ve used all of the examples highlighted above and want to share with you some frameworks that are very effective.
The Plan on a Page is an important synopsis of your strategic vision. I call it your elevator speech, and it is something that every person in your organization should know, and your leadership team should be experts in rallying and communicating its points to all levels of staff. If you have a focused and clear strategy, you can recite it in the 30 – 40 seconds it would take you to ride down the elevator with the CEO. A Plan on a Page drives discipline and focus on the most important strategic planks and tactics that must be delivered for the business to succeed.
Many companies have used a version of a Strategic Intent. There is not a correct model, but you need to be specific. Ethereal or generic statements, or broad, unfocused information is not actionable. Important elements to include are:
- Business definition statement. What business are you in?
- What are your core business areas: End Users, Route(s) to market (also known as Channels), and Products?
- What behavioral and tactical areas will be key to your success?
- How will you measure success?
Those with a consumer marketing background will be very familiar with the Positioning Pyramid. It is in this one-page document you clarify your brand essence, your target user, your brand personality, emotional & functional benefits, and your features and attributes (also known as your “reasons to believe”).
Finally, the when and where? Or, the metrics, resources and investments you will be making and/or using to determine success. Typically you will have a few types of metrics or key performance indicators (KPI’s):
- Brand health & “leading indicator”
- Organizational design & cultural
- Capital investment & payback
- Income statement
We’ve covered the Strategic Clarity Cycle. Remember, each step is important as you define the why, what, who, how and when/where. Below is a table to help you remember each step, which question you are answering, and a sample of applications you can use to create clarity & impact.
Business Model Design
Once the heavy lifting on the above strategic elements is completed & aligned, you should have a clear business strategy. As you’ve defined these critical elements, you will have likely noticed some things, such as:
- Your organizational design is not built specifically for your business. You might have people in the wrong roles, not enough talent or skill in a certain area, not enough bench strength or confusion on role/responsibility sorts.
- Your operations – what you order/make, how you accomplish, where and when you source, how you deliver, how effectively you service, what can be simplified and how you measure – need attention and adjustment.
- Your incentives, particularly with sales, need to be revised so you can drive the correct behaviors and aligned activity to support your business strategy. If, for example, you have a core KPI as operating profit growth, and sales is only compensated on gross sales, you will continue to have misalignment and unnecessary tension within the organization.
- Your commercial team – that is, how you market, sell & activate your brands & products – needs to be evaluated and revised. Do you have strategic skills? What about merchandising expertise, digital marketing application or marketing operations capabilities like pricing? What about insights & analytics?
- Your innovation process flow, and your pipeline, will need to be revised and reinvigorated. You have to define how you will innovate (internally/externally/combination), how and when cross functional engagement will occur, and how the innovation team will be able to support baseline vs. revolutionary products.
The first step is reviewing the organizational design, which I will cover in more detail on the next page.