The First Question to Ask of Any Strategy

A great article by Roger L. Martin regarding Strategy.  

Sadly, like the majority of strategies that I read, this firm’s strategy failed my sniff test and for that reason I would bet overwhelmingly that it will fail in the market as well. The test I apply is quite simple. I look at the core strategy choices and ask myself if I could make the opposite choice without looking stupid. For my wealth managers, the opposite of their “where” choice was to target poor individuals who don’t want and aren’t willing to pay for comprehensive wealth management services. The opposite of their “how” is to provide crappy customer service.

The point is this: If the opposite of your core strategy choices looks stupid, then every competitor is going to have more or less the exact same strategy as you. That means that you are likely to be indistinguishable from your competitors and the only way you will make a decent return is if the industry currently happens to be highly attractive structurally. The wealth management company was targeting the exact same clients as every single global competitor and, like every other global competitor, they planned on giving them “great service.”

I recently wrote about the differences between strategies and tactics, this gets to the heart of defining a good strategy.  It is a really interesting take on the definition of the strategy itself.  I am a big fan of differentiation of the a strategy.  Unless your business is the market leader, following the same strategy as your competition is a recipe for disaster.  You will never overtake the leader.  This is an entirely different take on competing with a strategy that is opposite of a winning strategy.  

Most market leaders and successful companies have good strategies.  They make a lot of money and have a lot of customers.  Sometimes as a business you have to take a strategy that is opposite of what those competitors are doing.  For instance, Apple looked at the smartphone landscape and determined their competitors were tailoring their products to business minded individuals, but Apple decided their strategy was not to go after that market, they decided to make a phone for consumers.  Yes this was in their wheelhouse, but it is an example of not following the competition.  Only later in the iPhone's life did it add features to compete in business, but that was secondary. 

DIB Digital Trends Report 2015_EMEA

I'm reading through the DIB Digital Trends Report for 2015 and there is some interesting tidbits.  For one, on Figure 5, what is the most exciting opportunity in 2015 vs last year.  Customer Experience has jumped into a huge lead, while Mobile and Social have fallen.  Why is this?  I believe organizations are starting to realize that both of those decliners are just channels.  Channels for your content to create great customer experiences.  Mobile shouldn't be your strategy any more than email.  I view content marketing and personalization as the same thing.  If your content isn't personal, then work needs to be done on your content.  However, I understand why they are separated here.  I believe multi channel campaign management needs to rate higher on these lists.  This is the engine that will run most of this,

Another interesting section is asking what companies plan on how they will differentiate themselves from their competitors within the next 5 years.  The report states they are surprised that price is only 5%.  I believe organizations will try to differentiate through customer experience, and maybe there is some bias in the respondents, because these companies are probably a little more innovative than the typical organization.  I believe companies tend to fall to price differentiation because it is the easiest way to gain sales and market share.  

Number 1 and 2 are intrinsically related.  As I wrote here, companies that focus on design will constantly look to improve on 1 and 2.  A design first mentality puts the experience and the quality ahead of all else.  Companies who are answering these questions should be looking to change their culture to a design culture before tackling these differentiators, or else the strategy may fail.

Strategy does not work without the culture to back it up.  The fact the respondents have listed strategy before culture leads me to believe these initiatives have a higher chance of failure.  If the culture of the company does not support the strategy, it will take too large of an effort to accomplish being customer first.

These are my thoughts halfway through the document.  Tomorrow I will comment on the next piece of the document.  Very interesting stuff.  Organizations are saying the right things, but with anything, it is all in the implementation.  The next 5 years will be very exciting indeed.

Digital Trends for 2015 | Digital Marketing

Simon Morris writes:

More than 6,000 mar­ket­ing, and ecom­merce pro­fes­sion­als around the world took part in this year’s Dig­i­tal Trends sur­vey, which has been by far our largest response since we launched this annual survey in 2012. Thanks to all of the con­trib­u­tors who took the time to provide their per­spec­tive. I’m pleased to say the 2015 Dig­i­tal Trends report is avail­able now to download.

I can't wait to dig into this report and green some insight on what marketers are seeing.  I suggest downloading and perusing yourself.  

Per­son­ally, what makes this report inter­est­ing to me, is not just the trends but the insight into how a com­pany needs to adapt to cap­i­talise on these new trends. Two aspects are key here: Strat­egy & Cul­ture. As seen with the emergence of cus­tomer expe­ri­ence as an over­ar­ch­ing dri­ver, we aren’t talk­ing about small shifts in your mar­ket­ing organ­i­sa­tion, but the con­scious deci­sion to develop and align your activ­i­ties with the goal of cus­tomer expe­ri­ence at the heart. How­ever, strat­egy change with­out cul­ture change is inef­fec­tive, to quote Peter Ducker ‘Cul­ture eats strat­egy for break­fast’.

These are concepts I have been writing about the last few days here and here.  Adapting to the "mobile first" shift in the consumers, organizations have to change their culture and structure.  The companies that will be successful in the next 5 years will be ones that adapt to these changes in their organizations, to put the customer first and align the organization around customer experiences instead of functional duties.

The Strategic Mistake Almost Everybody Makes

Every business and business model has a finite life. Products come and go. Customer preferences change. As Rita Gunther McGrath notes, competitive advantage is increasingly a transient notion. The companies that last over long periods of time do so by creating new products, services, and business models to replace yesterday’s powerhouses.

Scott Anthony makes some great points in this piece.  I stated in a previous blog how much focus is put on "churn" percentages.  In most industries it is very important to watch churn, however to keep customers as a defensive move will always result in long-term demise.  

Your customers will churn, this is a proven fact.  At what rate and when is always the biggest question.  The key is to have customers churn to your next innovation.  Apple didn't try to prevent churn in their iPod line as a defensive move, they were always on the offense.  Creating new form factors, adding color and video.  At some point they were so much on the offense, they destroyed this business with the iPhone, but I would imagine the positive churn of Apple customers is many times greater than if they would have played defense with the iPod line.  Compare this to Microsoft which has been playing defense with Windows for many years.  They are starting to see that negative churn by only playing defense, which has put them at a distinct disadvantage in mobile.  They played defense so much, their mobile strategy is Windows.  

Portfolio theory has its naysayers, but few argue with the fundamental idea that diversification decreases risks and increases a portfolio’s potential. Do you remember the most efficient buggy whip manufacturer or the most profitable distributor of packaged ice? Of course not.

I don't fully agree with what Anthony has to say here.  Where I disagree is with the size of the portfolio of the business.  Diversification is good if it remains within the core competency of the business.  Too many times businesses diversify into areas where they have little expertise just to increase the portfolio, which causes a loss of focus on the strength of the business.  The best companies diversify within the core, like Apple.  I think the proper strategy is to be the company that causes your customers to churn, this way you keep the customers loyal to your brand and you are always trying to be the next product in your industry.

The Art of Crafting a 15-Word Strategy Statement

Focus: What you want to offer to the target customer and what you don’t; Difference: Why your value proposition is divergent from competitive alternatives.

I don't know about 15 words, but succinct and to the point is the best way to articulate a strategy.  So much time is built constructing long strategy documents that sit on a shelf and are never read again.  A mantra or a short strategic statement become rallying cries of the organization.

I had the pleasure of watching a keynote by Guy Kawasaki where he stated that every organization needed a mantra.  It is something that has changed my way of thinking since hearing the logic behind his statements.  It takes so much inertia to move an organization that having a simple mantra can rally the entire organization around a single statement.  

The focus and difference in the strategy statement proposed by Alessandro Di Fiore are wonderful points.  So many times the target customer is forgotten in an organization.  In an age of growing earnings every quarter and constant pressure on short-term financial results, the target customer gets lost in the shuffle, replaced by revenue opportunities that alienate the target.  The difference piece is key for the organization to understand what they need to deliver to that target customer.  Once the organization understands why it's different, it becomes easier for everyone to deliver on the promise.