"Clarity of direction, which includes describing what we are going after, as well as describing what we will not be going after, is exceedingly important at the late stage of a strategic transformation." —Andrew Grove, former CEO, Intel
Think back to when you were a kid. Can you recall a time when you got lost? Maybe it was at the mall, a supermarket or museum. Maybe it was just for a few moments when you couldn’t find your mom, dad or aunt Susan. Can you recall the feeling? Were you anxious, frightened or downright terrified? And, do you remember the joy that came with finding them again?
Becoming lost can be a quickly-relieved scare for a child, but being rudderless and without direction in business can be a source of chronic frustration and failure. In a study of 89 companies, the group that emerged with both superior profit and sales agreed with the statement, "Strategic planning in our enterprise has led to an improved competitive position." Unfortunately, in an APQC study on the skills managers need versus the skills they possess, the number one skill deficiency identified was strategic planning.
For you and your organization to be successful, it’s critical to understand how to set strategic direction. In looking at 100 companies, we found that more than 70 percent of successful businesses started from a process of strategic planning. Consider your current plan: is it a clear, concise and motivating driver of your daily activities? If not, sooner or later you will lose significant business to your competitors. Research out of Harvard Business School over a 10-year period showed that companies with clearlydefined and well-articulated strategies, on average, outperformed their counterparts by 304 percent in profit margin, 332 percent in total sales and 833 percent in total return to shareholders. When asked what a CEO needs to focus on, Hewlett Packard Enterprise CEO Meg Whitman said, “First, you need the right strategy. Less than perfect execution against the right strategy will probably work. A 100 percent execution against the wrong strategy won’t.”
As important as the plan itself is the thinking that goes into it. Market trends, customer value drivers and the competitive landscape will all continue to evolve at different rates and at some point your current strategies may need to evolve as well. If you only rely on what worked in the past and are unable to generate new insights, your products and services may become obsolete.
When 10,000 senior executives were asked to identify the leadership traits most important to their organization’s long-term success, executives chose “strategic” 97 percent of the time. Not only is being strategic the most critical trait of a leader, it also dramatically improves team performance. Research shows that team members are 40 percent more committed when they believe their leader has a clear strategic direction.
When a group of managers is not effective at setting strategic direction, the results can be devastating. The consumer electronics retailer Circuit City had an impressive rise to dominance in its industry, being identified as one of the top 11 companies in the world over a 40-year period by author Jim Collins in his book, Good to Great. In reviewing his leadership of the company to these heights of success, Alan Wurtzel, former CEO and creator of Circuit City wrote, “Of all the good advice I received from the board over the years, creating a long-range plan and simplifying the business were clearly the best. They forced me to think systematically about the purpose and nature of strategic planning, about the outside world, about retail trends and about strengths and weaknesses.”
Unfortunately, after Wurtzel stepped down from his leadership role, the company lost its way and moved into several unrelated areas, such as used car superstores (CarMax) and an alternative to DVDs called DIVX. During this time, the company underestimated the growing competitor Best Buy and lost touch with its core competency and capabilities. In his cleverly titled book, Good to Great to Gone, former CEO Wurtzel lamented, “Whatever chance Circuit City had to retool and again challenge for industry leadership was squandered by the CEO’s inability to set a bold and coherent plan and execute it. By undervaluing and then discontinuing long-range strategic planning, he was, in effect, driving down a dark road without headlights. He faced many serious challenges that needed to be attacked decisively and in a coordinated manner, but without a strategic plan he was doomed to fail…The lack of attention to strategic planning had run the company into the ditch.” In 2008, the company that just seven years prior was touted as one of the top 11 in the world filed for bankruptcy.
There are three Cs to setting a strong strategic direction for your business: clear, cut and concise.
CLEAR. Setting strategic direction boils down to answering two questions:
- What are you trying to achieve?
- How will you achieve it?
While the team needs to think about and discuss the market, customers, competitors and the company, these two questions form the foundation of any good plan. If you and your group clarify your goals (what you are trying to achieve) and your strategies (how you will achieve them), you’re ahead of the pack.
One important element of being clear is reducing the clutter in your thinking and plan. Too often, strategic direction is unclear because the plan becomes a laundry-list catch-all of everything that’s happening in the business. Clear strategic direction limits the elements in the plan to what will make or break the business this year and jettisons the rest. A litmus test of this issue is your Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis. If your SWOT includes more than three to five entries in each section, that’s a sign that the thinking and plan are unclear. How clear is your team’s plan for achieving what you want and how you’ll achieve it?
CUT. Movie fans enjoy the time of year when the film industry award ceremonies are in full swing, culminating with the Academy Awards. Since 1981, not a single film has won “Best Picture” without at least being nominated for “Best Editing.” In fact, in about 66 percent of the cases, the movie capturing the Oscar for “Best Editing” has gone on to win “Best Picture.” Editing is the process of removing irrelevant, trivial and unimportant elements to make the film stronger. The editor uses intentional subtraction to add life to the storyline, dialogue and characters.
While not formally included in the job description, one of the main responsibilities of a leader is to act as the editor of the business. A good leader continually monitors products, services, processes and people’s habits for things to cut out if those things are no longer adding value. In the strategy workshops I facilitate, an exercise that generates great interest is discussing what a business should stop doing. Too often, projects, initiatives, reports and tactics continue to receive resources even though they have outlived their usefulness. Think about your business: what areas should you edit—or cut out—from time, attention, people and budgets so you can add value in other areas?
CONCISE. One of the favorite sayings around our dinner table is when one of us (OK, usually me) starts to finish a story with, “To make a long story short.” My kids chime in with “too late!” There is something to be said for brevity, especially when talking with teenagers. Brevity can also be a powerful tool in setting strategic direction.
Being concise heavily relies on the first two Cs. If there’s a lack of clarity in one’s thinking, and trade-offs or cuts haven’t been made, then it’s extremely difficult to be concise. This is most often evident in the huge PowerPoint decks that make up people’s plans. As strategist Keniche Ohmae wrote, “Inability to articulate a strategy in a single, incisive, natural-sounding sentence is a sure sign that there is something wrong in the strategy itself.” And Airbnb CEO Brian Chesky reinforced the importance of being concise when he said, “If you can’t fit it (the strategic plan) on a page, you’re not simplifying it enough. I told my team they have to put the entire plan on a page this big by next week—same size font.”
In my work facilitating strategy sessions with both start-ups and Fortune 500 companies, I’ve found it helpful to reduce the complexity of the plans by having the teams develop a StrategyPrint, or two-page blueprint, which becomes their plan. Since it’s only two pages in length, the StrategyPrint ensures their plans only include the make-orbreak insights on page one and the corresponding action plan (goals, objectives, strategies and tactics) on page two. Is your plan a concise guide to your strategic direction or a long, meandering PowerPoint deck that includes everything but the kitchen sink?
In the computer industry, vaporware is typically hardware or software that is announced but is never manufactured and in many cases, doesn’t exist. What passes for a plan in many organizations is VaporStrategy—a giant to-do list of tactics with goals or strategic imperatives masquerading as strategy. To set strong, strategic direction for your business, you need to be clear, cut and concise. If each of those criteria are met, you’ll realize the fourth C of confidence in knowing that you and your team are as prepared as possible to maximize your success.