Playing To Win

Emphasizing Improvement

There is considerable misunderstanding regarding the starting point for strategic planning. The prevalent belief is that a lack of strategy necessitates the development of one. However, I perceive it differently, which influences how we should initiate our strategic endeavors. This concept is elaborated in my article, Where to Start with Strategy: Emphasizing Improvement.

The Distinction Between Action and Rhetoric in Strategy

As previously discussed, every organization or individual inherently possesses a strategy. Frequently, the stated strategy diverges significantly from the actual strategy in practice, which is often laden with empty phrases, overly elaborate language, and tedious graphs. Such documents may serve well for retreats and corporate planning, but they are ineffective elsewhere.

An organization’s true strategy is defined by its actions. It comprises the choices that have been implemented over time. Much like the saying "you are what you eat," you are defined by your choices—regardless of the reasoning behind them or whether they are documented. This holds true even for entrepreneurs who might deny having a strategy. They allocate resources in certain areas while neglecting others. They opt to cater to specific customers while ignoring others. They choose particular markets to operate in while bypassing others.

My father, an entrepreneur, often claimed ignorance regarding strategy (until later in life when he read my works out of paternal duty). He refrained from spending on a personal office—despite being the CEO and sole shareholder—opting instead for a vacant salesperson's office. He understood that his office would provide no value to customers. Yet, he invested significantly in keeping delivery trucks immaculate, knowing that it instilled confidence in his farmer customers about the quality of service. He also consistently adhered to a fixed pricing structure to ensure fairness, enabling his sales team to focus on quality rather than price negotiations. These decisions, though never formally recognized as ‘strategy,’ were indeed profound strategic choices.

Why Does This Matter?

Approximately 92% of companies possess a strategy since they have been operational for over a year. Government data indicates that only 8% of U.S. companies are in their first year of operation. A newly established company lacks a strategy until it undertakes actions. While it may have strategic intentions, it does not yet have a concrete strategy. Some of those first-year companies might not have established consistent choices, but any company that has been operating has a strategy, whether documented or not.

Despite this, many new CEOs—whether internal or external—often presume they are starting with a blank slate regarding strategy. They frequently assert: “We lack a strategy. Can you assist in formulating one?”

From my perspective, this assumption plays directly into the greatest adversary of strategy: the grip of the status quo, shaped by historical choices and the competitive landscape. Operating under this assumption is not only unhelpful but potentially hazardous. The existing strategy—however it was arrived at and whether documented or not—holds sway, as it reflects the organization's current actions. Familiarity, comfort, and habit drive human behavior, encouraging the continuation of established patterns.

The status quo remains indifferent to any claims of a ‘new strategy.’ It will persist in its current operations.

Embracing the Concept of Improvement

Instead of approaching strategy as if one is starting from scratch, consider the idea of improvement. Is the ultimate aim to develop an exceptional strategy? Absolutely. I argue that strategy is an integrated set of choices that inspires desired actions from customers. However, the most effective starting point is to utilize a Pareto chart to identify the largest discrepancies between your aspirations and reality.

Begin with the most significant gap and inquire: “What different choices could we adopt to bridge this gap?” If a new set of choices can eliminate that gap, it likely represents the most strategic move you could make. This is improvement—enhancing the current situation.

Before implementing those choices, examine the second-largest gap and determine what alternative choices could resolve it. Assess those choices alongside those considered for the first gap. If they align, excellent! If they conflict, engage in the difficult task of reconciling the choices for both gaps to create a cohesive strategy addressing the top two issues.

Whether or not adjustments were necessary for the first two gaps, proceed to the third challenge to identify choices that could resolve that gap. Once again, assess compatibility. If there are inconsistencies, revisit all sets of choices to ensure they work together harmoniously.

If you successfully tackle the three most significant gaps with an integrated set of choices, you will significantly enhance your strategy. This lays the groundwork for ongoing improvements by allowing you to address the next most critical gap.

Focusing on Improvement Rather Than Perfection

This method may not satisfy those who strive for strategic perfection. They tend to view strategy formulation as a transition from poor strategy to ideal strategy—and for many of these individuals, one aspect of a poor strategy is the misconception of having no strategy.

The drawback of this mindset is that it often relegates the status quo to the background as the focus shifts toward achieving the perfect strategy. The assumption—whether overt or subtle—is that by creating an ideal strategy, it will replace the existing one, which is presumed to be ineffective. This belief empowers the status quo, undermining the pursuit of perfection.

Conversely, an improvement-focused mindset emphasizes the journey from the current choices that create a gap to enacting new choices that eliminate it. The existing choices, the gap, the journey, and the desired strategic outcome remain at the forefront.

Furthermore, concentrating on one gap at a time makes the strategic challenge more manageable, a common hurdle in strategic planning. Executives can feel overwhelmed by the prospect of crafting a flawless overall strategy, which often seems too daunting and abstract. Improvement represents a more tangible task, facilitating continued engagement and progress.

However, pursuing improvement isn’t without its challenges. Ultimately, a cohesive set of choices must emerge. If you halt after addressing the most pressing gap, you will not achieve an integrated strategy; you will merely have solved one significant issue. Additionally, if you don’t revisit earlier choices to ensure they align with those addressing the next gaps, you risk creating a disjointed strategy that allows the status quo to maintain its dominance. Neglecting to assess subsequent gaps will prevent you from approaching anything resembling an ideal strategy. Continuous improvement must prevail in strategy through the lens of enhancement.

Insights for Practitioners

The allure of perfection in strategy is compelling. Phrases like "Our strategy is lacking," or "We need to develop a strategy" often suggest a desire for a perfect strategy. The call to action is clear, and it seems both sensible and noble. Who wouldn’t aspire to a perfect strategy?

Yet, this scenario illustrates that wishing for something and pursuing it does not guarantee success. While achieving perfection isn’t impossible, it is often unlikely, as it complicates the task immensely.

A superior perspective embraces improvement. Begin by thoroughly understanding the choices that have resulted in the most significant gaps between desired and actual outcomes. Start with the first gap and develop a new set of choices, remembering the existing choices that created the gap. Consider how to transition from the current choices to the new ones.

Then, proceed gap by gap, crafting new sets of choices. Acknowledge that these choices may not seamlessly fit together; that’s acceptable. Your diligent consideration of the choices for each gap will better position you to adjust them for coherence and reinforcement.

In my experience, effectively addressing the three most critical gaps yields substantial rewards and drives focus on the most crucial strategic choices. However, don’t stop there. Once you’ve achieved this, create a new Pareto chart to tackle the next three most pressing gaps—and continue this process.

Though this may appear to be a roundabout path to perfection, the seemingly direct route is often less viable than one might think. Therefore, remain patient yet determined in your quest for an outstanding strategy through the pursuit of improvement.